Methanol (MeOH) stands as one of the most important chemicals for the hydrogen industry, playing a key role in various applications. Not only is it used directly in applications such as methanol-gasoline blendings or burning to generate heat and power, but it is also widely used as a feedstock for chemicals such as formaldehydes, acetic acids, and others. It is worth noting that methanol is also used as a precursor to make high-value chemicals such as olefins and aromatics (Methanol-to-Olefins (MTO) and Methanol-to-Aromatics (MTA) respectively), which are then converted into plastics. Currently, methanol is being made from syngas produced from natural gas reforming or coal gasification and emits CO2 as a result. Clean methanol will, therefore, help these industries reach their decarbonization goal and expand their role in the future energy system.

On the road to limiting global warming to 1.7 degrees (DG), Rystad Energy expects that methanol use will grow to almost 500 million tonnes in 2050, five times the current demand of approximately 110 million tonnes. A new demand category will emerge in the form of alternative fuel for the maritime sector (53 million tonnes), while most of the growth will be from plastics making, where clean MTO will offer a decarbonization path for this hard-to-abate sector.

China consumes approximately 80 million tonnes, followed by the US at 9 million tonnes, accounting for the majority of the world's total consumption of 110 million tonnes. In the long term, China and the US remain among the top three consumers, with India taking the number two spot. Currently, the Chinese use of methanol is mainly driven by MTO to support its mammoth plastics industry and methanol-gasoline blending. To reach a global warming scenario of 1.7 DG, the main category of growth for methanol use will come from becoming an alternative fuel for shipping and in the production of plastics through MTO. These two categories will reach 53 million tonnes and 314 million tonnes of MeOH, respectively, by 2050, representing 30% replacement of current fossil fuel paths in both cases. Early contracts and adoptions of clean hydrogen have emerged for both. There are 206 vessels in the orderbooks that are planned to operate on a mixture of methanol, with 50/50 for single and dual-engine platforms. The majority are coming from new bulk carriers, tankers, and Ro/Ro (roll-on/roll-off) vessels. On plastics use, Baofeng is building a few green hydrogen projects to support their existing MTO plants in China (details below), while in Europe, LEGO and Novo Nordisk group are now looking to be the first movers to produce green plastics by offtaking e-methanol from European Energy.

There are also other offtakers looking to use cleaner methanol to decarbonize their operations. In Spain, Foresa, following the footsteps of Fertiberia, is working with Iberdrola for e-methanol for their formaldehyde production. In the Netherlands, OCI’s methanol business is also seeking to decarbonize by offtaking from the HyNetherlands. The company also has various clean ammonia offtake plans for its global operations. In China, existing MTO plants using coal gasification for methanol production have also put a step into changing to cleaner hydrogen with the current biggest operating electrolyzers in the world at Ningxia Baofeng facility (150 MW) providing hydrogen for methanol making. The company is now working on a few more plants similarly.

Despite this potential for methanol, approximately 21 million tonnes of clean methanol projects (bio, blue and green; green & bio, about 8 million tonnes) have been announced so far. As shown on Rystad Energy Hydrogen Solution’s methanol database, most of the green and bio methanol projects are based in the US, Europe, and China, with some other projects scattered around Southeast Asia, Africa, and South America. The largest projects in the US primarily involve blue methanol, including Lake Charles, IGP, Trans World Energy, and New Hope Energy. The HyNetherlands projects flew the flag for Europe, while Malaysia’s H2biscus currently leads Asia. Efforts will be required to increase supply to meet the new demand and decarbonize existing usage. China currently dominates the world’s methanol production, with more grey methanol plants still being planned to come up in the next few years. These plants will need to consider blue, green, and bio options in order to decarbonize. The ‘color’ of methanol currently still corresponds to the ‘color’ of hydrogen.

To enable this pipeline of green methanol, it is crucial to also address the CO2 feedstock aspect. Rystad Energy estimates around 13 million tonnes of CO2 to support this pipeline of 8 million tonnes of green methanol. Currently, most projects are looking for biogenic options due to the high cost of CO2 from Direct-Air-Capture (DAC). As per the recent Delegated Acts in Europe, industrial originated CO2 from fossil fuels can still be used up to 2040 (2035 for CO2 from combustion of fossil fuels) to qualify as a renewable fuel of non-bio origin (RFNBOs) before biogenic and DAC-source CO2 need to be used. However, many plants now have opted for bio-sourced CO2. The story is the opposite in China, with many choosing industrial captured CO2 instead. Green methanol faces some challenges in the long term in this aspect. If the demand for methanol reaches 500 million tonnes by 2050 and green methanol is to be the primary source of supply, 524 million tonnes of biogenic/DAC CO2 will be required. To put things in perspective, the largest DAC plant currently in operation has a capacity of 4,000 tonnes per year, which means that 131,000 of these plants will be required to meet the demand for methanol production alone. For biogenic sources of CO2, scaling can be challenging as it could create sustainability issues on land use. Moreover, access to fresh water adds another challenge to the scaling of green methanol. 

This article features data from our new Methanol Dashboard, which is part of our Hydrogen solution. Clients can now analyze methanol demand/ consumption across various applications and use segments on the country level​.