To fulfill growing global demand for the commodity, Abu Dhabi National Oil Company struck an agreement with global methanol manufacturer Proman to establish the UAE’s first methanol production facility at the Ta’ziz Industrial Chemicals Zone in Ruwais.

The natural gas to methanol facility, which will be built by Abu Dhabi Chemicals Derivatives Company (Ta’ziz), a joint venture between Adnoc and Abu Dhabi Investment and Holding Company ADQ, in collaboration with Proman, the world’s second largest methanol producer, is expected to have an annual capacity of up to 1.8 million tonnes.

According to a statement released on Thursday, the plant will address “increasing domestic and worldwide demand” for methanol, which is gaining traction as a lower-emission fuel alongside its established uses in industrial products. Regulatory clearances are required.

“”As we create the UAE’s first domestic methanol manufacturing facility, we are thrilled to welcome Proman as a strategic partner. “By enabling local supply chains through the production of new chemicals in the UAE, this world-scale plant advances the Ta’ziz mission to diversify the UAE’s economy and accelerate industrial development,” said Dr Sultan Al Jaber, Minister of Industry and Advanced Technology and managing director and group chief executive of Adnoc.

“As Proman’s first investment in the UAE, our deal demonstrates the UAE’s sustained appeal as a very attractive destination for foreign capital, helping Abu Dhabi’s private sector’s long-term industrial growth.”

Methanol, a critical component of the chemical industry, is mostly used to make formaldehyde, acetic acid, and polymers. Methanol output has roughly doubled in the last decade, with over 98 million tonnes generated per year, according to a 2021 report from the International Renewable Energy Agency (Irena).

According to the report, production might reach 500 million tonnes per year by 2050 if current trends continue.

According to Mordor Intelligence, the methanol market is expected to increase at a compound annual rate of more than 4.87 percent between 2022 and 2027. The increasing demand for methanol-based fuel is one of the primary reasons driving the market in the short term, according to the report.

“When it comes to decreasing carbon monoxide, nitrogen oxides, and hydrocarbon emissions, methanol is favoured over ordinary gasoline.”

According to David Cassidy, chief executive of Proman, growing global interest in methanol as a cleaner fuel, particularly for the maritime sector, is expected to create a major growth in global methanol demand over the next decade.

Emerging economies in Africa and Asia are expected to drive the industry’s expansion.

Methanol production in the UAE will reduce dependency on imports, allowing local businesses to “Make it in the Emirates” and strengthen domestic supply chains, according to the statement.

The action also helps the UAE’s Ministry of Industry and Advanced Technology achieve its goal of diversifying the economy and speeding up industrial development. Chemicals are a key industry for the UAE’s Operation 300bn strategy, which intends to boost the industrial sector’s contribution to national GDP to Dh300 billion by 2031.

Mr Cassidy stated, “This will be the UAE’s first methanol production facility, and it will be one of the most energy efficient and low-emitting plants in the world.”

“As a result, it is an especially good time to invest in the UAE’s domestic downstream manufacturing capacity. We’re thrilled to be a part of the UAE’s downstream growth strategy and the ambitious Ta’ziz industrial development.”

Since its inception in November 2020, the Ta’ziz development has attracted “substantial interest” from local and foreign investors, according to the announcement.

Three industrial zones make up Ta’ziz. The first is an Industrial Chemicals Zone, which will house chemical manufacturing facilities and currently includes seven proposed projects in the design process.

The Light Industrial Zone, on the other hand, will house downstream conversion firms that will convert the chemicals zone’s outputs into consumable products.

The Industrial Services Zone, which will feature service companies to cater to the Ruwais Industrial Complex, will be the final one.

So far, Fertiglobe, GS Energy, and Mitsui have signed partnership agreements for the proposed development of a low-carbon ammonia production facility, and Reliance Industries has signed a partnership agreement for the proposed development of an ethylene dichloride, chlor-alkali, and polyvinyl chloride production facility.

In addition, Ta’ziz has signed agreements with eight UAE-based investors for up to a 20% share in a portfolio of chemicals projects in the chemicals zone, marking the first domestic public-private partnerships in Abu Dhabi’s downstream and petrochemicals sector.

The statement stated that final investment choices for these chemical projects are likely later this year and are subject to regulatory approvals.

A proposed joint venture agreement with AD Ports Group to establish a port and logistics facility in Ta’ziz was also signed.