Feb. 9, 2001, 10:30PM

Ripple effect of natural gas felt locally

Gasoline additive plant shut temporarily because of raw material cost By NELSON ANTOSH Copyright 2001 Houston Chronicle

When the price of natural gas rose to $10 per thousand cubic feet, officials at Global Octanes knew what they had to do: shut down their MTBE plant on the Houston Ship Channel.

A company can't continue manufacturing MTBE when the raw material is more expensive than the selling price of the product, said an official who preferred that his name not be used. "It's Economics 101," he added.

The plant in Deer Park, which shut down on Dec. 20, didn't restart until Feb. 1. By then the profits had returned because natural gas prices had gone down and the price of the widely used gasoline blending component was significantly higher.

That story was repeated over and over in Houston, the nation's center for MTBE production.

Plants in addition to Global Octanes shut down about the same time and are mostly now running again. Many used that down time for maintenance, although Global Octanes wasn't scheduled for what is called a turnaround.

The world-scale facility, Global Octane's only plant, produces about 15,000 barrels per day of the gasoline oxygenate.

As supplies declined, the price of the product started going up. MTBE got as high as $1.41 per gallon in early January, compared with the $1 to $1.10 in December when natural gas was at $10 per thousand cubic feet.

The price of MTBE on the Gulf Coast has made substantial gains, Friday selling for around $1.34, said Dexter Miller of DeWitt & Co.

Meanwhile, the price of natural gas drifted downward, settling Friday at $6.21 per thousand cubic feet on the New York Mercantile Exchange. Not all plants are back on line but they are moving in that direction, Miller said.

Because about 11 percent of reformulated gasoline contains MTBE, there have been warnings that the more than 30 percent rise would put pressure on gasoline prices.

The cause of the difficulty was "100 percent due to natural gas," said the company official.

The plant utilizes raw materials such as isobutane and methanol that are derived from natural gas. High manufacturing costs are a new problem facing this industry, which has been under attack because MTBE has been blamed for groundwater pollution.

MTBE is required in reformulated gasoline as a pollution reducer on the East Coast, West Coast and areas with air quality problems such as Harris and adjoining counties.

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-- Martin Thompson (mthom1927@aol.com), February 10, 2001