Chinese petrochemical company Yuhuang Chemical, Inc., a subsidiary of Shandong Yuhuang Chemical Co. Ltd., has chosen Air Liquide to supply oxygen for its $1.85 billion methanol production complex that will be built in St. James Parish, Louisiana.

This long-term agreement covers the supply of 2,400 tons of oxygen per day.

The industrial gas supplier also recently signed a licensing deal with Yuhuang Chemical for its MegaMethanol process technology, which converts natural gas to methanol.

As a result of the new contract, Air Liquide will invest around $170 million to build a state-of-the-art, energy efficient Air Separation Unit (ASU) producing nitrogen and argon as well as oxygen. This will be connected to Air Liquide's pipeline system in Louisiana to ensure reliable supply, the company said. The ASU is expected to be commissioned by the second half of 2017.

The new methanol manufacturing complex will produce about 5,000 tons of methanol per day, making it one of the largest methanol production facilities in the United States.

Yuhuang Chemical will build a second methanol plant after the first plant is completed, taking the annual capacity of the complex to 3 million metric tons per annum of methanol. A third phase will include a methanol derivatives plant that will produce intermediate chemicals.

Most of the methanol will be exported by ocean-going vessels for use in Shandong's production of downstream chemicals in China, while about 20 percent to 30 percent of the output will be shipped by barge and rail and sold to North American customers.

Construction work at the site on the Mississippi River is scheduled to begin in 2016, with the first phase of the project expected to start operating by 2018.