Economic Evaluation of the Methanol Value Chain: Focusing on MTO Plant Development and Toll-Based Olefin Production

Document Type : Original Article

Authors

1 Ph.D. Candidate in International Oil and Ga Contract Management, Faculty of Law and Political Science, Allameh Tabataba’i University, Tehran, Iran

2 Ph.D. Candidate in Oil and Gas Economics, Faculty of Economics, Islamic Azad University, Central Tehran Branch, Tehran, Iran

3 Assistant Professor of Oil and Gas Law, Faculty of Law and Political Science, Allameh Tabataba’i University, Tehran, Iran

Abstract

In the volatile and complex environment of global energy markets, making optimal investment decisions requires a deep understanding of the value chain and the relative advantages within each of its links. As a strategic resource, natural gas must be directed through pathways that generate the highest long-term value. This study focuses on a key segment of the natural gas value chain—the methanol-to-olefins (MTO) route—and evaluates the economic and strategic feasibility of two main options: (1) establishing a domestic MTO plant, and (2) exporting methanol for toll-based olefin production abroad.Using financial modeling based on three operational scenarios, the findings reveal that none of the proposed options meet the minimum expected internal rate of return (IRR) of 15%. High operating expenses, technological inefficiencies, and a lack of competitive feedstock pricing are identified as major barriers to economic viability. The toll-processing model—defined as outsourcing methanol conversion to olefins under a service-fee agreement—also fails to deliver acceptable returns under typical conditions. The study concludes that MTO projects are not financially attractive under current market dynamics. Therefore, the strategic focus should shift toward extended value chain models such as GTO+ and MTO+, which integrate downstream production of higher-value petrochemical products. These approaches, supported by innovative financing structures and collaborative investment models, are essential for creating sustainable value from natural gas resources.

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References

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Journal of sustainable Energy Systems
Volume 5, Issue 1
January 2026
Pages 57-78

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