Emirati chemical firm TA’ZIZ said Monday it had awarded a $1.7 billion contract to South Korea-based engineering firm Samsung E&A to build the United Arab Emirates’ first methanol plant as the country looks to shift to greener energy.

Once completed in 2028, the plant is expected to produce 1.8 million tons of the fuel a year.

Methanol is used as a fuel in different sectors, including the maritime sector, and is seen as a more sustainable energy type than traditional fuels. 

The methanol facility will be based in Abu Dhabi’s Al Ruwais Industrial City and will support TA’ZIZ’s strategy to spur the development of new chemical industries as the UAE continues to diversify its economy away from reliance on oil.

Abu Dhabi-based TA’ZIZ is a joint venture between the state-owned Abu Dhabi National Oil Company and its sovereign wealth fund, ADQ. Established in 2020, TA’ZIZ targets production of 4.7 million metric tons per year of chemicals including methanol, green ammonia, polyvinyl chloride, ethylene dichloride, vinyl chloride monomer and caustic soda by 2028.

Why it matters: Methanol is less flammable than gasoline and can be made from renewable energy sources, making it greener than traditional fossil fuels. 

As it is cheaper to produce, store and distribute than gasoline, methanol use is also expected to increase considerably over the next five years, with the Middle East and Asia being the major growth markets, according to a report by analytics firm GlobalData released January.

TA’ZIZ CEO Mashal Saoud Al-Kindi said in a statement that the Al Ruwais plant will position the UAE “as a leader in sustainable chemicals production.” The sector is expected to play a key role in raising the industrial sector’s contribution to the gross domestic product from 133 billion to 300 billion dirhams ($36.2 billion to $82.7 billion) by 2031.

TA’ZIZ said the new facility would be powered by clean energy from the grid.

Know more: According to the GlobalData report, Iran is expected to lead the charge in new methanol capacity globally by 2030, with 13 projects under construction expected to add around 19.62 million tons per year by 2030. The two major projects planned in Iran are the Mahan Chemical Zagros Petrochemical Eslamabad-e-Gharb Methanol Plant and Mahtab Parsian Petrochemical Bandar Abbas Methanol Plan. Both projects are expected to come online this year, with a capacity of 1.85 million metric tons per year.