The ceremony of breaking ground of Inner Mongolia Boyuan United Chemical Co. Ltd. (File photo)

The city of Ordos in north China's Inner Mongolia Autonomous Region will become the country's largest methanol production base this year, the China Securities Journal reports.

Currently, six methanol projects are being built in Ordos, with a combined production capacity of 9.6 million tons.

A million-ton-a-year project, being built by Inner Mongolia Boyuan United Chemical Co. Ltd., will go into production at the end of this year. The other five will be completed by 2010, bringing the city's annual methanol output to 10 million tons.

The largest project in the area will have a capacity of 4.2 million tons. It is being built by the China National Coal Group Corp., China Petroleum and Chemical Corp., China Yintai Investment Corp. and two other companies.

Currently, the country's largest methanol unit, located in southern Hainan Province and owned by China National Offshore Oil Corp., started operation on September 12, 2006 and is capable of producing 600,000 tons of methanol a year, said the report.

Ordos has become the home of many methanol projects because the city has rich coal and natural gas resources, which are essential for methanol production, the report quoted an unnamed analyst as saying.

Proven coal reserves around Ordos are estimated at 149.6 billion tons, making up half of Inner Mongolia's total reserves and one sixth of the national total.

Rising international oil prices have created a huge market potential for developing methanol and other clean alternatives, said the analyst.

The domestic price of methanol has soared to 3,000 yuan (384.62 U.S. dollars) a ton as China faces tight supplies of natural gas and will no longer approve new projects with a capacity of less than 1 million tons a year, he added.

During the past two years, 54 methanol companies went into production, with a total capacity of 8.44 million tons a year.

China will build 88 projects over the next four years and increase methanol output to 48.5 million tons a year.