Agrium Inc. and Synenco Energy Inc., managing partner of the Northern Lights Partnership (NLP), have signed a memorandum of understanding (MOU) in which products from a proposed NLP Upgrader in Sturgeon County, Alberta, would be sold to Agrium’s neighboring Redwater nitrogen plant. Agrium said back in May that it was eyeing the use of Alberta oil sand resources (GM May 15, p. 1).
Hydrogen, nitrogen, sulfur, and carbon dioxide produced from asphaltenes in the Upgrader’s gasification complex would be used in Agrium’s Redwater facility. Hydrogen and nitrogen would be sold to Agrium for use in anhydrous ammonia production, resulting in a substantial reduction in Agrium’s consumption of natural gas. Sulfur and carbon dioxide will be transferred to Agrium for use in the production of ammonium sulfate and urea fertilizers.
Agrium and NLP would negotiate a long-term supply contract. Hydrogen prices would not be tied to NYMEX or AECO natural gas prices, and would therefore be more stable and predictable. Agrium currently uses 22 BCF per year of natural gas at Redwater. It also uses hydrogen at its Joffre, Alberta, plant from the neighboring NOVA plant; however, that product is tied to natural gas prices.
Plant modifications would need to be made at the Redwater nitrogen facility in order for it to use a hydrogen feedstock, primarily to construct infrastructure and utilities to tie-in the two facilities. By-product sulfur would be supplied at no cost for the production of phosphate and ammonium sulfate. Agrium can currently buy low-cost sulfur, but must pay freight to get it to its plant ?存 the NLP plant would be next door. Start-up of the NLP Upgrader is anticipated for late 2010.
“We are excited about the opportunity to capitalize on the unique Alberta oil sands resources, including obtaining a new, stable, long-term, low-cost source of raw materials for our Redwater nitrogen, phosphate and sulfate facility,” said Mike Wilson, Agrium President and CEO. “We believe this project is an excellent example of how we can work with industry partners to take low-grade by-product hydrocarbons and add value for the environment and local economy. This project also illustrates our continued focus on enhancing Agrium’s competitive cost position.”
“The Northern Lights Partnership and Agrium both recognize the economic and operational benefits of working together ?存 confirming that industrial cooperation is more than just a concept in Alberta’s Industrial Heartland,” said Michael Supple, executive chairman and CEO for Synenco Energy. “This MOU further validates the selection of Sturgeon County as home of the Northern Lights Upgrader and the viability of the gasification of asphaltenes to enhance Project return, ultimately benefiting our shareholders. We look forward to the inclusion of additional industry players in the vision of a meaningful and economically attractive network for hydrogen, carbon dioxide, nitrogen, sulfur, steam, electric power and the processing of asphaltenes.”
Agrium was a tad coy as to the expected amount of gas savings the company will see as a result of the deal, saying such were confidential. However, as noted above, it did stress that hydrogen prices would not be tied to gas prices. Analysts have indicated that the company will see considerable savings from the deal.
“Agrium and Synenco Energy’s signing of an MOU this week to use hydrogen and CO2 and sulfur from asphaltenes gasification was uplifting news,” said Keith Stokes of Stokes Engineering. “Gasifying liquid asphaltenes could need less capital investment than gasifying coal or petcoke. And of course, Agrium’s ammonia and urea plants are close by.”
Synenco, a Calgary-based oil sands company, holds a 60 percent interest in and is the managing partner of the NLP. SinoCanada Petroleum Corp., an indirect wholly-owned subsidiary of Sinopec, owns the remaining 40 percent of NLP. NLP is the owner of the Northern Lights Project, an oil sands mining and bitumen extraction project northeast of Fort McMurray, Alberta, and a heavy oil upgrader project located in Sturgeon County northeast of Edmonton, Alberta. The independent best estimate of NLP’s resource is 1.49 billion barrels of in-place bitumen. NLP also holds extensive coal lease applications in the Athabasca region in northeastern Alberta. In addition to its interest in NLP, Synenco holds a 100 percent interest in an oil sands lease adjacent to the NLP lands.