Agrium Inc. said on Aug. 23 that it has successfully obtained sufficient natural gas supplies to allow for the operation of its Kenai nitrogen facility in 2007. Agrium expects that the nitrogen plant will experience an extended shutdown during the winter months due to seasonally higher demand for home heating.
Last winter the plant was down for some three weeks due to cold weather. This winter, said Agrium spokesman Richard Downey, the outages are expected to be months, not weeks. He added, however, that much is dependent upon weather conditions.
The facility is expected to operate at about 75 percent of capacity over the next 12 months, operating one ammonia and one urea plant. Annual urea capacity is 640,000 mt; net ammonia capacity would be approximately 280,000 mt if the single-train ammonia and urea plants both operated at full rates.
The extension is not expected to impact Agrium’s guidance for the second half of the year and is anticipated to provide only a modest contribution to earnings in 2007. This is due to a lower anticipated operating rate and higher average gas price than in 2006. The commercial gas contracts are with numerous Cook Inlet gas producers and are subject to strict confidentiality provisions.
“I would like to thank the employees at the Kenai facility for the outstanding dedication they have shown,” said Mike Wilson, Agrium president and CEO. “I would also like to thank the State of Alaska and Governor Murkowski for the continued assistance in helping keep an important value add industry in Alaska. An important consideration in Kenai’s continued operation is the potential future option value due to recent developments in the Cook Inlet that may create longer-term possibilities.”
Agrium last week was upbeat about its long-term options at Kenai. Downey noted that there has been a significant increase in natural gas drilling in the area in recent months, with more planned. The company also expects to make a decision soon on another option – coal gasification. He estimated that a new coal gasification plant to supply the Kenai nitrogen facility could be online around 2011. In the meantime, increased gas production could serve as a bridge until the new coal gas is available.
As a side note, Agrium will have to look to someone other than Gov. Frank Murkowski, 73, for future help. Murkowski ran a distant third in a three-way GOP primary Aug. 22. Despite the defeat, Murkowski is still trying to push through the legislature a major $20-$25 billion gas pipeline that could take gas from Prudhoe Bay to Alberta or the U.S. Midwest. Most expect the pipeline to wait for the new governor – either Republican Sarah Palin, former chair of the Alaska Oil and Gas Conservation Commission, or former Gov. Tony Knowles. Both are in favor of a pipeline, though critical of Murkowski’s version. Palin has suggested an all-Alaska pipeline that would take the gas to the port of Valdez to turn it into LNG for export.