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Idaho firm plans $2 B energy, nitrogen facility

Featured, News, Nitrogen, Pacific N.W.

Southeast Idaho Energy (SIE) LLC, American Falls, Idaho, announced June 27 that it is moving ahead with plans to construct a $2 billion nitrogen and energy facility in Power County, Idaho. Named the Power County Advanced Energy Center, it will produce nitrogen fertilizer and ultra-low-sulfur diesel fuel.

Ramesh Raman, SIE president, said the company is ready to begin the process of obtaining permits for the facility. The Center will be located in the heavy industrial zone southwest of American Falls, south of the Lamb Weston plant and east of Idaho Power’s Borah substation. SIE has an option on more than 450 acres there.

Raman said the Center would be built in two phases. In Phase 1, estimated at $1 billion, SIE would install one gasifier to turn coal and petroleum coke into more than 4,000 st of nitrogen and 1,400 barrels (58,800 gallons) of diesel per day.

The nitrogen plant will produce 1,650 st of anhydrous ammonia, 500 st for sale and the rest for urea production, according to John Burk, SIE director of communications. Urea production will be 1,500 st/d, with 1,200 st/d granulated. The plant will also produce 1,400 st/d of UAN.

Burk said the company is talking with several potential customers for its products and is optimistic about reaching an agreement soon. It is also working to line up coal and petcoke supplies.

There will also be byproduct sulfur, with the quantity depending on the sulfur content of the fuel. SIE expects to produce at least 125 st/d and use it to produce sulfuric acid. It has also begun preliminary discussions with these buyers.

In Phase 2, estimated at another $1 billion, the company would add two gasifiers to boost diesel output to 8,400 barrels (350,000 gallons) per day.

Burk said WorleyParsons will do the engineering, Zachry will be the construction contractor, and Conoco Phillips will provide the gasifiers. He could not provide details on the investors in the project at the current time, but said he should be able to do so in the future.

SIE hopes to begin construction late next year, with startup of Phase 1 in 2011-12. Construction will require about 700-1,000 workers over a six-year period. Raman said that approximately 150 employees would be needed to operate Phase 1 facilities.

“We will be creating jobs that pay well,” he said, “and we are committed to hiring locally. As we approach operations, we plan to work with local institutions to create a workforce training program.” Besides stimulating the local economy, the project will contribute to local taxes. “We expect to make a substantial contribution to the tax base of Power County,” Raman said.

SIE is a subsidiary of Refined Energy Holdings (REH), which is headed by Raman and based in Mount Kisco, N.Y. and Denver, CO. Raman said REH has secured the equity funding necessary to advance the project. “Once we receive our permits, we will seek a lender to complete the financing of the Advanced Energy Center,” he said.

“This project is a small, important step toward energy independence,” said Raman. “Significant advances in technology now make it possible for our country to put its vast coal resources to clean use and reduce our dependence on imports. We will demonstrate to the Idaho Department of Environmental Quality that our Center will operate well within the most stringent air quality standards, which are set and enforced by federal and state government agencies to protect human health and the environment. Advanced clean coal and environmental technologies enable us to do so.”

SIE says it has secured water rights to meet Phase 1 and Phase 2 requirements. In Phase 1, the Center is expected to use up to two million gallons per day. SIE plans to design the facility for zero water discharge.

“The Power County Development Authority (PCDA) deserves a great deal of credit for the project,” Raman said. “Through the support and efforts of PCDA, we have defined a project that makes sense for us, for the county and for its residents. It also makes sense for Idaho. There is an excellent market for fertilizer and diesel products in the state, and in the region as well.”

Almost two years ago, Raman proposed an electric generating plant for the FMC site in eastern Power County. “As the project evolved, we became convinced that a facility to produce fertilizer and diesel not only made commercial sense, but also would have greater benefits for the region,” he said. Raman explained that as plans for the Center developed, “We found that the available property at the FMC site could not accommodate the Center.” He thanked FMC for its efforts to help him make use of the FMC site.

The Advanced Energy Center will produce electricity for internal use. Raman said SIE will keep Power County residents informed as the project progresses. “In addition, we are interested in any ideas and questions that residents might have. That’s an important part of our commitment to ensuring that our facility will be a positive addition to the county.”

Industry observers last week were awaiting more details about the project. One source said the pivotal issue is financing; the true news about SIE will not come until that is achieved. Another acknowledged that SIE has indeed been making the rounds with large industry players, but said it is still very early in the process. Buyers might welcome a new nitrogen producer in the region, what with the region mainly served by two local producers – Agrium Inc. and J.R. Simplot Co. – and importers.

While the number of proposed coal-gas projects continues to grow, sources noted that the U.S. Senate on June 19 failed to put coal-to-liquid incentive amendments in the Clean Energy Act of 2007. However, industry proponents say coal-gas incentives will rise again, as some form or fashion of incentive has bi-partisan support from at least 69 of the 100 senators. They say no fewer than 69 senators voted for at least one form of coal-gas amendment, and they are hoping they can come together on one they can all support. Another source observed that states getting the coal-gas facilities can be relied upon for some support. To date, Illinois, Mississippi, and Alaska have been supportive of such projects.

Terral River Services exits AN market

Ammonium Nitrate, Featured, News

Terral River Services Inc. in Alexandria, La., is no longer in the ammonium nitrate business. Don Philley, fertilizer manager for Terral, said the company opted to drop AN from its fertilizer line this spring because of burdensome security regulations enforced by the U.S. Coast Guard.

“We’ve had all the fun that we can handle,” Philley told Green Markets, referring to the many security steps the company has taken to stay in compliance with the strict handling requirements for AN. The regulations are part of the 2002 Maritime Transportation Security Act (MTSA), and have been in effect since 2004 (GM Oct. 11, 2004). The Coast Guard, under the Department of Homeland Security, is the lead enforcement agency in the U.S.

A partial list of the MTSA requirements for AN handlers includes the establishment of a Coast Guard approved security plan; maintenance of vessel and facility security records, including records of training, drills, breaches of security, and audits; the establishment and training of vessel and facility security officers so that AN supplies are “continuously patrolled;” the installation and maintenance of vessel and facility security systems; strict control of restricted areas, as well as the monitoring and control of vessel and facility access; security training for all vessel and facility personnel, including regularly scheduled drills and exercise requirements; and security procedures for interfacing with other facilities and vessels.

At one time, Terral shuttled as much as 20,000 st/year of AN through its Alexandria facility, Philley said. That volume dropped to less than half in recent years, however, and has continued to shrink as the number of AN customers dwindles. Terral operated a dedicated, 3,000-ton storage dome for AN that will now be used to store other fertilizer products such as potash and ammonium sulfate, thereby freeing up space at the company’s 18,000-ton primary warehouse in Alexandria.

Philley said the company had closely followed “list after list” of security regulations for handling AN, and had implemented numerous measures and policies to abide by federal regulations. These included lock-down gates, 24-hour guards, additional fences and equipment, emergency plans, and a lengthy checklist to follow for the transport and transfer of AN to distributors, dealers, and end-users.

When the security regulations first took effect in 2004, Terral said it would continue to handle AN and would work with the Coast Guard to ensure compliance. “We’re trying to take a positive approach to it and work with the Coast Guard,” Randy Frost, operations manager for Terral, said at that time. “I think it’s a battle worth fighting, at least for now.”

Philley said the decision to back away from AN was also influenced by Terral’s barge business. “It is increasingly difficult to have the product delivered to our site,” he said. The company obtained AN barges through an outlet on the Mississippi River that transitions to the inland waterways of Louisiana, and operated the only tow boat and tow captain on the Red River that were certified by the Coast Guard to shuttle AN cargoes to Alexandria.

Philley also expressed frustration with how the Coast Guard regulations were interpreted and the resulting inconsistencies in how they were enforced. When the Coast Guard’s enforcement office for Alexandria switched from one office to another, he said, a different officer came into play with a different understanding of the rules, requiring Terral to make additional changes to its security regimen. “These seemed to be more stringent than the requirements placed upon facilities that were administered under other Coast Guard enforcement offices,” he said.

These hurdles ultimately become too great. “You have all these same policies and inspections required to fleeting barges, boats, boat captains, as well as the warehouse facility.” Philley said. “We did everything they asked us to do. Yet the inconsistency and the risk of having our entire operation shut down – not just ammonium nitrate, but the entire facility – have become too burdensome.”

Tribe opposes Simplot land swap

News

Shoshone-Bannock tribal officials say they oppose a proposed land swap between the J.R. Simplot Co. and the Bureau of Land Management that would give Simplot a large parcel of federal land near its Don phosphate fertilizer plant in exchange for a mule deer winter range near Blackrock Canyon.

The tribes said they fear the company will use the land it gets for phosphate mine waste that could degrade local air quality and pollute the Portneuf River. Piles of phosphogypsum concern them, because the U.S. Environmental Protection Agency designates the gypsum as a radioactive waste product that decays to form radon ?Çô a carcinogenic, radioactive gas.

The land swap will trade 680 acres of the mule deer winter range near Blackrock Canyon that Simplot owns in exchange for 719 acres of BLM property in the Trail Creek area near the company’s phosphate production area. Simplot acquired the 680 acres near Blackrock Canyon in the early 1990s. Much of the BLM’s Trail Creek acreage was charred on June 17 by a wildfire. The BLM hosted a public scoping meeting last fall for public comment about the land swap.

Rick Phillips, a Simplot spokesman, said the land trade will allow the company to expand the waste pile that remains after phosphate is removed from slurry transported from the Smoky Canyon Mine nearly 100 miles away. The Don plant’s long-term viability depends on Simplot’s ability to handle the gypsum product, he said.

David Pacioretty, the BLM’s Pocatello field office manager, said the land exchange and environmental concerns are separate issues. He said the BLM is commissioned to ensure the land it gets from Simplot is of equal or more value to the Trail Creek area property. The Shoshone-Bannock officials will have the opportunity to voice their concerns when EPA and the Idaho Department of Environmental Quality consider Simplot’s application to build a new pile.

When the Michaud Flats Superfund site, which includes the Simplot and FMC industrial properties, was created, Simplot’s gypsum pile was identified as a potential source of water contamination. Phillips said Simplot could prevent contaminants from leaching into the watershed by installing clay or vinyl liners.

Fertilizer surges at ConAgra, company-wide results up despite Peter Pan woes

News

A huge surge in fertilizer and other commodity trading significantly boosted the results at ConAgra Foods Inc. in the fourth quarter ending May 27, helping the company offset the losses triggered by its contaminated Peter Pan peanut butter, which plagued its food business during the company’s second half.

Operating profits at ConAgra’s Trading and Merchandising unit, which includes fertilizer trading and distribution, were up 376.9 percent for the quarter, to $200.3 million on sales of $659.2 million, versus the year-ago $42 million and $359 million, respectively. ConAgra does not break out fertilizer results; however, sources say the quarter’s performance would have been phenomenal. By comparison, operating profits at ConAgra’s other businesses were either off (Consumer Foods 15.4 percent and International Foods 23.9 percent), or up modestly (Food and Ingredients 10.4 percent). ConAgra-wide, operating profit was up 37.1 percent to $489.2 million, versus the year-ago $356.8 million.

ConAgra fourth-quarter net sales were up 224.3 percent, to $192.0 million ($.39 per diluted share) versus the year-ago $59.2 million ($.11 per share). Sales were up 13.2 percent to $3.33 billion from $2.94 billion.

T&M operating profit for the quarter reached a $200 million record, almost five times year-ago amounts. Energy trading and fertilizer operations reported their highest quarterly profit ever by successfully capitalizing on the market environment, said the company. ConAgra’s fertilizer business has some 77 locations and over 1 million st of storage so as to take advantage of a hot fertilizer market.

ConAgra officials told analysts the T&M performance was impressive by any standard and knocked the cover off the ball. However, the company said it views segment profitability to be extraordinary, and plans fiscal 2008 profitability from this segment to be significantly lower than fiscal 2007 levels. Citing the current positive tone in the fertilizer market, analysts prodded the company about this assessment; however, executives said they wished to be conservative and not over promise. Next year is yet to be determined, said Greg Heckman, president and chief operating officer of Commercial Products, who said that while next year should be a good environment, it may still not be as robust as this year. He said it is expected to outpace the five-year average.

Overall, ConAgra believes fiscal 2008 will be see an approximate earnings per share of $1.48, down from fiscal 2007’s $1.51. ConAgra believes its other businesses will step up to compensate for the expected decline in T&M. It values the T&M next year at $.15 per EPS. ConAgra was optimistic about its other businesses, citing innovation, marketing, pricing, and cost-saving initiatives. Plus, Peter Pan, one of ConAgra’s core products, it is expected to fly back on the shelves in late July.

For the year ending May 27, 2007, T&M reported a 68 percent increase in operating profit and a 22.7 percent increase in sales. Operating profit was $317.1 million on sales of $1.45 billion, versus the prior year’s $188.8 million and $1.18 billion, respectively. T&M led all four divisions in percentage changes in profits and sales, with the giant Consumer Food business increasing profits by a marginal 2.4 percent on a .3 percent decrease in sales.

For the year, ConAgra net income was up 43.2 percent to $764.6 million ($1.51 per share), versus the prior year’s $533.8 million ($1.03 per share). Net sales were up 4.8 percent to $12.0 billion from $11.48 billion.

Tornado-hit Southern Plains rebounds

News Briefs, Southern Plains

Greensburg, Kan.-Southern Plains Co-op, which was destroyed by this town’s devastating tornado (GM May 14, p. 1) surprisingly is back to 80 percent of full operation and is looking to be close to 100 percent in a short time. Manager Danny McLarty, who is operating out of temporary offices in a trailer, estimates that it will cost more $3 million or more to replace all the facilities that were lost when the May 4 storm left only the two elevator structures standing. ”We were back in operation about 10 days after the storm,” he said. ”We started loading out liquid fertilizer at that time, and we haven’t slowed down since.” With a lot of help from the Southern Plains main office in Lewis about 25 miles away, Greensburg has its liquid fertilizer operation up to full speed and is relying on the main plant for the dry side, which was wiped out. That’s no problem, McLarty said, because liquid and ammonia are the big items for now, and he expects to be fully ready when fall harvest arrives. He explained that up until a few days ago the plant had to operate on generators, which hampered the recovery effort. “But the city worked diligently to get the electricity restored so we could take care of all the farmers in the area,” he said. McLarty said a structural engineer checked out the two silos, which were the only tall structures left standing in Greensburg, and found them in good shape even though windows and doors had to be replaced. One odd happening was that the chemical storage warehouse was carried three blocks away and scattered among other debris, while the chemicals themselves remained inside their containment. All 15 full-time employees, plus four new part-timers, are on the job, even though four who either lost their homes or had severe damage have returned after taking time off to relocate their families.

Incitec eyes coal gas for Indonesia

Australia, Indonesia, News Briefs

Melbourne-Incitec Pivot Ltd. said June 26 it intends to conduct a feasibility study to consider the construction of a $700-$800 million coal gasification plant in Indonesia to supply feedstock to three existing ammonia and urea plants. The study is to be complete in first quarter 2008. Incitec says the three facilities have not been able to produce at capacity due to a natural gas shortage. Current annual production is put at 300,000 mt/y, versus capacity of 1.7 million mt/y. Incitec would provide the coal gas in exchange for an ammonia and urea offtake agreement. The coal gas would supply two state-owned facilities of PT Pupuk Iskandar Muda and one owned by PT Asean Aceh Fertilizer.

Uhde signed for new Algerian project

Egypt, News Briefs

Cairo-Orascom Construction Industries said June 25 that Sorfert Algerie, a joint venture between OCI and the Algerian state-owned oil & gas company Sonatrach, has signed an agreement with Uhde GmbH to design, develop, and construct a world class fertilizer complex located in the industrial zone of Arzew, near three major Algerian ports on the Mediterranean coast, for a total value of EUR 1.17 billion + US$160 million. The complex will consist of an ammonia/urea production unit of 1.1 million mt/y and a second ammonia production unit with a capacity of 0.77 million mt/y. The first unit is expected to start operations end 2010, and the second unit will start operations six months later. OCI Algeria, OCI’s Construction Group subsidiary and one of Algeria’s largest construction contractors, is expected to perform all onshore works on the new complex. Sorfert was incorporated in early 2007 as a joint venture between OCI (51 percent) and Sonatrach (49 percent). “We are extremely proud of our partnership with Sonatrach and its management team. The project is now on track to be Algeria’s largest fertilizer producer and geared to be a major exporter on the Mediterranean,” said OCI CEO Nassef Sawiris. In addition to its investment in Sorfert, OCI is the largest shareholder in Egyptian Basic Industries Corp., which is currently constructing a state-of-the-art ammonia plant in Egypt with a production capacity of 0.7 million mt/y. The EBIC plant is scheduled to start operations in mid 2008.

Mosaic prepays $150 M in debt; ratings boosted

News Briefs, Northern Plains

Plymouth, Minn.-The Mosaic Co. has announced that it is notifying the lenders under its senior secured bank credit facility of its election to prepay $150.0 million principal amount of term loans on June 29, 2007. This prepayment is in addition to the $250.0 million previously prepaid on May 1, 2007. The prepayments are being made from available cash generated by the ongoing business operations of Mosaic and its subsidiaries. Mosaic considers the prepayments to be a significant step in its plan to reduce outstanding borrowings, strengthen its balance sheet, and achieve investment grade credit ratings. Fitch Ratings was watching, and removed Mosaic from its Ratings Watch Negative as a result of the prepay; Fitch now has Mosaic on stable. It had taken the negative action due to the brine flow problem Mosaic had announced earlier in the year. The inflow problem has abated, and Fitch says it is satisfied that the mitigation efforts at the mine are now complete and there is no longer a threat to future earnings and cash flow. Brine inflow has declined from an initial estimate of 20,000-25,000 gpm to less than 4,000 gpm. Fitch said the mine is currently capable of pumping 12,000 gpm, far above mine requirements. The mine, which recently completed a 1.1 metric mt expansion, is currently operating at near full capacity of 5.3 million mt per year.

ICL buys Supresta

Israel, News Briefs

Tel Aviv-Israel Chemicals Ltd. said June 25 that it has entered into a definitive agreement to acquire U.S.-based Supresta LLC, the world’s largest producer of phosphorus-based flame retardants and other products made from phosphorus. The purchase price is $352 million, subject to certain adjustments – mainly working capital. The consideration will be paid in cash upon closing of the transaction. ICL is financing the purchase from its own resources and from existing bank credit lines. After the acquisition, Supresta will become part of the ICL Industrial Products segment, giving the segment annual revenues of approximately $1.1 billion (based on 2006 data). Supresta was established in 2004, when it was bought from Akzo Nobel by a portfolio company of Ripplewood Holdings LLC, a U.S.-based private equity firm. Supresta employs more than 300 people in two plants, one in the U.S. and one in Germany. It manufactures more than 80 phosphorus-based products used in industrial applications.

Toyo, Ferrostaal, VEC get Pequiven contracts

News Briefs

Tokyo-Toyo Engineering Corporation, MAN Ferrostaal A.G. (MFS), and a consortium formed by two Venezuelan engineering contractors – VEC Ingeniería y Construcción (VEC) – have jointly been awarded a contract from Petroquímica de Venezuela, S.A. (PEQUIVEN) for a large-scale fertilizer project in Venezuela. Scope of work under the contract includes grant of license, engineering, procurement of equipment and materials, construction, and commissioning assistance on a lump sum turnkey basis. The project is scheduled to be completed in the second quarter of 2010. The natural gas-supplied facility will serve the domestic market. This complex is composed of an ammonia unit (1,800 mt/d), urea unit (2,200 mt/d), and utility and offsite facilities. TOYO will take charge of the design and construction of the urea unit based on its own technology to be licensed for the project. An ammonia production technology will be licensed by Kellogg Brown & Root. The project site is adjacent to the existing Moron Petrochemical Complex of PEQUIVEN in Moron, Carabobo State, Central Region of Venezuela, which is approximately 150 km west of Caracas. Toyo said this is its third project with MFS, following an ongoing fertilizer project in Trinidad & Tobago and methanol in Oman.