Agrium looks at impact of gas supplies

Posted: Thursday, November 28, 2002

KENAI (AP) -- Agrium's problem of not being able to get enough natural gas could significantly impact the Nikiski plant, company officials say.

Mike Nugent, the Nikiski plant's general manager, said the plant will have to conduct an evaluation in coming months because the gas situation means it can't run at full capacity. He says prices also are lower in the marketplace.

''We'll probably take a pretty close look at how many employees we have, what projects we undertake and what monies we spend in order to keep our costs as low as we can,'' he said.

The Agrium facility uses hydrogen from gas to produce urea and ammonia, which is sold for fertilizer and used in rocket fuels, glue and plastics.

When Unocal scaled back its supply of natural gas to Agrium, the Calgary, Alberta-based chemical corporation began searching for alternate sources to maintain normal plant operations.

Agrium signed a 10-year contract with Unocal to deliver 155 million cubic feet per day of natural gas until 2009. As of Tuesday, Unocal was providing only 120 million cubic feet per day between November and April, Nugent said.

That is only enough for the plant to operate at about 70 percent capacity, said Agrium spokeswoman Lisa Parker.

Agrium recently announced it had reached a 30-day agreement with a major Cook Inlet oil and gas producer, but didn't name the source at the gas company's request.

Nugent said Agrium currently is exploring both long- and short-term solutions to its current gas shortfall.

''We actually have two efforts going,'' Nugent said, ''one long-term, to establish as many Cook Inlet suppliers as it takes to be able to operate to capacity over the long term. This one is the first step in doing that.''

He said the second step will be to continue to get more short-term relationships. Nugent said the price the company will pay for those short-term contracts ''depends on the supplier, quantity, whether it's interruptible and what the supplier is able to do.''

Bill Popp, the Kenai Peninsula Borough oil and gas liaison, said the price Agrium pays for short-term agreements is going to be key to what happens to the company in the coming months.

''Agrium has been forced into the spot market, which is a much higher gas market. Until they can find a longer solution, the price of gas will produce a longer impact,'' he said.

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