Agrium says shutdown effects ‘not bad’

Company turns concern to acquiring gas to operate past October when current contracts expire

Steve Sutherlin

For Petroleum News

Agrium hasn’t calculated its loss of income from a 10-day shutdown at its Kenai, Alaska, nitrogen fertilizer plant — losses weren’t staggering, and the company is more concerned about extending its natural gas contracts beyond the current expiration in October, says Lisa Parker, Agrium spokeswoman.

Extreme cold temperatures spiked home heating demand and tightened natural gas supplies in the Cook Inlet region in January, prompting Agrium to shut down one plant at the Nikiski complex Jan. 23 and another Jan. 25, after scraping by for a couple of weeks on a marginally sufficient supply of gas. The facility restarted Feb. 2.

Now that temperatures have risen, the company is turning its focus to negotiation with Cook Inlet gas producers for a supply to carry the plant into 2007, Parker said.

In the company’s quarterly earnings conference Feb. 2, Ron A. Wilkinson, Agrium vice president of wholesale, said the company won’t know right away what the future holds for the plant.

“It will be summertime before we can work through things and get commitments from suppliers,” he said, adding that coal gasification is a longer term solution and the company doesn’t expect it to be implemented before 2010, at the earliest.

Wilkinson said earnings were squeezed companywide by high natural gas prices that have risen faster than the price of nitrogen fertilizer. He predicted that unless nitrogen prices rise, supply shortages might arise in some areas during the coming growing season.

Agrium’s Nikiski plant earnings aren’t presently being squeezed because its gas prices are fixed under current supply contracts, Parker said, adding that the effects of the squeeze might be felt in October when the price of gas for the plant will be set anew.

Agrium’s workers weren’t hurt by the shutdown either.

“There were no layoffs as a result of the temporary shutdown,” Parker said.

Workers performed maintenance on the plant and made sure that pipes didn’t freeze up, she said.

Because the plant had already done a scheduled shutdown in October 2005 for a turnaround, it didn’t need to be shut down for maintenance, but the gap in operations did allow workers time to get many tasks completed, she said.

Gas supplies weren’t the only complication for Agrium during the cold snap. Large ice blocks in Cook Inlet delayed the docking of a urea tanker that was scheduled to pick up product from the Nikiski plant in early February, but that delay caused no major disruption. Parker said.

The company said the shutdown was something it had planned for.

“We anticipate a little bit of cold in Alaska,” Wilkinson said.