Unocal may further reduce gas to Agrium

Agrium said June 2 that Union Oil Company of California may further reduce its supply of natural gas to Agrium’s Kenai, Alaska, fertilizer facility. While the timing, volume and duration of these reductions is uncertain, Agrium said Unocal indicated the reductions may occur as early as the summer of 2003.

Agrium said it disputes Unocal’s attempt to unilaterally reduce its gas deliveries to the Kenai facility and continues to pursue legal remedies in regard to Unocal’s reduction in natural gas supply. In addition, Agrium said, it is continuing to have discussions with other potential natural gas producers regarding the supply of natural gas on both a short and long term basis to attempt to offset Unocal’s failure to supply sufficient gas and thereby minimize the impact to employees at Kenai.

In the event Unocal reduces natural gas supply as indicated and Agrium is unable to continue to source additional natural gas from other suppliers, Agrium may be forced to reduce production at the Kenai nitrogen facility to as low as 50 percent of capacity, the company said.

Agrium said in April that it would lay off approximately 65 employees at the Kenai plant over the next several months as a result of an extensive analysis begun in late 2002 “to improve the facility’s efficiency and operating costs” for competitiveness worldwide, “and in light of the current gas supply issues with Unocal.”