Agrium cuts valuation for Alaska plant

Allen Baker

Petroleum News Contributing Writer

Agrium plans to take a charge of $140 million (U.S.) in the fourth quarter to write down the value of its Nikiski, Alaska, fertilizer plant. The Calgary-based corporation made the announcement Dec. 2. When Agrium bought the ammonia and urea plant from Unocal in 2000 a long-term natural gas supply contract was part of the deal. But the two companies have been at odds over Unocal’s responsibilities under that deal, and Agrium has filed a lawsuit charging breach of the contract. An arbitration hearing is scheduled in May. But for this winter Agrium expects to idle half of the plant, increasing capacity again next summer as local heating demand declines and the gas market loosens up. Agrium says Unocal has indicated it can only provide gas to operate the plant through the end of 2005, even at lower capacities. Just how much gas Unocal has available to supply the plant is the crux of the dispute between the two companies.

That issue has been sharpened by a number of recent gas discoveries on the Kenai Peninsula, including Unocal’s November announcement that its 100-percent owned Happy Valley field near Ninilchik was estimated to contain 75-100 billion cubic feet of recoverable gas.