Agrium Inc., which has been searching for more than a year for ways to secure natural gas supplies for its Nikiski nitrogen plant in Kenai, AK, said Thursday it has begun a detailed feasibility review on the proposed Kenai Blue Sky Coal Gasification Project. If the project is completed, it could be operational by 2011.

Two weeks ago, the Calgary-based manufacturer obtained enough gas supplies to allow its Kenai facility to operate into 2007. The plant had been scheduled to shut down in October after its gas supply contract with Cook Inlet producers ended (see Daily GPI, Nov. 18, 2005).

Renegotiating a contract for new gas supplies has become an annual endeavor — and never guaranteed, Agrium stated. After announcing last year that it might have to shutter the Kenai plant because of a lack of secure gas supplies, Alaska officials teamed up with the fertilizer manufacturer to evaluate the potential use of coal gasification as a feedstock. Now, armed with a $2 million grant from the Denali Commission and a $5 million grant from the state of Alaska, Agrium will begin the six-month study.

“We greatly appreciate the ongoing support of the Denali Commission and the state of Alaska as we commence this next phase of the Kenai Blue Sky Project,” said CEO Mike Wilson. Agrium, he said, hopes to attract interest from a “group of industry partners” to site the facility.

The Blue Sky Project would use low-sulfur coal mined in Alaska and delivered by barge to produce the feedstock needed for the production plant. To run at full capacity, the Kenai plant needs about 53 Bcf a year. The fuel produced through coal gasification would be more than enough for the facility, and excess capacity could be sold into the Alaska power grid, generating 100 MW of power for converting coal to gas and as much as 250 MW for sale to the Railbelt power grid.

The completed facility would be Alaska’s second largest power plant, second only to Chugach Electric Association’s Beluga plant. The project also could provide excess carbon dioxide that could be used for enhanced oil recovery, said Agrium.

Over the next 12 months, the Kenai facility is expected to operate at about 75% of capacity, operating one ammonia and one urea plant. Annual urea capacity is 640,000 thousand metric tons, and net ammonia capacity would be 280,000 thousand metric tons if the single-train ammonia and urea plants both operated at full rates, Agrium said. When fully operational, the Kenai plant can produce about 1.5 million metric tons of fertilizer a year. It then ships the product by truck to Alaska agricultural and industrial markets, and by ocean-going vessels all over the world.

©Copyright 2006Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.