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Gold/Mining/Energy : Gasification Technologies -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (112)	11/19/2005 7:56:33 AM
From: Dennis Roth	Respond to of 1740

Step closer to coal By 2010 Agrium, Usibelli expect to replace gas with coal as feedstock for Nikiski plant Alan Bailey Petroleum News Staff Writer Vol. 10, No. 47 Week of November 20, 2005 petroleumnews.com Agrium announced Nov. 16 that it and Usibelli Coal Mine have completed the first part of a study into the use of a coal gasification plant to generate feedstock for the company’s fertilizer plant in Nikiski, Alaska. The evaluation indicated the plant should be workable and that a complete feasibility study is justified. If the Blue Sky Project goes ahead the coal gasification plant would completely replace the use of natural gas at the fertilizer plant, perhaps by 2011. Faced with dwindling supplies of natural gas from Cook Inlet, the plant would in effect replace increasingly expensive natural gas with plentiful supplies of Alaska coal. “We believe this proposal contains a lot of merit,” Bill Boycott, general manager of Agrium Kenai nitrogen operations, said. “We plan on working with a number of partners to evaluate the potential to commercialize one of Alaska’s largest natural resources in an environmentally responsible manner.” Preliminary engineering Two engineering firms, Black & Veatch and Uhde, have worked on the preliminary engineering of the proposed plant. And Agrium has discussed with Shell that company’s proprietary coal gasification technology. Agrium has also been working with the U.S. Department of Energy and Alaska’s congressional delegation, Boycott said. “The Energy Bill that was passed this year has significant incentives for the utilization of coal gasification,” Boycott said, “… The Department of Energy is actually embarking on a study within the next two weeks to look at exactly this opportunity in the Cook Inlet relative to our facility.” At present, because of natural gas shortages, Agrium is only able to operate the Nikiski fertilizer plant at half capacity and has only secured gas supplies up to October 2006, Boycott said. The gasification plant would enable the fertilizer plant to operate at full capacity and would effectively double the size of Agrium’s Nikiski industrial complex. A coal-fired electricity power plant that would power the gasification plant could export up to 250 megawatts of excess electrical power into the Kenai electricity grid. Oxygen and coal Gasification of coal involves combining the coal at very high temperatures with pure oxygen, separated from air, to form hydrogen and carbon monoxide. The carbon monoxide and hydrogen would be further refined into feedstock for the fertilizer plant. The process of removing oxygen from air leaves nitrogen, another feedstock for generating ammonia and urea in the fertilizer plant. The process also generates carbon dioxide which Agrium could use in the production of urea and sell for use in oilfield enhanced oil recovery operations. The only other product from the plant would be an inert, environmentally harmless slag that could be used for applications such as road construction. “(Coal gasification) is a very mature process and one that’s used all over the world,” Boycott said. “(The process) has seen a lot of improvements and developments over the last few years.” Boycott and Steve Denton, vice president for business development for Usibelli, have just returned visiting an operational, state-of-the-art gasification plant in the Netherlands, to assess the issues associated with operating this type of plant in Alaska. “The technology is extremely clean,” Boycott said. “In fact we can look at the potential for emissions that are lower than power generation in a natural gas-fired unit.” Two coal fields Coal for the gasification plant would arrive in Nikiski by barge and would come from Usibelli’s coal mine in Healy and from the huge Beluga coal field on the west side of the Cook Inlet. The Beluga coal is particularly conveniently located for supplying the Nikiski plant. Healy coal would be shipped by railroad to Anchorage or Seward for barging to Nikiski. “We’re talking about a complex that will consume roughly 4 million tons a year of coal and produce 2 million tons a year of fertilizer for sale into the Pacific Rim,” Boycott said. The two coal fields contain proven reserves that could easily supply the gasification plant with coal for 100 years, Denton said. “We’re not coal supply limited,” he said. Plant could close in April 2006 Boycott said the remainder of the first phase of the project, scheduled for completion in April 2006, involves finishing the preliminary process design and refining the preliminary cost estimate. “The integration of this new complex with the existing operation needs to be defined in more detail,” Boycott said. As part of this project phase the project team will also complete the required environmental scoping. “We have completed a first phase of screening of the required permits and what it would take to execute this project, but that needs further definition,” Boycott said. Agrium will also assess the financial structuring of this large, complex project and the company anticipates seeking partners to help fund the project. “We now believe we have something of substance, which is why we are … announcing that we are moving into the next phase of development of this project,” Boycott said. But a decision to go forward beyond phase one will depend on funding being in place. “We’re prepared to embark on significant expense in mine development and detailed engineering for the complex,” Boycott said. If Agrium fails to find gas supplies for the existing fertilizer plant after October 2006 the plant will have to close until the gasification plant goes into operation, Boycott said. “If this project is going to proceed and we are unable to secure additional gas beyond October of ’06 we’d be looking at additional layoffs,” Boycott. “It obviously wouldn’t be all of our people because we would need some folks on site to take care of the equipment that’s there and also obviously for the development of the project.” And Boycott emphasized that the ramp up of construction of the new plant would require large numbers of contract workers. Alaska Gov. Murkowski expressed particular gratification that someone had found a practical use for the Beluga coal and that Agrium had found a means to achieve a long-term, sustainable future for the Agrium nitrogen facility that forms such a critical part of the economy of the central Kenai Peninsula. “It’s significant because it marks a major breakthrough to utilize the huge coal reserves that we have in Alaska, particularly in the Cook Inlet area,” Murkowski said.

To: Dennis Roth who wrote (112)	11/29/2005 7:54:01 AM
From: Dennis Roth	Respond to of 1740

New fuel may allow Agrium plant to run at full throttle By Tim Bradner Alaska Journal of Commerce alaskajournal.com Web posted Sunday, November 27, 2005 Agrium U.S. Inc. hopes to switch its Kenai fertilizer plant's feedstock from natural gas to coal, a move that might allow the plant to eventually return to its full production rate of 2 million tons per year of ammonia and urea fertilizer. The plant is now producing at half capacity due to gas shortages. If the project moves ahead it will still take several years to make the change, and operations at the plant may still have to be shut down if additional supplies of natural gas can't be contracted, said Agrium's Alaska manager, Bill Boycott, in a Nov. 16 briefing. Agrium announced Nov. 16 it is considering installation of a coal gasifier at its Kenai fertilizer plant. If such a facility is built, along with a related power plant, it would approximately double the physical size of the Agrium plant in Nikiski, north of Kenai, Boycott said at the briefing. The company's study is independent of a U.S. Department of Energy study of coal gasification at the plant. Agrium has had a conceptual feasibility study of coal gasification underway for about six months and is encouraged by the results so far, Boycott said. It hopes to complete the study by April and then make a decision whether to proceed with the project, he said. Boycott said the company is working with Alaska coal producer Usibelli Mine Inc., Kansas-based engineering firm Black & Veatch, and Uhde, a German engineering company. The gasification plant could be completed by 2011. The timetable is aggressive because of deadlines in the recently enacted federal energy bill for grants and loans to aid coal gasification projects, Boycott said Meanwhile, the DOE has contracted with Science Application International Corp. for a $490,000 study of a gasification plant located at the Agrium facility. The DOE study will proceed independently of Agrium's effort and will also look at feasibility of using carbon dioxide that will be produced in the gasification process for enhanced oil recovery projects in nearby Cook Inlet oil fields. In such a project, the carbon dioxide would be injected into the oil wells to force more oil to the surface. Teams working on both studies are expected to meet in early December to coordinate the work, Agrium spokeswoman Lisa Parker said. Boycott said the conceptual feasibility study will consider a base case of 4 million tons of coal consumed yearly in two coal gasifiers, with a 350-megawatt power plant built adjacent to the gasifier complex. The gasifier and fertilizer plant would use 100 megawatts, which would leave 250 megawatts to be sold into the regional electric grid, he said. Steve Denton, vice president for Usibelli Mine, said his company is working with Agrium in an analysis of coal supply options. Usibelli operates a mine in Healy, in Interior Alaska, and coal could initially be transported to the Agrium plant by rail and barge from the existing mine, Denton said. The best option, however, is for coal to be supplied from undeveloped coal deposits at Beluga, on the west side of Cook Inlet 30 miles from the Agrium plant. Coal leases at Beluga are held by two groups, Placer Dome U.S. and the Bass-Hunt group. Plans for a coal mine at Beluga have been made and permits have been secured, but neither leaseholder has been able to secure commitments from customers to proceed with mine development. By coincidence, the power available for sale to the grid from the project could come when the proposed Pebble copper-gold mine will be in its initial phases of startup. Pebble will require 275 megawatts of power supply. Homer Electric Association is working with Northern Dynasty, the company developing Pebble, on a plan to provide power from the Kenai Peninsula by way of a submarine cable across lower Cook Inlet. Agrium has a troubled history with its plant at Kenai. The facility was built by Union Oil of California in 1969 as a way of commercializing large Cook Inlet gas resources, which at the time had no markets. Unocal expanded the plant in 1975 and sold it to Agrium in 2000. In 2002 Agrium began experiencing shortfalls in gas delivered by Unocal under a long-term supply contract that was part of the sale agreement. Litigation over the long-term contract resulted and a settlement agreement ultimately resulted in Unocal paying Agrium $35 million in compensation for reduced sales because of the supply shortage. The settlement also provided for a termination of the long-term contract on Oct. 31, 2005. Last January, Agrium announced that it would close the plant if it was unable to secure additional gas supplies at a price it could afford. The company also issued requests for proposals from Cook Inlet gas producers for supplies beyond Oct. 31. Neither Agrium nor Unocal has disclosed the price of gas in the long-term contract, but independent sources have determined it at $1.20 per thousand cubic feet (mcf) - a figure that Agrium has not disputed. In its request for new gas supply, Agrium said it would be willing to pay up to $3 per mcf. The company was able to secure additional commitments of gas from several local producers at an undisclosed price, but Boycott said the contracts are short-term and will expire next November. Agrium is now working on securing additional commitments for gas, but if those cannot be obtained the plant will have to be shut down while the company works on its conversion to coal as a source of feedstock, Boycott said. Tim Bradner can be reached at tim.bradner@alaskajournal.com.