Natural Gas and Nitrogen Fertilizer. WSU ALL Extension Conference March 7, 2997 Spokane, Washington

Transcription

1 Natural Gas and Nitrogen Fertilizer WSU ALL Extension Conference March 7, 2997 Spokane, Washington

2 Outline of Presentation Agrium Overview Natural Gas and Nitrogen Fertilizer Production U.S. Impacts to Agrium Options and Alternatives

3 Agrium s History 1931 Cominco Ltd. Enters fertilizer business 1969 Vanscoy Potash Operations opens 1993 Cominco Fertilizers Ltd. Trades on TSE as separate company 1994 Crop Production Services acquired (CPS) 1995 Cominco Fertilizers Ltd. Changes name to Agrium Inc. Argentina Farm Centers open 1996 Agrium listed on NYSE 1998 Rasmussen Ridge Mine acquired 2000 Porfertil S.A. comes on stream 2005 W. Canadian fertilizer distribution assets from Imperial Oil acquired 2006 Nu-Gro fertilizer technology and professional products businesses acquired 1954 Sherritt Gordon Fertilizers enters fertilizer business 1983 Fort Saskatchewan, Alberta plant opens 1994 Sherritt acquires Imperial Oil assets including Redwater Operations 1995 Western Farm Services acquired (WPS) Nu-West Industries acquired 1996 Viridian (Sherritt) fertilizer assets acquired 1999 Kapuskasing Phosphate Mine begins production 2000 Unocal nitrogen fertilizer operations acquired 2004 Astaris Production LLC assets acquired (Nu-West's Conda, Idaho phosphate operation) 2006 Royster-Clark acquired Acquired Pursell Technologies Inc. (PTI)

4 Agrium Throughout the Value Chain Agrium is the only company to reach across entire value chain Agrium Wholesale: $2.3-billion sales Nitrogen, Potash, Phosphate & Sulphate Purchase for Resale Retail Customers Distribution & Storage Agrium Retail: $2-billion sales Largest NA Agricultural Retailer* Distribution & Storage Industrial customer Growers Agrium Advanced Technologies: Growers Leader in Specialty Fertilizers Turf, Home, Garden * Measured by direct to grower sales

5 Production and Distribution Facilities Wholesale and Agrium Advanced Technologies North America Nitrogen Prod. Facility Solution Prod. Facility Phosphate Prod. Facility Phosphate Mine Potash Prod. Facility South America Potash Mine Micronutrient Prod. Facility Granulation Prod. Facility Anhydrous Ammonia Storage Solution Storage Dry Storage Blend Storage Engro Distribution Ammonia Pipeline System Corporate/Wholesale Head Office (Alberta) U.S. Sales Office Agrium Advanced Technologies Prod. Facility Agrium Advanced Technologies Head Office (Ontario)

6 Agrium Retail Centers Approximately 450 retail centers globally Agroservicios Pampeanos S.A. (ASP) Western Farm Service (WFS) Crop Production Services (CPS) Regional Offices Retail Headquarters South American Retail Centers

7 Global Natural Gas Prices

8 Natural Gas Prices in the US Source: EIA

9 U.S. Ammonia Plant Closures and Natural Gas Prices $ MMBtu 5 4 number of plants Source: Blue, Johnson & Associates, Natural Gas Week and The Fertilizer Institute.

10 U.S. Ammonia Industry Number of Companies & Plants operating 4 idle Source: Blue, Johnson & Assoc. and The Fertilizer Institute. Number of Plants Number of Companies

11 U.S. Ammonia Production and Net Nitrogen Imports 16 55% million short tons N % 45% 40% 35% 30% 25% 20% 15% Net Imports as share of Total 10% 2 5% / / / / / / / /06 Ammonia Production Net N Imports (Imports - Exports) Net Imports as share of Total (right scale) Source: U.S. Department of Commerce and The Fertilizer Institute. 0%

12 Index of Fertilizer Prices Paid by Farmers = Source: National Agricultural Statistics Service, USDA.

13 Index of Input Prices Paid by Farmers Jan = Fuels Seed Farm Machinery Fertilizer Wage Rates Ag Chemicals Source: National Agricultural Statistics Service, UDA.

14 U.S. Natural Gas Price $ MMBtu (2005 dollars) ACTUAL Source: Energy Information Administration, U.S. Department of Energy. FORECAST

15 Impacts on Agrium Ammonia Plant Closure Washington: Kennewick Fertilizer Operations 2001 Curtailed Operations Texas: Borger Nitrogen Operations Alaska: Kenai Nitrogen Operations

16 Global Nitrogen Capacity Additions (excl. China) 2006 additions only slightly higher than past 2 years Limited capacity nitrogen additions in 2007 and 2008 World nitrogen capacity of 135 mmt, excluding China 100 mmt Does not account for nitrogen closures: 1.3 mmt in 2004 & 2005 (Million tonnes of Nitrogen) Future capacity additions highlighted in blue = Iran Note: Excludes Chinese capacity additions, nutrient tonnes Sources: Stokes Engineering, IFA, Fertecon, British Sulphur, The Market, Fertilizer Week, Green Markets, Agrium

17 Snapshot of Key Prices Ammonia Pacific Northwest US $/mt Urea (granular) Pacific Northwest U.S.$/mt Corn No. 2 Yellow U.S.$/bu Wheat No. 2 Soft Red U.S.$/bu Natural Gas NYMEX October October

18 What Options Are Available to Replace Natural Gas? Alternate feedstock to natural gas: Coal Petroleum Coke More efficient use of Nitrogen: Controlled release fertilizer Increase imports of ammonia/urea: Already underway, trend identified earlier

19 ESN and Agriculture ESN Control release fertilizer that matches nitrogen release with crop needs Enhances crop yields Improves economic return for farmers Enables higher protein levels in grain which achieves premium in the marketplace Reduced on farm labor eliminate split applications Increased flexibility in timing of application Increases carbon sequestered on farm Reduces on farm GHG emissions via reduced transport

20 Growers- ESN On Farm Advantage Relative corn yields for ESN and urea and UAN, US Corn Belt,

21 Conclusion Natural gas prices have impacted fertilizer operations the past ten years Current tight supply/demand for fertilizer U.S. demand for nitrogen fertilizer remains strong increase in corn prices & acreage planted Alternatives must be considered

22 Natural Gas and Nitrogen Fertilizer Questions? WSU ALL Extension Conference March 7, 2997 Spokane, Washington

23 Agrium & Royster-Clark Retail Centers 480 retail centers globally 35 South American Retail Centers Existing Agrium Retail Royster-Clark Retail

24 Monthly Average Urea Price Western Canada Urea 350 NOLA Urea Black Sea Urea Oct-06 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 US$/tonne Source: Blue Johnson & Associates

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26 Energy Intensity - Nitrogen Production Gj/ tonne of N production AN Production NH 3 Production Urea Production Gj/tonne production Source: CFI Manufacturing Committee