29.0°

The complex employs about 230 workers. Worldwide, Agrium employs around 4,800.

The facility is operating at less than 50 percent capacity.

Agrium President and CEO Mike Wilson blamed Unocal, with which Agrium has an ongoing, unsettled dispute over gas supply.

"We have been unsuccessful in reaching a commercial settlement with Unocal on reasonable terms," the chief executive officer said in a press release. "Under the circumstances, we feel it is prudent to adjust the carrying cost of our Kenai facility to reflect the negative effect of Unocal's failure to deliver sufficient gas to meet plant requirements, which we believe is a breach of their contract. We are aggressively pursuing our claims against Unocal through the arbitration and litigation process, with an arbitration hearing scheduled to commence in May of 2004."

Agrium said the carrying-cost adjustment was calculated using gas supply indications from Unocal and did not assume significant alternative gas supplies because no long-term gas contracts had been arranged.

However, recent local gas discoveries, some of them by Unocal, show significant gas resources exist in the Cook Inlet region. Agrium said it was continuing "to work with the state of Alaska and gas producers to maintain plant operations and our employee base in the region."

The Nikiski complex includes two urea- and two ammonia-manufacturing units. Agrium said it expects to operate one of the plants, composed of one urea and one ammonia unit, through the winter, which represents about 50 percent capacity. The company plans to increase production during the summer as additional gas becomes available.

Looking ahead, the company said it is assuming operation of one plant through 2005, but beyond that, the outlook is uncertain.

Agrium continues to claim that Unocal has additional gas that is contractually committed to the Kenai facility.

"Unocal is meeting all of its contractual obligations to Agrium and will continue to do so," Unocal spokeswoman Roxanne Sinz told the Peninsula Clarion last week.

Agrium's Alaska operation has undergone major restructuring since spring. Between April and June, the firm laid off 65 workers "to improve the facility's efficiency and operating costs for global and export competitiveness and in light of the current gas supply issues with Unocal," the company said.