April 13th, 2024

CF Industries set to boost fertilizer production

By Collin Gallant on August 25, 2018.


Ongoing work this summer by CF Industries at its Medicine Hat plant will boost fertilizer production by 10 per cent — a move to take advantage of rock bottom prices for stranded natural gas — the News has learned.

It’s one of a handful of projects by major industrial interests in the region, which could see others move ahead soon and others announced this fall as provincial incentive programs and long-term green energy contracts are announced.

Fertilizer maker CF Industries hasn’t commented publicly on the massive crane and ongoing work at the site in the city’s northwest, leading many observers to assume it was a general maintenance turnaround.

However the investment is in a series of generally positive news for chemical and utility sectors in Medicine Hat region, and local economic developers are saying the effect it spreading.

Jon Sookechef, of Invest Medicine Hat, tells the News that small business confidence is springing up as companies with major operations in the area are investing.

“It’s a growth market; people are looking at setting up businesses here, and those ‘Moby Dick’ once-in a lifetime industries are creating the knock-on effect,” he said on Friday.

According to Sookechef all major industries are “on the record that they plan to expand when conditions are right.”

That’s partly due to a recovering economy across the province, according to a new report from Reuters, as well as rock-bottom natural gas prices that are attracting capital spending even when weighed against drastic tax cuts in the United States.

The news agency published expanded coverage of the province’s new push towards petrochemical diversification and the opportunities in the sector provided by a glut of extremely low-cost natural gas.

CF Industries officials are quoted stating low and flat price for gas allows them to make up extra freight costs, and the new production is destined for the U.S. midwest.

Continent-wide prices for natural gas are dropping to historic lows as major volume is brought online via shale gas development and hydraulic fracture oil drilling.

It’s especially pronounced in Alberta however, where volumes are currently trading at one-quarter the price of gas.

The Alberta spot price for one gigajoule of gas on Friday was C$1.01, compared to the Henry Hub spot price in US$2.97. That marks a differential of almost C$3 when exchange rates are factored in.

CF Industries has said it won’t discuss specifics of its capital spending plan, but recently outlined it had budgeted up to US$500 million for maintenance at all its plants.

The low price of gas as a feedstock widens its margins, pushing the stock to an all-time high this week, and is similarly boosting electricity producers bottom lines.

The City of Medicine Hat recently tripled profit forecasts for its power plant this year, partly due to a new data processing centre, announced in March and built for approximately $100 million this spring. Next year the planned Aurora Sun cannabis plant is expected to come online and use a similarly huge amount of power.

Up to C$325 million is expected to be spent on constructing the Whitla Wind farm south of Bow Island starting this fall.

According to its winning bid in Alberta renewable power auction last fall, the facility, and another near Oyen owner proposed by EDP Renewables, must be in service by the end of 2019.

Two events this fall could add to the windfall for the region. A handful of green energy producers with local projects are taking part in second round of low-price energy auction this fall. Those plants will need to be operating by 2021.

Also, the Alberta Ministry of Energy will accept applications to a second round of the Petrochemical diversification grant program are due on Oct. 1, which results and awards of $500 million in late 2018 or early 2019.

Local methanol producer, Methanex, has said it is watching the second round closely, and like in the first round in 2016, will submit its plan to twin the Medicine Hat facility at a cost of about C$1.3 billion.

This summer, the company announced that it would dedicate about US$400 million towards final engineering work at a first-in-line expansion at its Geismar, Louisiana plant location.

It previously said Medicine Hat that it hopes to partner with either a competitor of supply company on the facility and if so, capital cost savings could move Medicine Hat twinning ahead as well.

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