Nucor Corp., which is building a $750 million direct-reduced iron plant in St. James Parish, will pay Encana Oil & Gas Inc. a portion of costs, plus interest, to drill onshore natural gas wells.
The agreement effectively locks in a reliable, low-cost supply of natural gas for at least the next two decades, the company said.
The Nucor plant under construction in Convent is the first phase of what could eventually be a $3.4 billion facility with 1,250 employees by 2019. Other stages of the project call for a second direct-reduced iron plant, a pellet plant and a blast furnace. The final stage of the project calls for Nucor to build a $750 million steel mill.
The first phase should go online in mid-2013, creating a “significant increase in Nucor’s usage of natural gas,” the company said in Tuesday’s announcement.
“The agreement will ensure a sustainable competitive advantage in natural gas costs for Nucor’s direct-reduced iron facility currently under construction in Convent,” the company said in a news release.
The company pointed out that while it isn’t possible to guarantee production volumes, the wells will be drilled in areas with proven reserves. Also, wells drilled under a previous agreement with Encana have exceeded expectations by more than 60 percent.
Nucor officials said last month that the company had achieved two major milestones in the construction of its direct-reduced iron plant in Convent, and that the steel corporation started hiring for the second phase of its proposed $3.4 billion steel facility.
The company said storage domes have been inflated on the site to hold iron ore and announced the arrival of a furnace vessel, made in Texas and shipped to the construction site via the Mississippi River.
The company said 644 contractors are on-site, with more than 30 percent of them local hires.