Agri-Chem Corporation

Case Study 2: Agri-Chem Corporation- Curtailment Plan

Introduction:

Due to the heat wave in the summer of 1980, there was a sever shortage of natural gas in the Houston area. That is why in June 1980 Enerco the major producer of natural gas in the South-Gulf Coast region has decided that in the case of a shortage in natural gas, Enerco will enforce "rolling brownouts" which is temporary and periodic curtailments of natural gas supplies based on the level of priority defined by the Federal Power Commission. The priorities are stated as:

First Priority: Residential and commercial heating and cooling

Second Priority: Commercial and industrial firms that use natural gas as a source of raw material

Third Priority: Industrial firms that use natural gas as a boiler fuel

According to Mr. Ben Elliot from Enerco, Agri-Chem Corporation's uses fall within the second and third priority classifications set forth be the Federal Power Commission. Therefore, as a staff we need to study and analyze the information we have on our hands and decide which complex that the company produces will be the least affected by a natural gas curtailment and what production levels will maximize profit for the company .

Below are two different charts that reflect each complex's production rate, impact on profit, consumption of natural gas and total capacity.

Below are some charts that analyze in detail 3 different capacities at which the company may be forced to run with.

Definitions:

Ð'* Optimal capacity of 100%: the company runs at full capacity without any natural