Critical Considerations for Global Gas-to-Power Deployment Success
After the Fukushima disaster in 2011 and the subsequent sunsetting of many of Japan’s nuclear facilities, the Japanese economy’s reliance on fossil fuels intensified and altered the country’s energy mix. In the following years, major suppliers profited from rising demand in Asian markets and promoted the benefits of liquefied natural gas (LNG). Its ability to be transported easily with minimal infrastructure requirements, as well as drastically lower prices compared to domestic or stranded gas prices, led to a tremendous buildup of liquefaction capacity globally. Consequently, the increased supply on the market also caused prices to drop dramatically.
Looking to take advantage of the LNG oversupply and low pricing, many developing regions are now establishing gas-to-power markets that can accommodate imported supply. Converting to gas power, particularly in regions that have historically run on diesel fuel oil, can carry additional economic benefits. In some areas, conversions can cut electric costs in half.
It is a lucrative time to invest in gas-to-power projects, but developing long-term stable markets will rely heavily on effectively moving LNG to these emerging regions and on the economical configuration of gasfired generation infrastructure.
Territories in the Caribbean are seeing opportunities to lock in long-term LNG supply contracts and build integrated LNG import facilities and combined-cycle power plants. In Puerto Rico, Ecoeléctrica’s Peñuelas plant project, commissioned in 2000, was helping to cut the country’s reliance on oil and coal. Black & Veatch supported the development of this combinedcycle power plant and LNG regasification units, the first project in the territory to produce electricity with natural gas. The regasification facility integrates waste heat vaporization with combined-cycle turbine operation-one of the most efficient methods to regasify LNG. However, the devastation wrought by Hurricane Maria, a Category 5 hurricane that made landfall on Puerto Rico in late September 2017, has since set back efforts within the island nation.
In Brazil, a 1,516 MW combined-cycle power plant is being built in conjunction with a new natural gas floating storage and regasification unit (FSRU). The Porto de Sergipe plant is being built by Centrais Elétricas de Sergipe (CELSE), a consortium formed by eBRASIL and Golar Power. The plant will include advanced technology gas turbines that run on LNG power. It will be the largest natural gas power station in South America when fully commissioned in 2019.
“When complete, the Porto de Sergipe project will serve as a preeminent example of efficient and economical LNG-to-power integration,” said Eduardo Antonello, Chief Executive of Golar Power. “To successfully deploy a project of this magnitude, collaboration with experts with strong development, technical design and execution expertise is critical to meeting cost and schedule goals.”
If LNG import terminals and natural gas-based combined-cycle plants are designed and integrated appropriately, energy providers can experience up to a 10 percent increase in power generation capacity, increased power plant efficiency and lower operating expenses, with a minimum cost impact. In addition to a significant reduction in a project’s overall capital cost and increased efficiency of LNG import facilities, there are also environmental benefits. In locations with colder winters, vaporized LNG is warm enough to meet distribution pipeline minimum supply temperatures for more efficient transport to power consumers.
Integrated LNG-to-power projects can be complex endeavors, and successful deployment will require well-defined plans established early in development. Comprehensive project execution planning and collaborating with gas distribution companies in addition to power generation can also help capture necessary funding for LNG supply and import infrastructure for maximum return on investments.
Advantages of Floating Applications
Floating LNG (FLNG) applications carry several advantages over onshore LNG import terminals because of their flexibility and quicker deployment schedules. FLNG and FSRU projects reduce potential issues due to shoreline impacts, size and complexity considerations in development.
In India, Black & Veatch is working with Swan LNG Private Limited on India’s first FSRU LNG import terminal in Gujarat. The Jafrabad FSRU project includes construction of a jetty topside that will receive LNG from carriers and also includes onshore support facilities. The new FSRU will be moored to a fixed jetty and will regasify imported LNG to enable distribution by pipeline and road tanker. Scheduled for completion in 2020, the project will boost the country’s LNG import capacity and help develop the Indian gas market, which is projected to be one of the fastest growing in the world during the next two decades.
The LNG-to-Power Independent Power Producer Procurement Programme (IPPPP) underway in South Africa is also providing a framework for similar projects that may be ideal for deploying floating solutions. Closed-cycle gas turbine projects in Richards Bay and the Coega Industrial Development Zone are slated to add up to 3,000 MW of power capacity. Both ports will be equipped with LNG import and regasification facilities. Existing transmission infrastructureand the need to move new power supply are important factors for each project site’s generation and storage elements.
From a technology perspective, the installationof an FSRU should be considered at both sites. Floating applications in South Africa can reduce execution and startup time, mitigate siting constraints and allow for the shipment of gas to multiple locations. Business decisions must be carefully weighed, and sound planning and implementation, supported by proven project controls and management, can enable gas to become a more prominent, economically viable energy source for South Africa.
Overcoming Barriers in Southeast Asia: Indonesia
For island nations such as Indonesia, planning for integrated LNG receiving terminals and gas-fired generation can help balance energy portfolios and meet environmental regulations. More LNG infrastructure will need to be developed to meet these objectives and increase access to gas supply across the country. As in Puerto Rico and Brazil, Indonesia could gain from co-locating LNG and power infrastructure, but such projects will require additional planning considerations, collaboration with local governments and engagement with nontraditional stakeholders for successful deployment.
LNG oversupply throughout Asia has changed dynamics in the region, encouraging buyers to renegotiate long-term contracts and boosting spot trade. In Indonesia, this has strengthened the case for smaller and more distributed LNG receiving terminals for combined-cycle generation. Unlike landlocked areas, co-located facilities in Indonesia can use and share heat, water and cold energy. The power plant can work as a “sink” for the LNG cold produced in the vaporization process. As a result, less seawater would be needed to regasify LNG, thereby reducing capital, operating costs and impacts to the environment while boosting the available output from the power plant. Investors need to plan strategically for these integrated projects to overcome barriers, lessen risks and bring plans to final investment decisions. A recent memorandum of understanding has been signed to provide LNG imports to Bangladesh, reinforcing the importance of increasing investment in LNG infrastructure in Indonesia.
Markets in nearly every continent are looking to use natural gas power to diversify energy portfolios and support economic development. The viability of LNG from a price perspective incentivizes nations that run solely on fuel oil or that have limited existing infrastructure for fossil fuels. For long-term deployment success, developing projects will need to consider both the economics of converting power generation from fuel oil to LNG, and evolving global trade trends.
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