Various oil projects were announced over the past several days. To receive these updates, plus dozens more, directly to your inbox, please subscribe to the CapProCon newsletter.
Last week Total, Borealis, and Nova Chemicals said that affiliates of the three companies will form a joint venture focusing on petrochemicals on the US Gulf Coast.
The joint venture will include the under-construction 1 mn tonne per year ethane steam cracker in Port Arthur, Texas; Total’s existing polyethylene 400 kilotonne per year facility in Bayport, Texas; plus a new 625 kilotonne per year Borstar polyethylene unit at Total’s Bayport site, following a decision on the outcome of an acceptable EPC contract.
LTHE and Saipem deals
Meanwhile, L&T Hydrocarbon Engineering (LTHE) secured a USD341.79 mn EPC contract from Al Dhafra Petroleum Operations Company for field development in Abu Dhabi. The scope of the contract includes EPCC of flow lines, gathering facilities and pipelines to transfer crude oil and gas from Haliba fields to a processing facility at Asab. It also includes the installation of 132 kV and 33 kV overhead electrical transmission lines.
Finally, Saipem won a contract valued at approximately USD750 mn for the EPCC of new facilities at Duqm refinery in Oman.
Majors, national oil companies (NOC) and independents are all scrabbling to get a slice of Mexico’s burgeoning oil and gas industry, according to analyst Wood Mackenzie.
Simon Flowers, chairman and chief analyst, said Mexico is ”as hot as a habanero, the spiciest of Mexican chillies”. The country is vying alongside the top drawer of proven oil provinces for scarce investment capital, such as Brazil and Iran.
Mexico’s proven reserves of 64 bn barrels of oil equivalent (boe) in fields discovered so far, is similar in scale to global giants like Norway, Brazil and the UK.
In the northern part of the Gulf of Mexico, in the deepwater Sabina Rio Grande play, Pemex has already made a series of discoveries in the Perdido area. Each may hold up to 400 mn barrels of oil. Further south in the Salinas Sureste basin, US independent Talos last year found 500 mn barrels at Zama.
Also in the south of the country in the Tampico Basin, explorers are attracted by structures offshore, similar physically to recent onshore discoveries, which could make for giant light oil or gas finds.
“Investment in recent decades has been comparatively modest, barely scratching the surface of many plays. There may be much more oil and gas yet to be found,” said Flowers.
Mexico attracts FDI
Mexico has recognised that it needs external investment capital for its oil and gas industry to flourish. Flowers said oil exports’ contribution to Mexico’s GDP has halved from 6 percent in 2004 when production peaked at 3.8 mn bpd to just three percent today. Oil production this year will be 2.1 mn bpd and will still be in decline into the early 2020s. NOC Pemex was not in shape to turn things around on its own.
The Mexican government has taken bold steps to create a favourable regulatory and fiscal environment, in bid to draw investments. The 2013 Energy Reform was a critical step, opening up Pemex’s monopoly to private investment. One measure of success is the number, quality and range of companies now active in the country’s upstream space.
“Over 80 E&Ps, including all the majors, numerous NOCs, independents, and a growing cadre of domestic small-caps have entered the sector in successive licence rounds. The integrated players see opportunities beyond upstream, in the gas value chain and downstream.”
Wood Mackenzie suggests that domestic political stability under President Pena Nieto has also been a key factor in the progress achieved.
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The Capital Projects and Contracts e-newsletter contains dozens of project updates. See below two notable projects approved in the last week.
Mitsubishi Hitachi Power Systems (MHPS) has received a full-turnkey order for the EPC of a 5,300 MW natural-gas-fired power plant. The project is planned by a joint venture of Thailand’s Gulf Energy and Mitsui & Co. The units will be installed at two plants located near Bangkok, with commercial operations due to begin in 2021 and 2023, respectively.
The plans call for two 2,650 MW gas turbine combined cycle (GTCC) power plants incorporating eight M701JAC gas turbines.
Meanwhile in South Korea, GE Power has been awarded a USD320 mn contract through its joint venture, KAPES, by Korea Electric Power Corporation (Kepco). It will provide equipment and expertise for a 4 GW HVDC transmission link from a power complex located in South Korea (pictured).
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A whole host of developments can be seen in the latest Capital Projects and Contracts (CapProCon) e-newsletter. Here’s a taster of what included in our most recent edition..
CG/LA Infrastructure has released its 11th annual Strategic 100 Global Infrastructure Report, which features a list of 100 projects representing over USD644 bn in expected investment.
In 2018, the transit sector presents the highest number of opportunities with 20 projects with a combined value of USD115 bn. High-speed rail is second with seven projects at a value of USD106 bn. Bridges and tunnels come in third place with almost USD74 bn of investment spread across 14 projects.
Elsewhere, in power generation, Mitsubishi Hitachi Power Systems (MHPS) received a full-turnkey order for the EPC of a 5,300 MW natural-gas-fired power plant in Thailand. Meanwhile, India approved the construction of 12 new nuclear power projects.
In a week where a number of the oil majors reported significant rises in net profitability, CB&I received a letter of award from Abu Dhabi National Oil Company (ADNOC). It will build the Crude Flexibility Project (CFP) , valued at more than USD500 mn, in Ruwais, UAE.
Meanwhile, in South Africa, DRA secured a contract from Exxaro Coal Mpumalanga to construct a 500 tonnes per hour coal handling and preparation plant in Mpumalanga.
The Capital Projects and Contracts (CapProCon) e-newsletter, distributed every Monday, includes dozens more updates and developments. To learn more, click here or email firstname.lastname@example.org
Steve Sawyer, secretary general at the Global Wind Energy Council (GWEC) suggests that 2017 will have been a year of modest growth for the renewable energy sector, although he has entered 2018 with great expectations for renewables.
“Plummeting prices both on and offshore wind means that the appetite for new wind power continues to grow across the globe – although not as evenly or as quickly as we would like.
“In particular the offshore sector is expected to be exciting, with the European market now really hitting its stride, the Chinese market finally reaching escape velocity, and new markets in the USA, Taiwan and potentially a whole list of others (including India) making progress in 2018,” said Sawyer.
US renewables dodge bullet
He said the industry in the USA “dodged a bullet” with the preservation of the production tax credit (PTC) at the end of 2017. He also pointed out that Canada, Brazil, Colombia and Argentina have demonstrated exciting potential. “The impasse in South Africa looks like it might finally end, and we’re going to see the beginnings of new markets in Russia and Saudi Arabia this year, along with build-out in Morocco, Egypt, Kenya and probably elsewhere on the African continent,” he added.
In Europe, Sawyer expects 2018 to be “a year of reckoning in the climate negotiations”, as EU the determines its post-2020 climate targets.
Finally, Sawyer said the renewable energy in Asia, aside from China and India, remains a “tough nut to crack”, although GWEC will be “working on Vietnam and perhaps the Philippines, as well as looking for opportunities elsewhere in the region. The Indian market took a hit this year with a policy gap while the auction system was put in place, but we expect a return to growth in 2018.”
This article on renewables was first reported in the CapProCon e-newsletter. Learn more here!
The US Energy Industry Association’s (EIA) January 2018 short-term energy outlook (STEO) forecasts that natural gas power generation will remain the primary source of the USA’s electricity generation for at least the next two years.
The share of total electricity supplied by natural gas-fired power plants is expected to average 33 percent in 2018 and 34 percent in 2019, up from 32 percent in 2017. The EIA expects the share of generation from coal, which has been the predominant fuel for power generation, to average 30 percent in 2018 and 28 percent in 2019.
Changing power mix
The mix of energy sources used for power generation continues to shift in response to changes in fuel costs and the development of renewable energy technologies. Since 2015, the cost of natural gas delivered to electricity generators has generally averaged USD3.50 per mn British thermal units (Btu) or less, and is expected to remain near this level through 2019. EIA expects the cost of natural gas for electricity generation to remain relatively competitive with coal over the next two years.
The average cost of natural gas delivered to generators in 2018 is forecast to fall 2 percent, while the forecast delivered cost of coal rises 5 percent. These relative price changes should increase the share of natural gas generation in 2018. The costs of both natural gas and coal in 2019 are expected to remain relatively unchanged from this year’s forecast prices.
Power plant operators are scheduled to bring 20 GW of new natural gas-fired generating capacity online in 2018, which, if realised, would be the largest increase in natural gas capacity since 2004. Almost 6 GW of the capacity additions are being built in Pennsylvania, and more than 2 GW are being built in Texas. In contrast, about 13 GW of coal-fired capacity is scheduled to be retired in 2018. These changes in the generating capacity mix contribute to the continuing switch from coal to natural gas, especially in southern and midwestern states.
Wind turbines manufacturer Vestas announced a flurry of turbine orders multiple markets.
Vestas received a 28 MW order from Total-EREN for the Flampouro project located in Greece. It includes the supply and installation of two V117-3.45 MW turbines and six V126-3.45 MW turbines.
It also secured a 279 MW order in Sweden from Eolus Vind. 61 V136-3.45 MW turbines will be supplied to the Kråktorpet and Nylandsbergen wind projects. 13 V136-3.45 MW turbines will be delivered to the Sötterfällan and Anneberg projects.
Vestas also signed a partner agreement with W.E.B to supply its 4 MW platform for future projects in Germany, Austria, Italy, France, Canada, and the US. Meanwhile Ebert Erneuerbare Energien Projekt placed a 28 MW order with Vestas for eight V136-3.45 MW turbines for the Grohnde-Kirchohsen wind park in Lower Saxony, Germany.
Vasa Vind ordered 23 V110-2.0 MW turbines for the 49 MW Munkflohögen wind farm located outside Östersund in central Sweden.
Vestas has received a 96 MW order from Innogy Renewables UK for the Clocaenog Forest wind farmin the UK.
Aquila Capital is set to acquire the 357 MW Valhalla windpower project in Sweden. The project will consist of 85 V136 4.2 MW Vestas turbines. The project will be delivered on an EPC basis.
North American orders
Vestas has received a firm and unconditional order from an unnamed client for a 190 MW project in the USA. Vestas will supply its 4 MW platform. It also received a firm and unconditional order for 87 V136-3.45MW turbines for the 300 MW Henvey Inlet wind project in Ontario, Canada. The order was placed by Pattern Energy Group.
Avangrid Renewables placed a firm and unconditional order for 184 MW of wind turbines. The deal includes 41 V136-3.45 MW turbines for the first phase of the Montague wind project in Oregon.
South America and Asia
Vestas will supply nine V136-3.45 MW turbines to Vientos de Renaico for the 32 MW La Flor wind farm in the Renaico region of central Chile.
Argentina’s Petroquímica Comodoro Rivadavia placed an order with Vestas for the supply and installation of six V117-3.45 MW turbines. Delivery is planned for the second quarter of 2018 and installation is scheduled for the fourth quarter of 2018.
Vestas has signed a deal with Aluar Aluminio Argentino to extend the Aluar wind park. The contract to build the second phase of the project comprises supply and installation of 14 V126-3.45 MW turbines.
Compañía Eólica Vicente Guerrero has placed a 118 MW order with Vestas for the Vicente Guerrero wind park in the state of Tamaulipas.
Watsun Infra Private, a subsidiary of Continuum Wind Energy, has placed a 96 MW order with Vestas for the second phase of the 150 MW Periyapatti wind farm in the state of Tamil Nadu, India. Vestas will supply 34 V100-2.0 MW turbines as well as 14 V110-2.0 MW turbines.
Having started 2017 facing a lack of investment and high volumes in storage, the international oil and gas business saw a steady improvement over the course of the year, with the oil price gradually climbing and now approaching USD65 per barrel.
Some cite the production cut agreement worked out by the Organization of Petroleum Exporting Countries (OPEC) and Russia as being behind this recovery, but underlying factors supporting a continuing price rally are also apparent.
Some commodity investors suggest that oil prices could surge as high as USD110 per barrel this year. Bullish investors point to the fact that inventories continue to fall, with demand forecast to increase this year. OPEC is expected to restrict oil production output until at least the end of 2018.
The US Energy Industry Association (EIA) reported another strong drawdown in crude stocks for the week ending on January 5, 2018. At 419 mn barrels and falling, US crude inventories have not been this low since early 2015.
On the demand side of the equation, OPEC sees demand growing at a brisk 1.5 mn barrels per day in 2018; the International Energy Agency (IEA) expects a softer 1.3 mn barrel per day growth this year.
Encouraged by the rising oil price, there has been talk of restarting previously postponed projects, which would be good news for the project logistics companies that serve this sector.
But there has also been the suggestion that price increases could slowly undermine the willingness of Middle Eastern producers to comply with agreements made with OPEC, which would create further uncertainty in the sector and could negatively impact oil prices.
South Australia premier, Jay Weatherill, has flicked the switch on the world’s largest lithium-ion battery.
The 100 MW battery is paired to Neoen’s Hornsdale wind farm, and will be used to help address the state’s energy woes by providing support to the grid.
Tesla may have been hogging the headlines in the international media with the launch of its new battery-powered trucks. However, earlier this year, Australian tech billionaire Mike Cannon-Brookes challenged Tesla boss Elon Musk to help solve South Australia’s energy problems.
Tesla accepts the challenge
Musk said that if he couldn’t build a 100 MW battery in 100 days from signing the contract, he would provide it for free. The battery was commissioned the unit in just 63 days.
“The completion of the world’s largest lithium-ion battery in record time shows that a sustainable, effective energy solution is possible,” Tesla said in a statement.
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There have been a number of significant power generation projects approved across Europe in the past week. The items below were first reported in the CapProCon e-newsletter. To learn more about subscribing, please follow this link.
Vattenfall, owner of the Dutch utility Nuon, signed a contract for the delivery of 50, N117/3600 turbines with Nordex for installation at Wieringermeer, the Netherlands. The wind turbines will be installed from March 2019 and will be complete come the end of the year.
Meanwhile, Vattenfall selected Siemens-Gamesa to supply 113 turbines, rated at 8 MW each, for three of its Danish offshore wind projects. The three wind farms (Kriegers Flak in the Baltic Sea, Vesterhav Syd and Nord in the North Sea) have a total investment value of close to EUR1.7 bn (USD2.01 bn).
Power generation at Vesterhav Syd and Nord is schedule to start in 2020, with Kriegers Flak expected to enter service in 2021. The joint deal covers design, manufacturing, installation, commissioning, testing and service of the turbines.
Blacksmith Kovačica goes with GE
GE Renewable Energy signed an agreement to provide 38 of its 2.75-120 turbines for the Blacksmith Kovačica wind farm. The 105 MW wind project will be built in the Vojvodina region of Serbia and will be operated by Enlight Renewable Energy.
The turbines, which have a hb height of 110 m, are ideally suited for the medium wind conditions of the Serbian great plains, said GE. The turbines will be manufactured in Europe by GE at Salzbergen, Germany. Blades will be manufactured by LM Wind Power in Spain and Poland.
Cory to deliver London energy park
Cory Riverside Energy has set out plans to build a low-carbon energy park at its site in Belvedere, southeast London.
The company said it had already selected Hitachi Zosen Inova as its engineering, procurement and construction (EPC) contractor, which delivered the existing Riverside Energy Recovery Facility. The energy park, expected to cost around GBP500 mn (USD673.4 mn) to build, will comprise a range of technologies including waste energy recovery, anaerobic digestion, solar panels, and battery storage.
Construction is expected to begin in 2021, with the energy park expected to come online in 2024. Cory will host public exhibitions in summer 2018 to identify the main environmental and planning consideration.