EWI said to adjust LNG Project.

The above is the headline taken straight from the Jamaica Gleaner Business section, which goes unto to say.

Energy World International (EWI), the Hong Kong based firm that won the bid to establish a gas fired power plant in Jamaica, known as the 360MW project, now plans to split the project into two segments, with facilities in the parishes of St James and St Thomas , the Gleaner source reported.

The restructuring would not change the  US$737M projected cost of the project, they say EWI is to formally update the OUR this week on its recrafted engineering, the sources added.

http://jamaica-gleaner.com/gleaner/20140312/business/business1.html#disqus_thread

Commonsenseja has raised concerns on a number of occasions about the ability of EWI to handle this project, not only in terms of its financial capabilities, but also source of fuel and the cost of that fuel.

The Gleaner  continued..

Financing 

The OUR is still awaiting final details from EWI about how it plans to finance the project – “Wednesday Business sources hinted that the bulk [ of the funding] would from its[EWI] own resources   Huh ??, Like, seriously ???

I will come back to the financing issue later.

 

EWI New Proposal deconstructed (Engineering and Logistics).

For EWI to build the two plants as noted by this “source” to which the Gleaner refers, there are a number of things that comes readily to mind.

First let’s make an assumption.

We will assume that EWI plans to deliver the entire 360MW Project in one shot . As far as we know that was the original thinking behind the single plant at Old Harbour.

  1. EWI would require two separate set of resources competing at the same time .
  2. EWI would need two separate  regasification units to convert the LNG back to NG for use in the generating units at the different sites.
  3. Infrastructure cost at two locations would have to be higher than that of a single location.
  4. Acquisition cost of land for two separate locations and acreage required, would be greater for two locations vs a single location.
  5. Building at two separate sites hundred of miles apart requires dedicated equipment and human resources, which no doubt will increase construction cost.
  6. Operational structure would have to be maintained at the two sites ie management, technical etc, which would increase overall operational cost.
  7. Storage of fuel would change if you have two sites vs one .
  8. Cost of transportation of the fuel would be increased marginally, moving from Bull Bay to Montego Bay or the other way around. (Note the delivery process would be doubled vs a single delivery at a single location )
  9. The operational cost (scale of economy), would no doubt be higher for two separate sites vs a single site.
  10. Overall cost of electricity generated would be higher for each the two sites, than it would have been for a single location. ( Larger plant tend to be more efficient)
  11. Cost of stuff like High Voltage  Transmission Transformers and related  switch gear  dedicated to each generating site, would have been increased vs a single site operation.

So if I should now go back to the second paragraph from the Gleaner source, which said” The restructuring would not change the  US$737M projected cost of the project”,  one has to ask the obvious question ” How realistic is that”, given the few items I have mentioned from 1 – 11. I did not even spend an hr coming up with these, so were I to get into the details, I am, sure I could find another 20 – 30 items of concern.

Financing

The Gleaner source reported the following  “Wednesday Business sources hinted that the bulk [ of the funding] would from its[EWI] own resources.”

I have already raised concerns in previously articles about the ability of EWI to fund this project, so this comment about funding from its own resources is laughable at best.

In the last annual  financial report of the parent company EWI , the company reported only US$86M in cash on its balance sheet ( June 2013)  http://wp.me/pvIkx-1As

The company borrowed over US$200M last year to complete the construction(expansion) of a 60 MW power plant in the Indonesia  as well as funding its gas exploration activities. 

In its half-yearly reported ended Dec 31, 2013, the company borrowed another US$33M , with a provision for access to another US$75M once certain performance target was met in respect of the first disbursement. This loan was to fund gas exploration activities in Indonesian as the company continues its quest to find Natural Gas.

The source also stated the requirement for LNG for this project is of the order of 350 million tonnes , but based on my calculations under the Title ” Jamaica will not see cheaper electricty cost come 2016, Part 2” See the link here  http://wp.me/pvIkx-1LZ , I have worked out the fuel requirement based on the original plan of  ~   537 million cubic meters of LNG or 241 million tonnes. This was based on the following assumptions:

  1. EWI power plant would be a CCGT  given that this type of plant uses a  HRSG or a Heat Recovery Steam Generator to boost efficiency. ( Cost more to build of course)
  2.  A total operational efficiency of 50%

 

If EWI were to build a SCGT or Single Cycle Gas Turbine , the operational efficiency on this type of plant is lower and averages about 35%.

At a 35% operational efficiency level ,the volume of LNG naturally increases and would be in the region of  767.4 Million cubic meters (m3) or 345.4 million tonnes, which is close to the Gleaner source of 350 million tonnes.

So my question therefore becomes  ” Will EWI be building a CCGT or a SCGT”.

If it’s the later, the fuel requirement becomes  30% higher than for a Combined Cycle Gas Turbine, which equates to higher fuel cost and therefore high generation cost, which means at the end of the process the savings in electricity cost would be lower for the Jamaican consumer.

I know it’s a lot to digest, but I what I hope to do from this is to stimulate the discussion, because the numbers are just not adding up.

OUR – Please help us out here , what on earth is really going on ?

Bless.

 

 

 

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