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U.S. rig count falls as demand for gas stays low at home and abroad

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Though U.S. rig counts decline and dry gas production fell by 0.3% in recent weeks, overall gas supply is up…

The discount of gas prices in the Permian Basin to the U.S. bellwether Henry Hub is narrowing, according the U.S. Energy Information Administration (EIA).

Rig counts fall, though at a slow rate. According to Baker Hughes, the natural gas rig count decreased by 3 to 75 for the final week in June, while the number of f oil-directed rigs fell by 10 to 189. The total rig count decreased by 13, and it now stands at 266.

The price at the Waha Hub in West Texas, situated near major Permian Basin production activities, averaged a low of $1.27/MMBtu last Wednesday – 21¢/MMBtu lower than the Henry Hub price. In early July, the Waha Hub gas price traded slightly higher at $1.45/MMBtu – some 13¢/MMBtu lower than the Henry Hub price.

Gas-burn up by a quarter

With gas storages fast approaching their filling points and comparatively low feedgas demand for LNG exports, the power generation sector is left as the largest end-user. Before the coronavirus crisis, U.S. gas consumption was nearly evenly split among the electric power sector (36% of total consumption in 2019); the industrial sector (33%); and the residential, commercial, and transportation sectors (31% combined).

Now, industrial gas use is in the doldrums while gas-burn in the power sector surged by 20.5% week-on-week, according to IHS Markit data, as temperatures increase following last week’s mild weather. Industrial sector consumption fell 1.0% week-on-week, while residential consumption fell 0.1% over the same period.

On a bullish note, analysts pointed out that feedgas to liquefied natural gas (LNG) terminals since Wednesday, July 8, increased 0.6 billion cubic feet per day (Bcf/d), or 18%, compared to last Wednesday, giving lift to prices.


Wärtsilä wins 200 MW power plant contract in South America

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The Finish technology group Wärtsilä will supply a flexible baseload 200 MW power plant to a country in the Northern…

Once fully operational, the 200 MW  fast-starting Wärtsilä solution will provide grid balancing to deal with rising volumes of intermittent wind and solar power supply. At the same time, it will serve as a capacity plant to back up the system in cases of shortage.

The plant will be powered by 11 Wärtsilä 50SG engines running on natural gas. Wärtsilä is supplying and installing the plant on a full engineering, procurement, and construction (EPC) basis.

Gonzalo Granda, Business Development Manager, Wärtsilä Energy said: “This is an important step for Wärtsilä, as we are continuing to expand from our traditional markets in this region to a new key segment: flexible baseload.”

“We are on a path to a 100 percent renewable energy future, which means fast-starting and efficient load following flexibility will be increasingly needed to balance the power systems,” Sampo Suvisaari, Wärsilä’s Energy Business Director for Latin America North, pointed out.

It was also remarkable that the construction contract was negotiated remotely from start to finish, owing to the specific challenges of the coronavirus pandemic in South America.

Cummins to install QSK60G lean burn gas genset in Spain

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TROIL Vegas Altas, an olive oil treatment plant in Valdetorres, Spain, has contracted Cummins to install a QSK60G lean burn…

Olive oil manufacturing is complex and the treatment of oil sludge, a by-product, requires a reliable solution to ensure TROIL’s plant in Valdetorres can operator continuously.

According to the manufacturer, the initial mass of by-products processed from oil mills derives with a humidity range of approximately 65–70%. This mass is then poured from the rafts and is stored. About 50% of the mass weight is separated as vegetal (from plants or vegetables) water and the rest accounts for the remaining seedless olive pomace oil with 60% humidity.

To make best use of the by-product, Cummins proposed a combined heat and power (CHP) application. Hereby, the power generated by the existing two gas generators and the Cummins QSK60G generator, installed within the oil treatment plant, is used to dry the pomace and evaporate most of the vegetal water.

At the same time, the power from the exhaust gases is used to heat air in a gas/air exchanger reaching a temperature of around 360ºC. This excess heat is utilised to dry the wet pomace produced in the mill.

Through this cogeneration application, the facility can now gain significant fuel and financial savings by also exporting any excess power generated to the Spanish national grid.

Japan’s policy to close less-efficient coal plants creates upside for LNG

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Coal is no longer a favourite fuel in Japan’s new energy policy which stipulates to mothball or retire up to…

However, rather than phasing out all of Japan’s pre-1995 coal-fired fleet, market observers say it  is more likely that all lower efficiency plants could be targeted. Low-efficiency coal power plants are defined as requiring more than 8,600 Btu of fuel per kWh of electricity output.

Lost coal capacity could reach 160 TWh

If all these units will be closed, Japan would lose an estimated 24 GW of thermal generating capacity which represents about 51% of the country’s currently operating fleet of coal power plants. This is a significant proportion of the current mix, representing about 51% of Japan’s operational coal-fired plants.

Assuming that a gradual phasing out takes place over the next decade, then Japan’s power mix has “little option but to become more reliant on nuclear and imported LNG,” says Wood Mackenzie Asia Pacific vice-chair, Gavin Thompson. In his view, ‘lost’ coal generation could reach around 160 TWh by 2030.

Gas, nuclear generation to fill the gap

In this case, the contribution of nuclear power would have to be increased but gas-fired generation is likely to fill make up for most of the lost capacity. By 2030, up to an additional 13 million tons (Mt) of LNG could be required to help fill the gap.

“Any issue with nuclear restarts – an obvious risk - and LNG demand could be higher still. This will inevitably increase generation costs,” Thompson cautioned.

Japan is also expected to build over 50 GW of renewables capacity out to 2030, including a major increase in offshore wind, though high costs of that technology in Japan make it rather challenging. 

‘Clean coal’ IGCC plants gain ground

Some of the shuttered ageing coal-fired capacity might also be replaced with clean coal power units. Around 6.1 GW of ultra-supercritical and integrated gasification combined cycle coal plants (IGCC) are currently under construction in Japan.

Others have been proposed, and Wood Mackenzie pointed out that given their higher operational efficiencies, adding a significant volume of newer IGCC units to replace less efficient plants would “clearly support a continued role for coal in Japan’s power mix.”

In the long run, this would also allow the government to keep up its existing 2030 clean energy targets to reduce the share of unabated coal in the energy mix to around 25%.

Construction starts on 1.4 GW Viking Link between UK and Denmark

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National Grid has started the construction phase of the 1.4 GW Viking Link – the world’s longest interconnector stretching over…

Viking Link, a joint venture between National Grid Ventures and the Danish TSO Energinet, is overseeing construction of the high-voltage direct-current (HVDC) power cable, connecting from Bicker Fen in Lincolnshire, UK and Revsing in South Jutland.

Mike Elmer, Viking Link project director for National Grid Ventures said initial groundwork, surveys and water work studies have been completed, so the construction start is “key milestone for the project.”

“Viking Link will play a vital role in helping to decarbonise the UK’s power supply on the journey to a net zero carbon energy system. It will enable access to a cleaner greener supply of electricity, which will make energy more secure and affordable for consumers,” he said.

For starters, Siemens needs to build a new access road to the site of the converter station. The permanent road will take nine months to complete and allow for equipment to be transported and installed at the converter station which is due completed in 2023. 

Once the entire 1.4 GW Viking Link is completed by the end of 2023, the €2 billion subsea electricity cable will have the capacity of supplying enough renewable energy to power one and a half million UK homes. National Grid’s aim is to import 90 percent of its electricity from zero carbon source by 2030.

Viking Linked backed by $743 million loan

To finance the interconnector, National Grid in June secured the first multi export credit agency (ECA) covered loan for the Viking Link. The $743 million financing package is made up of $488 million from SACE Export Credit and $255 million from Euler Hermes.

BNP Paribas acted as the structuring bank, bookrunner, mandated lead arranger (MLA) and lender for both credit facilities. Euler Hermes was joined by HSBC Bank as bookrunner for the agent of the SACE export credit and by and by Natwest as bookrunner and MLA for the Euler Hermes export credit.

Britain’s 6th interconnector to Europe

For Britain, Viking Link will be the sixth interconnector to Europe. National Grid already has three operational interconnectors to France (IFA), the Netherlands (BritNed) and Belgium (Nemo Link). Two further projects are under construction to France (IFA2, operational 2020) and Norway (North Sea Link, operational 2021).

Following the completion of Viking Link, National Grid will have 7.8 GW of interconnector capacity – enough to power 8 million homes. The TSO aspires to source 90% of its electricity imports from ‘zero carbon sources’ by 2030.

“Britain’s energy system is in the midst of a rapid and complex transformation. We know we have a critical role in the acceleration towards a cleaner future,” Katerina Tsirimpa, Head of Corporate Finance for National Grid commented. “This green loan represents an important contribution towards our net zero commitment.”

Henry Hub gas prices fall to record low in June

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Monthly gas prices at the U.S. Henry Hub have fallen to a low of $1.63 per MMBtu in June –…

In the first half of 2020, the average Henry Hub spot price plunged to record lows of around $1.81 per MMBtu. Since then, prices eases further with HH gas prices last seen trading at $1.76 per MMBtu.

Dire demand outlook

U.S. gas storage levels are already higher than average for this time of the year, as low gas prices globally have led to a decline in LNG exports. Demand for US LNG has fallen by half in the first half of 2020, from 9.8 billion cubic feet per day (Bcf/d) in late March to less than 4.0 Bcf/d in June. Industrial gas demand in the United States, meanwhile, is down by 0.6 Bcf/d, or 2.7%, compared with the first half of 2019.

Health experts are warning of the effects of a second wave of coronavirus infections in the autumn which may make it necessary to re-instate lockdowns with dismal effects on the economy and energy prices.

Prices set to stay low

The U.S. Energy Information Administration (EIA) expects natural gas prices to stay low in the coming months before eventually increasing by the end of 2020. In its July 2020 Short-Term Energy Outlook (STEO), EIA forecasts the Henry Hub natural gas spot price for the second half of this year will average $2.05 per MMBtu.

By the onset of autumn, EIA expects low prices to lead to further declines in natural gas production as a result of lags between natural gas price changes and adjustments to production levels. Analysts expect U.S. dry gas production will decrease by 3% to average 89.2 Bcf/d in 2020, down from 92.2 Bcf/d in 2019.

Gas-burn rises

The low US gas price has been driving a rise in gas-burn in the electric power sector, which is already 7% higher in the H1-2020 compared with last year. The EIA expects consumption in all other sectors to decline and that overall 2020 natural gas consumption will decline by 3 Bcf/d.

Prices at key trading hubs across the country have generally traded close to the Henry Hub basis, and they are largely driven by regional temperatures. Except for California, prices at all major trading hubs in population centers averaged less than $2 per MMBtu in the first half of 2020.

Prices at PG& Citygate in Northern California and SoCal Citygate in Southern California averaged $2.57 per MMBtu and $2.35 per MMBtu, respectively. The mild winter this year kept the gas price at the Algonquin Citigate in New England relatively low, hovering around $1.88 per MMBtu in the first half of the year.

Looking ahead, EIA analysts expect natural gas spot prices to rise by the fourth quarter of 2020 as production falls and the winter heating season begins.

Woodside takes A$6.3 billion hit as sales revenue plunges

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Australia’s Woodside Petroleum has announced write-downs of nearly A$6.3 billion (US$3.92bn), mostly related to its exploration assets. Australia’s largest oil…

Like most of its industry peers, Woodside has been struggling with low realized prices for its oil and LNG exports following and a coronavirus-induced slump in demand. BP, Royal Dutch Shell and Eni have already announced similar write-downs and impairments on their assets.

Woodside Petroleum reported a 29 percent drop in revenue for the three months ended June 30, with sales for the period fell to US$768 million, from US$1.08 billion in the previous quarter.

Slump in realised LNG and oil prices

Badly hit by an oil and gas price slump, Woodside said its realised LNG prices in the quarter came to US$5.00 per MMBtu compared with US$8.10 MMBtu in the first quarter of 2020 and US$7.10 per MMBtu in the year-ago quarter.

Realised oil prices came to US$31 per barrel compared with US$52 per barrel in the first quarter and US$69 per barrel in the 2019 second quarter.

Australia’s largest oil and gas exporter had taken a risk by making a US$447 million provision for a LNG offtake agreement from Cheniere Energy’s Corpus Christi liquefaction plant in Texas, at a time when several Asian and European buyers have started to cancel cargo as the Covid-19 crisis unfolded.

Expansions projects delayed

Fitch Ratings affirmed Woodside Petroleum long-term Foreign-Currency Issuer Default Rating at 'BBB+' with a Stable Outlook. The agency said the rating “reflects Woodside's strong balance sheet and limited leverage” as well as the company’s decision to reduce expenditure and delaying final investment decisions (FID) on its major expansion projects.

Woodside’s earnings report also gave updates on its main overseas developments, the Sangomar oil project offshore Senegal and the Myanmar natural gas venture, as well as on its delayed Australian West Coast gas hub. The company said it submitted applications for production licences and retention lease renewals for the Burrup Hub project in Western Australia.

U.S. marketed gas production continues to fall

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Marketed gas production in the United States keeps falling to an average 96 Bcf/d in 2020, down from 99 Bcf/d…

Oil and gas production in the United States in April fell by 670,000 barrels per day (b/d) and 2.6 billion cubic feet per day (Bcf/d), respectively, the U.S. Energy Information Administration’s (EIA) said in its July Crude Oil and Natural Gas Production Report.

April was the first full month to be affected by the low crude oil and natural gas prices related to the sudden drop in petroleum demand associated with coronavirus mitigation efforts. The declining market led oil and natural gas operators to shut-in wells and limit the number of wells brought online, lowering the output for the major oil- and natural gas-producing regions.

Texas hardest hit

The largest fall in crude oil production took place in Texas, where output plunged 234,000 b/d, or -4.3%, between March and April 2020. More crude oil is produced in Texas than in any other state or region of the United States, accounting for 41% of the national total in 2019.

The ‘Lone Star State’ also saw the largest monthly decrease for natural gas production in April, decreasing by 1.2 Bcf/d, or 4 percent. Oklahoma had the second-largest decrease at 0.5 Bcf/d, or 6 percent, while Louisiana and Pennsylvania recorded production increases for April.

Crude oil production in the U.S. has been in steep decline largely due to Covid-19-related lockdowns which sharply brought the gasoline consumption in transportation sector.

The EIA expects crude oil prices will average $40 per barrel (b) for the first half of 2020 and will average $39/b in the second half of 2020.

In its July Short-Term Energy Outlook (STEO), analysts forecasts that U.S. crude oil production will average 11.6 million barrels per day (b/d) in 2020. These levels would be 0.6 million b/d lower than the 2019 average of 12.2 million b/d.


Fine tuning engine fuels in the far north

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Through careful analysis, Wärtsilä’s Fuel Laboratory Services (FLS) team in Vaasa, Finland, can adapt engines to run more efficiently on…

The FLS team is part of Wartsila’s energy solutions division, which focuses on flexible and more environmentally advanced solutions, according to Tommi Rintamäki, who heads up the team as General Manager.

 “Sustainability and intermittency need to be addressed in today’s power systems. We offer plants that are highly energy efficient and can load or unload in a rapid manner, which is a key enabler in matching flexible flows. And then there’s the fuel flexibility,” he said, stressing that the lab’s role is not only to enhance value for the customer, but above all to be an enabler in the transition to a sustainable and modern power system.

In practice, this means Wartsila is looking at offering back-up power and load peaking solutions in parallel with solar or wind capacity, to ensure reliable power supply. “Wartsila is able to offer solar energy hybrids, and storage solutions. Our EPC [engineering, procurement and construction] experience over 10-20 years gives us the flexibility to combine renewables with smart backup and peaking sets, while most OEMs [original equipment manufacturers] rely on contractors,” said Mr Rintamäki. His team’s role is then to make sure the backup engines run as efficiently as possible on whatever fuel is cheapest and cleanest.

Gas is almost always preferable to liquid fuels for backup and peaking, according to Kristian Blomqvist: “Emissions regulations mean gas is better than liquids, with NOx, SOx, and particulates all less than 5% of liquid fuels. Gas prices are also more stable and affordable than liquid fuels. And on the efficiency side, gas is better, converting more of its energy to power,” he said. The team noted that new modular LNG plants, such as Wartsila’s Tornio Manga plant in northern Finland, were extending the reach of gas and displacing dirtier fossil fuels.

Enhancing fuel flexibility

The main objective to the Fuel Laboratory Service’s (FLS) is to enable the use of the widest possible range of liquid fuels or gases in the company’s engines. This broader fuel portfolio should leave it well positioned to capture new markets, as well as allow the upgrading of existing installations to operate on cheaper or lower carbon fuels.

“In our engines we want to be able to burn any gas or liquid that has a decent calorific value. Real flexibility means the ability to choose the cheapest or most appropriate fuel at any time over the life of the plant, which could easily be more than 20 years – It represents a hedge for the future in business terms,” Mr Rintamäki explained.

To achieve its aims, the lab provides a variety of services, including chemical analysis of liquids down to atomic level, and, most importantly, combustion research – “which differentiates us from commercial labs”, he said, stressing the team has developed its dervices over 10 years, and now has have the right techniques to refocus on the customer. “End customer value is the main point, and to further increase fuel flexibility.”

“If from using locally sourced fuels, an engine’s operating parameter is on the high side, a customer will ask us what to do – we can test the fuel in the lab and use the result to adapt the engine onsite,” he said. The trend is away from liquid fossil fuels and towards gas and biofields, especially in the east, including those produced from jatropha and palm oil – “all of which we have tested in our lab”.

The team’s most important piece of equipment, the Rapid Compression Machine (RCM), tests fuel for its knocking limit, according to Per Löfholm: “Knocking means all the gas is detonating at once. It’s the main limiting factor for a fuel’s performance. So, if you have a specification for a gas, we can quickly recreate it in the lab’ and test it using our gas chromatograph to see if we have the right mixture.” The sample is then combusted in the RCM to see if it can be used in a Wartsila engine and at what output level.  

“Knocking needs to be avoided, otherwise the engine dies pretty soon.” Rintamäki said. Adding on to this, Mr Löfholm explained said knocking was largely dependent on the methane number, which is the ratio of carbon to hydrogen in the mixture. A low methane number means longer hydrocarbon molecules, which increases the risk of knocking.

From the chart it can be seen that LNG methane numbers can vary from 50 to 100 – requiring a different set up of the same engine, depending on the type of LNG. Wartsila’s DF [duel fuel] engine requires a methane number above 70 to work without adjustment.

Testing in the Lab’ can be done with a couple of litres of fuel in a day or two rather than the six months and many gallons of fuel required to test a real engine. As the sample gas is combusted in the RCM, a high-speed camera, operating at 100,000 frames per second, helps analyse the explosions closely.

“We start with low engine power and then we gradually increase, which produces a ‘knocking curve’. By doing this we find the knocking limit or threshold point at which we can run the fuel without knocking. Then we have a correlation with the real machine through reference curves,” Mr Löfholm said.

As the number and variety of fuel samples (currently around 1500) increases, the lab is building up a library of data. The more samples tested, the more accurate this library becomes, and eventually it could be used for predictive analysis – where information on the fuel’s composition alone will be enough for the team to assess the fuel, without the need for testing. The team already has a pretty good idea what results are likely to be once they have the composition.

Another key piece of equipment is the Combustion Research Unit, which is typically used for biofuels. This helps with assessing energy content and ignition speed, which can also be done quickly. However, Olai Lagus noted that other tests take longer, including acidity tests, metal content and so on. “Once all the tests have been done we can get back to our customer with the results – which may mean altering the way the engine is operated,” he said.

Online Gas Analyser

The team has also developed an online system that can analyse the quality of gas flowing into a power station in real time. The first plant to be monitored using the system is the Dorflund plant in Denmark, where Wartsila is attempting to iron out problems resulting from unpredictable gas quality variations. The plant uses gas from three sources – German gas, North Sea gas and biogas – which vary without notice, leaving it difficult to adjust performance quickly in response.

“With a mixture of fuels going into the system, constant monitoring is required, so we have developed this online near-real time quality content monitor. It uses near IR [infra-red] optics, and because different molecules absorb different wavelengths of light, we can assess the composition from the spectrum of light produced,” Mr Rintamäki said. The multiple gas sources mean the plant has a real problem with knocking, which he is trying to sort out. “We are trying to optimize the operation and performance, and cut NOx emissions too.”

Once the real-time monitoring identifies low methane numbers, the team has a two-stage approach to remedy the situation – firstly they can change engine parameters such as ignition timing to maintain the same load level, which often means burning a little more gas to get the same output. The next stage involves de-rating the engine, or reducing its operating level – to say 85% - just to keep the engine running.

Without the monitoring, the engine is likely to be damaged by the knocking, and once higher quality gas arrives, the rating can go back to 100%. “It’s difficult to quantify how much longer engines will last,” Mr Löfholm said, “but the real-time monitoring and fuel testing decreases maintenance, improves performance, and is also a civilized way to control emissions.”

Recession could pull down German power prices by €10.20/MWh

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Should Germany’s energy demand stay subdued, wholesale power prices could fall by €10.20 per MWh in 2021, compared to pre-COVID…

In its baseline scenario, Germany’s Federal Council of Economic Experts assumes a sharp decline in economic output of -2.8% this year, but expects an increase of +3.7 % in 2021.

“If we apply this rebound to the demand for electricity, we must not expect any adverse effects beyond 2020,” Energy Brainpool analyst Carlos Perez commented.

A ‘Recession’ scenario, in contrast, assumes negative economic growth in 2021 and 2022 which will keep demand, prices and emission on very low levels. In this scenario, analyst assume a reduction in electricity demand in the years 2021 and 2022, with key parameters being the intensity of the economic slump and its impact on the electricity markets.

Cheap gas, high CO2 works in favour of CCGTs

Any further decrease in natural gas prices would increase the competitive of combined-cycle gas power plants (CCGTs) against thermal-coal power plants. In fact, CCGTs have largely become the referable option to balance a rising influx of low-cost intermittent wind and solar power supply.

“CCGT power plants are further ahead in the merit order,” Perez said, largely due to a “likewise sharp fall in gas prices and only a very moderate decline in hard coal prices.”

The latest recovery of the CO2 prices to even higher levels than in the pre-COVID period strengthens the competitive edge of gas combined-cycle power plants.

Datteln-4 test runs disrupt German power prices

In May, the German utility Uniper kept its new Datteln-4 coal power plant running in test operation in North Rhine-Westphalia (NRW) despite the low demand for electricity on the market.

Scheduled to go online this summer, Datteln-4 has been repeatedly tested at full capacity which on some days pushed down prices to minus €80/MWh.

Critics fiercly oppose start-up of a new coal power unit in Germany, arguing this contradicts Government's agreed plans to phase out all coal-fired plants by 2038. Uniper argues, however, the hard coal-fired Datteln 4 unit will be the country's "most modern" coal power unit. With 1,100 MW installed electric capacity at 45% net efficiency plus 380 MW thermal power output, the plant’s overall efficiency reaches 60%.

Datteln-4’s exceptional level of operational flexibility will allow Uniper to dispatch the unit for grid balancing purposes to backstop intermittent supply from renewables energy sources. Traditionally, this grid balancing role has had been fulfilled by combined-cycle gas-fired power plants.

Uniper said it already sold 413 MW of the electric power output to the German rail operator Deutsche Bahn, and CEO Andreas Schierenbeck indicated Datteln-4 is expected to generate an annual operating profit for Uniper of at least 100 million Euros.

AEG storage converters run hybrid off-grid power plant in Nigeria

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AEG Power Solutions has installed Convert SC Flex storage converters to help run Africa’s largest off-grid solar hybrid power plant…

Storage systems are key to the hybrid off-grid installations as they are balancing load requirements in decentralized area with the electricity supply from different renewable power sources.

 The storage converters hereby operate in voltage- and frequency-control mode.

Together with the battery storage, the converters ensure that both voltage and frequency of the microgrid is being kept well within its target limits. Converters hereby have to balance rapid variations of generator output or its connected loads like pumps or lightning.

The Convert SC Flex storage converters systems are also used to black start the complete micro- grid in the event of any unforeseen interruption.

Phase-1 of the Kano off-grid project, funded by the Nigerian government, is designed to supply electricity to nine university complexes and a teaching hospital. Two further phases are planned, to be funded respectively by the World Bank and the African Development Bank.

In total over 55000 students and more than 3000 staff at the universities get access to green energy via the programm. In addition, some 2850 streetlights can also be powered by the hybrid micro-grid.

Micro-grid now “proven in the field”

Andreas Becker, Head of Grid & Storage inside AEG Power Solutions, said the off-grid features of Convert SC Flex made it easy to combine with any type of batteries This combination made the system “perfectly suited for micro-grid applications,” he said, pointing out this is “now proven in the field.”

Dutch-German AEG Power Solutions has decades of experience with UPS and power electronics, and grid integration of various power sources and energy storage. The company’s engineering capacities can bridge both AC and DC power technologies.

Westwood sees EPC contract awards rebound to $13 billion in 2021-24

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Westwood Global Group says engineering, procurement and construction (EPC) contract awards for floating structures will reach just over $5 billion…

The Aberdeen-based consultancy’s latest EPC value projections for floating platform structures (FPS) are a 73% reduction on its pre-COVID outlook and assuming a base oil price of $37/bbl in 2020.

“While the impact of the pandemic has hit FPS EPC contract awards significantly this year, the industry is in a much better place than the downturn of 2016 based on order intake so far, as well as the healthy backlogs of FPS contractors stemming from 2017-2019 activity,” said Westwood’s senior analyst, offshore, Mark Adeosun.

Two FPSO contract awards in Q1-2020

The first quarter of this year saw two EPC contract awards – the Sangomar floating production storage and offloading (FPSO) unit, built by Modec on behalf of Woodside’s project off Senegal and the Anna Nery FPSO, deployed offhshore Brazil – accounting for about $2 billion of EPC value.

Other key contracts are still pending, and hoped to be awarded later this year, notably Equinor’s Bacalhau unit and Petrobras’ Mero 3 which would account for over $3 billion in construction spend.

Over the 2020-24 period, EPC contract awards are estimated to recover towards $56 billion – including 40 FPSOs, 9 FPSS and 7 FLNG systems. The outlook for the latter, however, looks “increasingly difficult,” he cautioned, “as low spot prices and looming overcapacity threatens the attractiveness of potential future investments.”

Brazil, Guyana seen to “dominate investment”

“Latin America will account for nearly 42% of probable FPS contract awards over the next five years – totalling an estimated $24 billion,” Adeosun said. Brazil is likely to dominate investment, he explained, as international oil companies ramp up activity and Petrobras commits to the development of its pre-salt discoveries,

Outside Brazil, Guyana will contribute two additional orders to the forecast in addition to the Liza Unity and the Prosperity FPSO that are currently being built in Singapore (Topsides) and China (Hull).

Thermo-acoustic instabilities point to turbine improvements

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Solving thermoacoustic instabilities for gas turbines can substantially speed up the design-period, research at the Technical University Munich (TUM) shows. Results…

Typically, when  instabilities for gas turbine operation are modelled, these calculations are solved by means of a mathematical factor known as 'eigenvalue'. But given the complexity of interactions within a turbine, this approach can quickly become 'computationally heavy'.

System savings though adjoint surrogate approach

“The adjoint approach allows us to perform Monte Carlo simulations of the Helmholtz equation by means of mere Matrix-Vector multiplications...."TUM researchers said in a research paper, adding "therefore, we replaced the effort of solving a full eigenvalue problem (given by the Helmholtz equation) by only a few matrix-vector multiplications."

Traditionally, the 'eigenvalue' appears under nonlinear terms with exponentials such as time delays related to the flame model but Dr. Silva and his team have instead proposed to simplify this calculation using matrix-vector multiplications.

“Let's assume we want to obtain the output (in terms of one eigenmode growth rate) of 10,000 eigenvalue problems... [With our approach] it is enough to perform two eigenvalue problems…. [and] 10000-30000 matrix vector multiplications,” he explained. The method, applied at TUM, is particularly well-suited to large systems, such as the modelling of turbines, where there are hundreds of thousands to millions of degrees of freedom.

Replacing Monte Carlo simulations with Uncertainty Quantification

With the results of the initial phase of research delivering a promising decrease in computing time, the team are now focused on refining the approach. “The idea now is to replace Monte Carlo simulations by a more efficient Uncertainty Quantification method. There are two methods in view: Method of moments and Polynomial Chaos Expansion (PCE). Instead of modeling a "discrete" stochastic field (each realization is a point in the probability space), we want to model a "continuous" stochastic field,” the paper explains.

To do this, researchers plan to replace deterministic variables with stochastic ones. It is expected that adjoint surrogate method will allow for easier implemented as compared with the traditional eigenvalue problem formulation. The researchers hope that the findings from their research can readily be integrated into existing design tools and software to allow rapid commercial adoption of the technology.

“Flexible tools (like Comsol) should allow an easy implementation of the method, so that in the future we will talk about 'Adjoint Helmholtz solvers' as something commonly found in standard tools,” researchers concluded.

Sharp rise in U.S. power project delays due to Covid-19 mitigation

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Commercial in-service dates of U.S. power projects are beset by delays. In March and April 2020, commissioning of 21% and…

Though the ongoing pandemic affects projects in all stages, projects in the construction stage are more likely to be delayed. Sixty-one unique projects, with a total of 2.4 GW of generating capacity, under construction during March and April were delayed, analysts at the U.S. Energy Information Administration’s (EIA) pointed out.

Building a power plant normally requires a string of simultaneous and dependent works as the final plant consists of numerous key components and related equipment. This was not possible during the coronavirus crisis, as workers were advised to follow social distancing rules while operating.

Supply chain disruptions, permitting delays, and restricted travel of specialized workers, affected project scheduling and often led to project delays.

According to the EIA’s March and April Preliminary Monthly Electric Generator Inventory data, lockdowns in most countries have severely impacted global supply chains which substantially increased the volumes of delayed U.S. power plant projects from normally 20% to nearly 30% in April.

In March, a total of 163 of the 772 proposed generating units delayed their operational date, with 41 citing the coronavirus crisis as a reason for delay. Of the 746 generating units reporting in April, 220 were delayed and 67 of these reported Covid-19 as a reason.

The delays attributed to mitigation measures during these two months represent 3.1 GW of total U.S. generating capacity, or 18% of total delayed capacity. The median delay was two months, EIA data shows.

Williams gets FERC approval to advance Leidy South pipeline project

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Williams has received approval from the U.S. Federal Energy Regulatory Commission (FERC) to move forward with the Leidy South Project.…

Leidy South will create 582,400 dekatherm (dth) per day of additional pipeline capacity by adding two greenfield compressor facilities come at an estimated cost of $100 million, said Williams, the operator of Transco. This infrastructure investment will support 680 jobs in Pennsylvania with an estimated payroll of $28 million, and produce $1.3 million in state tax revenue, according to third-party research.

Together, the Leidy South and Transco expansion will boost gas transit capacity enough to serve the equivalent of more than 2.5 million homes and allow further power plants to be converted from coal to natural gas. The expansion project is design to maximise use of the existing Transco gas transmission corridor in Pennsylvania and will seek to minimize the land use to meet these needs.

Transco is the largest-volume interstate natural gas pipeline system in the United States, supplying customers through its 10,000-mile pipeline network, whose mainline extends nearly 1,800 miles between South Texas and New York City. The system is a major provider of cost-effective natural gas services that reach U.S. markets in 12 Southeast and Atlantic Seaboard states, including major metropolitan areas in New York, New Jersey and Pennsylvania.

 Natural gas prices at the U.S. Henry Hub have fallen to record low due to a Covid-related slump in global energy demand, surplus shale gas production is either put into storage or increasingly used for power generation. Retrofitting aging coal power stations to run on natural gas is both economic in terms of fuel prices and helps operators comply with more stringent limits on NOx and CO2 emissions.

Alan Armstrong, president and chief executive officer of William said: “This project represents one of many opportunities to further reduce greenhouse gas emissions with right here, right now available solutions as coal-fired electric generation plants are replaced with natural gas units to reliably balance the intermittency of new renewable resources.

“In fact, there remain more than 80 coal plants in the states Transco serves that can potentially be displaced by clean, efficient and affordable natural gas.”


Germany "not in the greatest hurry" to build LNG import terminal

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Low prices for pipeline gas imports have rendered the economics of building a German LNG import plant less attractive. The…

Germany’s Federal Council of Economic Experts, in its baseline scenario, assumes a sharp decline in economic output of -2.8% this year but sees a possible increase in output by 3.7% over the course of 2021.

A ‘Recession’ scenario, meanwhile, assumes negative economic growth in 2021 and 2022 which will keep demand, prices and emission on very low levels which could lead to a sharp reduction in electricity as well as related coal and gas demand.

Nord Stream-2 to boost Russian gas supply

Supply of natural gas to Germany is abundant and keeps rising as Nord Stream-2, second leg of the Gazprom-led interconnector through the Baltic Sea, is now set to become a reality. Denmark on July 6, gave the Nord Stream 2 consortium permission to utilize Russian pipe-laying vessels with anchors in Danish waters.

Start-up of the second pipeline leg will increase the overall transport capacity to nearly 99 bcm per year which is bound to greatly reduce Germany’s need for additional LNG imports.

‘Akademik Czersky’ to build final stretch

Construction of the 1,230-kilometre pipeline is nearly complete, except for a final stretch of about 120-kilometers in Danish waters. The project was halted in December when the Swiss-Dutch pipe-laying company Allseas suspended works over threats of U.S. sanctions.

Denmark’s decision to allow Gazprom to build Nord Stream-2’s final stretch with Russian vessels means the controversial interconnector will become a reality. The pipe-laying vessel ‘Akademik Czersky’ is already in nearby waters in the Baltic Sea. The vessel is currently owned by the Samara Thermal Energy Property Fund (STIF), operated as part of the Gazprom Fleet.

Though Gazprom is included in some less U.S. stringent sanctions, analysts expects this will not hamper the Russian state gas exporter to forge ahead with a project as strategic as Nord Stream-2.

Apart from Gazprom, Nord Stream’s lead developer, the European utilities Uniper, Winterhall, Engie, OMW and Shell are also invested in the project.

Russia keeps playing ‘pipeline politics’

Once Nord Stream 2 is in place and fully operational – and provided gas transits via the Belarus/Poland route resume as agreed – Gazprom would no longer need to use the route through Ukraine which would jeopardize supply security in Ukraine itself and in several eastern European countries.

Alexey Miller, CEO of Gazprom, and the Government of Belarus in mid-February agreed on the pricing of Russian gas deliveries until the start of 2021. The transit volume of Russian gas is understood to remain at the same level, ensuring stable onward deliveries to Germany via the Belarus-Poland pipeline.

Now, Gazprom said is striving to complete construction of the Nord Stream 2 as well as the second leg of TurkStream pipeline through the Black Sea to Bulgaria, Serbia and onwards to Austria before the end of 2020.

Over the past few months, Gazprom has already substantially reduced the volumes of gas it transits across Ukraine, and by ramping up volumes through Nord Stream and Turkish Stream instead. The Ukrainian state is at risk of losing roughly $3 billion gas-transit fees – about 3 percent of national GDP.

Linde signs MoU with China Power to develop green hydrogen

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Industrial gas company Linde has signed a Memorandum of Understanding (MoU) with Beijing Green Hydrogen Technology Development, part of China…

The MoU also stipulates hydrogen technology research and development (R&D) as well as various implementation projects both in the transport and power generation sector.

Tian Jun, Party Secretary, Chairman of the Board and President of China Power International Development Ltd said the company is keen to focus on sustainable solution and “delighted to partner with Linde to pilot the application of green hydrogen at the Winter Olympics, and work towards establishing a model for China's transition to clean energy."

Linde, a global leader in hydrogen, has the largest liquid hydrogen capacity and distribution system in the world including over 180 hydrogen refuelling stations, 80 hydrogen electrolysis plants and the world's first high-purity hydrogen storage cavern.

"Sustainability is a key priority for Linde and our mission is making our world more productive; (...) we look forward to collaborating with China Power to develop local green hydrogen and clean energy solutions to support China's energy transition, “ said Sanjiv Lamba, Linde CEO Asia Pacific.

Headquartered in Guildford, UK, Linde plc is an Irish-domiciled multinational chemical company formed by the merger of Linde AG of Germany and Praxair of the United States. Listed on NYMEX and the Frankfurt Stock Exchange, Linde plc’s 2019 sales reached $28 billion (€25 billion).

Exelon claims ISO New England ends Mystic power tariff “hastily”

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Exelon Corp has accused ISO New England of putting Boston’s power supply security at risk by “hastily” eliminating the out-of-market…

By “hastily” implementing changes to its capacity retirement scheme, ISO-NE can allegedly enforce an early retirement of the Mystic Generating Stations which has been classified as “system-relevant” for regional power supply.

Exelon claims ISO NE’s tariff changes, approved without FERC review, are in breach of the grid operator’s tariff scheme, especially with regards to Order 1000 provisions on competitive transmission procurements.

Mystic is “system relevant”, says ISO New England

Gas-fired power generation is not always economical in New England. In fact, Exelon two years ago approached FERC saying it would only keep its two large Mystic gas power blocks and the adjacent Everett LNG import facility operational between 2022 and 2024, if it gets permission to collect $1 per month from all electricity customers in New England.

Trying to put pressure on the regulator, Exelon had floated plans to retire Mystic’s two gas power units at the end of May 2022 rather than continue to lose money. Estimating the future costs of operation, Exelon said at the time its annual fixed revenue requirement for the two plants totals nearly $219 million in 2022-2023 and nearly $187 million in 2023-2024.

However, the regional power grid operator ISO New England insisted it needed the 1,700 MW capacity of the two gas power blocks to keep the system in balance.

Pipeline constraints limit the amount of natural gas that can be transported to the U.S. north-eastern state, hence ISO NE urged FERC at the time that Exelon needs to keep the Mystic plants running because it can rely on imported LNG.

Massachusetts looks beyond fossil fuels

Since June 2020, the public regulator is investigating again whether the Boston Everett LNG import terminal might have to close, given that the government of New England considers phasing out all fossil power stations.

Everett LNG, in operation since 1971, is used primarily to balance peak demand during the winter season, when gas consumption for heating is prioritized. The terminal feeds regasified LNG into two interstate gas pipelines and the Mystic Generating Station.

JERA fast-tracks work on LNG-to-Power project (718 MW) near Dhaka

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JERA, Japan’s largest LNG importer and electric utility, and Reliance of India are fast-tracking construction on a LNG-to-Power project near…

Reliance in September 2019 sold a 49% stake in the project to JERA which no strives to accelerate construction with a view to delivering LNG to the power plant from its own portfolio.

JERA, a joint venture between Tokyo Electric Power and Chubu Electric Power Co, is not only Japan’s largest power producer but also has access to a global LNG supply portfolio through various long-term oil-indexed procurement deals.

Once fully operational, the Meghnaghat CCGT will use an estimated 110 million cubic feet per day (mmcf/d) of regasified LNG. Equipped with two dual-fuel gas turbine, capable to both operated on liquid fuel and natural gas, the Meghnaghat power plant will have an installed capacity of 337 MW (gas), 315 MW high speed diesel (HSD) fuel.

JERA, Petrobangla to handle LNG supplies

LNG imports to fuel the power plant will be handled by JERA, although the actual gas supply agreement for the 718 MW Meghnaghat CCGT has been signed with Titas Gas Transmission & Distribution Company, a local TSO in Bangladesh. In preparation for further LNG-fuelled power projects in the country, Bangladesh’s state-run Petrobangla already increased the country’s import capacity to 1.0 billion cubic feet per day (bcf/d) by chartering two additional floating storage and regas units (FSRUs).

Once operational by August 2022, the LNG-fuelled power plant at Meghnaghat will help meet the region’s fast growing energy demand. Household energy use typically peaks during the summer season, when demand for air conditioning is at its highest.

Demand industry and manufacturing is also on the rise even though the Bangladeshi government is considering re-imposing partial lockdowns to quell a second wave of the Covid-19 pandemic.

Electricity sold under 22-year PPA

All electricity produced at the Dhaka LNG-to-Power plant will be purchased by the Bangladesh Power Development Board (BPDB) under a 22-year power purchase agreement (PPA) at a levelised tariff rate of 7.312 US cents per kilowatt-hour (kWh), assuming a 82% load factor.

Project finance comes partially from Japan, were JERA helped to arrange a $644 million loan from public and private lenders, including Japan Bank for International Cooperation, the Asian Development Bank (ADB), Mizuho Bank, Sumitomo Mitsui Banking Corp and MUFG Bank.

In addition to the Dhaka LNG-to-Power project, Reliance also plans to develop 3,000-MW gas-fired power plant and an adjacent LNG terminal with 500-mmcfd capacity in Bangladesh.

Gazprom, Botas defy threat of U.S. sanctions against TurkStream

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The U.S. Administration has decided to end of grandfather clauses, a legal exception that spares companies involved in TurkStream from…

“Get out now or risk the consequences,” he said when announcing the U.S. Department of State was updating public guidance for the ‘Countering America's Adversaries Through Sanctions Act (CAATSA)’ authorities to include these projects.

“Aiding and abetting Russia’s malign influence projects will not be tolerated,” he said, brand-marking both TurkStream and NordStream as “the Kremlin's key tools to exploit and expand European dependence on Russian energy supplies.”

Botas and Gazprom, meanwhile, are trying to calmly continue with works on the second leg of the controversial TurkStream pipeline. The Russia-Turkey interconnector through the Black Sea consists of two 930-kilometer offshore lines through the Black Sea as well as two separate onshore lines that are 142 and 70 kilometers long and extend to Greece and Bulgaria.

First leg of TurkStream in operation since January

Commercial deliveries of natural gas via TurkStream to Greece via the first 15.75 billion cubic meter per year (Bcm/y) pipeline leg have commenced on January 8, 2020.

Pipe-laying for the first leg from the Russian town of Anapa to Kiyikoy in northern Greece took 15 months and was completed ahead of schedule. Construction of the pipeline’s offshore section is carried out by Allseas Group -- the same Swiss pipe-laying firm that had been involved in the controversial Nord Stream-2 project.

Gazprom underlined the TurkStream interconnector is “unique from a technological standpoint,” given it is the first project whereby a pipeline of 813 millimeters in diameter has been laid at a depth of 2,200 meters.

Bulgaria still needs to build landfall for TurkStream-2

Now, works are progressing on building a second 15.75 Bcm y line, designated to carry Russian gas to Bulgaria. Combined, the two legs of TurkStream will have an annual capacity of 31.5 Bcm/y.

However, works in Bulgaria have suffered some setbacks that prompted Gazprom to accuse the government in Sofia of delaying the construction of the pipeline landfall on its territory.

In January, Gazprom stated it had supplied its first billion cubic meters of gas via the TurkStream gas pipeline. CEO Alexey Miller said TurkStream fully covered all contractual deliveries to consumers in Bulgaria, Greece, and North Macedonia. While some 54% of supplies went to the Turkish gas market, the remaining 46% were carried onwards to the border with Greece and Bulgaria.

Turkey is Gazprom's second largest export market, with Russian gas currently being delivered to Turkey via the Blue Stream gas pipeline and the Transbalkan Corridor. Supplies through the 31.5 Bcf/y TurkStream dual pipeline will both enhance the volumes of Russian gas supply to Turkey as well as to the wider region of south-eastern Europe.  

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