The EcoEléctrica LNG import terminal and cogeneration power plant

02 October 1998

For regions without natural gas reserves, the advantages of gas-fired power plants can be gained through the import of liquified natural gas (LNG). The world’s first independent combined LNG terminal/CCGT power plant project has been brought to fruition by Enron in Puerto Rico, and this venture may act as a blueprint for other such installations around the Caribbean and beyond. Kenneth Koye Enron International

The EcoEléctrica project on the island of Puerto Rico, a US territory, will be the world's first independent, private combined liquefied natural gas (LNG) receiving terminal, power station and desalinated water plant. The project is also the first to use non-recourse project financing for an independent combined power plant/LNG receiving terminal, and is the first LNG receiving terminal to receive siting permits and be built in the US in the last 20 years. The project is planned as a nominal two million barrel (318 000 m3) LNG receiving, storage and regasification terminal, coupled to a nominal 500 MW combined cycle gas turbine power station, co-generating electricity and thermal energy. Thermal energy in the form of low-pressure steam will be used in a 2 million gallon/day (7570 m3/day) desalinated water plant. The project is located about 9 miles west of Ponce, Puerto Rico, on the island's south coast, on a peninsula known locally as Punta Guayanilla in the surrounding communities of Peñuelas and Guayanilla (see Figure 1).

The project is a 50-50 joint venture currently owned indirectly by Enron Corp.'s international development subsidiary, Enron International (EI) of Houston, Texas, and Kenetech of San Francisco, California. Enron International is a world leader in independent energy project development, including natural gas combined cycle power plants, pipelines, and natural gas process plants, including LNG and liquified petroleum gas (LPG). Enron Engineering and Construction Company (EECC) will act as turnkey contractor for the project. On 15 December 1997 the project achieved financial close of the $670 million project financing, and EECC received full Notice to Proceed (NTP). An official ground breaking ceremony was held on 27 February 1998, where Governor Pedro Roselló blew a "start work" steam whistle.

COMMERCIAL BASIS

The EcoEléctrica project is an important step in the island's future economic growth with environmentally clean energy. Puerto Rico is an island of four million people, 35 miles wide and 150 miles long, lying about 1000 miles east of Miami, Florida, in the Atlantic Ocean and the Caribbean Sea. Recently, the island has enjoyed healthy economic growth in parallel with the US mainland, tied mostly to tourism and light manufacturing, principally in the pharmaceutical industry. Other industrial activities include oil refining, chemicals, and distilling.

In the early 1990s, the Puerto Rico Electric Power Authority (PREPA) recognised the need to add 1200 MW of new electricity generating capacity by the year 2000 to keep pace with a 3-4 per cent projected load growth. PREPA's existing generating capacity of 4200 MW had only been augmented by 247 MW in the last 20 years. PREPA needs to maintain a high reserve margin as an island generator, with no interconnection for imported power, and the sole provider of electricity on Puerto Rico. In June 1995, PREPA had reliable, available capacity which barely exceeded its peak load of of 2748 MW. But PREPA could not finance the new generating capacity without risking a downgrade in its credit rating (PREPA's senior unsecured debt is rated BBB+ by Standard and Poor's and Baa1 by Moody's), so IPP solutions were advised. Further, fuel diversity is a key objective of the Commonwealth's energy policy, as the island now depends on fuel oil, much of it high sulphur (greater than 1.0 per cent by weight) number 6 oil, for 98 per cent of its energy needs. In 1993, PREPA was facing a $50 million lawsuit filed by the US EPA for noncompliance with clean air standards and lack of progress in mitigating fuel oil generated air pollutants.

In response to the financial, technical and environmental challenges of adding new generating capacity, PREPA turned to the international independent power industry. PREPA evaluated over a dozen proposals for independent power projects. The Eco-Eléctrica proposal to PREPA was both timely, and a bit radical: import LNG to the Island of Puerto Rico, and use it to fuel a 500 MW combined cycle gas turbine power plant, with LPG as the back-up fuel. LNG storage and vaporisation capacity would also be available to serve a downstream market for natural gas on the island once the terminal was completed and commercial operations had begun. Because the power plant could be constructed faster than the LNG terminal, LPG would also be used to fuel the power plant until the LNG terminal could be completed. In early 1994, the EcoEléctrica project concept ultimately beat three other project finalists, including competing LNG, LPG and orimulsion fuelled power plants. (A circulating fluidised bed coal plant was also selected.) The project is structured such that it will be dispatched at base load, below the cost of PREPA's incremental number 2 or 6 fuel oil generating capacity. Finally, since the project's power price was below PREPA's avoided cost of new power generation, and because the project supplies thermal energy for desalinated water production, the project meets the criteria for a Qualifying Cogeneration Facility under the US Public Utilities Regulatory Policy Act of 1978 (PURPA).

The EcoEléctrica project will be the cleanest power plant for environmental performance on Puerto Rico and one of the cleanest in the world. The benefits of clean burning natural gas when compared to fuel oil air emissions are now well known (low NOx, essentially no sulphur or particulate matter). In addition, because the LNG terminal will require 32 months to complete and the power plant just 24 months, LPG will be used as the interim fuel. LPG from Enron's nearby Procaribe terminal will also be used as the principal back-up fuel in the event of an LNG supply interruption. Low sulphur number 2 fuel oil will be used in the event LPG is unavailable, with its use voluntarily limited to 90 days.

Consequently, the project helped PREPA solve many of the problems facing the island in 1993: the need for new, fast track, base load generating capacity, improvement in its environmental performance, maintaining its credit rating, and diversifying its fuel source options for thermal power generation. In addition to the economic rationale for fuel diversity, air emissions from PREPA's existing generating capacity fuelled on the high sulphur number 6 oil make clean air act compliance difficult. This project will bring economical natural gas to the island available for use in power generation for the first time. Further, contracting for independent power production to expand PREPA's generating capacity has the added benefit of allowing PREPA to preserve its capital for existing facility maintenance and upgrades, as well as thermal efficiency and environmental enhancement programs, rather than investing heavily in new power plant construction. PREPA signed a 22-year Power Purchase and Operating agreement with EcoEléctrica in March of 1995.

APPROVAL PROCESS

Because Puerto Rico is a territory of the United States of America, an energy project on the island is subject to US federal laws and regulations governing the importation of natural gas, the siting of an LNG facility and the environmental impact of new sources of pollution. As an LNG import terminal, the project falls under the jurisdiction of the US Federal Energy Regulatory Commission (FERC) Office of Pipeline Safety to ensure that design of the facility meets certain safety standards. The FERC was also the lead Federal agency for the preparation of the project's Environmental Impact Statement (EIS) in compliance with the requirements of the National Environmental Policy Act (NEPA) and the Council on Environmental Quality regulations for implementing NEPA. The Puerto Rico Planning Board (PRPB) is the Commonwealth's agency with authority over location approval and land use control, and was also required to prepare an EIS. For the EcoEléctrica project, these two agencies acted together to prepare a single EIS.

The FERC must consider the project sponsor's application for authority to construct and operate a site of import of LNG under Section 3 of the US Natural Gas Act, and the assessment of environmental impacts is an important and integral part of the decision to approve a siting application. Selection of a suitable site for the project was key to the project's ultimate success, both in terms of obtaining a siting permit without delay and in achieving strong project economics. The site selection process was restricted to the southern coastal area by the need for deep water, ocean delivery of LNG and the development team's desire to build the project on a joint site (power plant/LNG terminal). Proximity to PREPA's coastal electric power transmission system and Enron's existing LPG terminal for back-up fuel led to the Guayanilla Bay area on the island's south coast as a preferred location.

The site is a 45-acre portion of a Union Carbide petrochemical facility that ceased most operations in 1985. The LNG terminal occupies 25 acres of the site. While the Punta Guayanilla site was ideal in meeting the siting criteria mentioned above, it was less than ideal in meeting some other engineering siting criteria. The geologic setting led to significant engineering complexities and siting permit challenges at this site, which took some effort to overcome.

Permit planning and application work began in July of 1994 and was completed in early 1997. The project faced engineering challenges in the areas of air emissions and water use. To facilitate air permits, the project chose to pursue a strategy of non-significant air emissions. The combustion turbines will utilise steam injection for NOx control, with Selective Catalytic Reduction for final NOx removal to 7 ppm (@15 per cent O2, dry). The heat recovery steam generators (HRSG) stacks will be co-located for improved emissions dispersion. A saltwater cooling tower was selected for waste heat removal as a means of minimising saltwater intake and the effect on marine life in Guayanilla Bay. The saltwater cooling tower also eliminated the need for any offshore construction required for a direct cooling water intake and discharge system, and the resulting impact to the sensitive marine environment in the bay. The resulting project is designed and is being constructed to comply with the most stringent environmental performance and LNG terminal siting standards imposed by both the US federal and Puerto Rico Commonwealth agencies.

THE ECOELÉCTRICA SOLUTION

The EcoEléctrica power plant will consist of two Westinghouse 501F combustion turbines rated nominally at 160 MW; two, three pressure, reheat, ABB-Combustion Engineering HRSGs; and one, three pressure reheat, single cylinder-single flow, Toshiba steam turbine, nominally rated at 214 MW. Because the project is a dedicated use LNG receiving terminal built to fuel an independent combined cycle power plant, optimum use of waste thermal energy was used to improve the power plant's fuel efficiency. Cryogenic energy from the LNG terminal (transferred by means of a circulating water/glycol cooling loop) will be used to chill the combustion turbine inlet air in the tropical climate of Puerto Rico (site average air temperature of 80°F (27°C)). The use of inlet air chilling on the combustion turbines results in additional power output and higher fuel efficiency. In turn, the ambient heat rejected from the combustion turbine inlet air, and other sources of waste heat, will be used to vaporise LNG for use as fuel in the combustion turbines. Excess cryogenic energy will be dumped to the plant's cooling water under some operating scenarios. The steam cycle's waste heat will be rejected to an eight cell, counter flow, mechanically induced draft, saltwater cooling tower, built by Hamon. The application of advanced turbine technology and combined cycle design will result in a thermal efficiency for the power plant in excess of 50 per cent (LHV) on natural gas and propane fuel at site conditions. Finally, this plant will be the first to be able to switch between three fuels - natural gas, propane, and fuel oil - without shutting down the combustion turbines.

The EcoEléctrica LNG import terminal will include a one million barrel gross (159 000 m3) LNG storage tank (a second tank has been pre-rermitted); a world class LNG tanker berth at the end of a 533 m pier; two shell and tube LNG vaporisers and superheaters, each rated at 93 million scfd peak capacity for power plant fuel service; up to four additional vaporisers for pipeline gas service; four, screw-type natural gas compressors and centrifugal blowers for LNG tank boil-off gas service; and a double-duty flare for both LNG and LPG emergency releases. The LNG tank will be the world's largest above ground LNG storage tank. Pitt-Des Moines, Inc. will design and construct the LNG terminal and a new LPG storage tank as a subcontractor to EECC.

Puerto Rico's only current source of clean burning gas fuel is imported LPG. Enron operates the largest refrigerated LPG storage terminal in the Caribbean basin just 3 miles east of the project site in Tallaboa Bay: the ProCaribe Terminal. Infrastructure improvements to the ProCaribe terminal are being made to augment its unloading, storage, and send-out capabilities to meet the EcoEléctrica project needs. The two existing refrigerated LPG storage tanks, of 11 800 and 7700 cubic meters, are being supplemented with a third LPG tank of 19 900 cubic meters, which is now under construction. The first LPG specifically for the power plant is due to be delivered between August and October 1999. This gas will be used for commissioning the new LPG tank, LPG unloading system upgrades and LPG forwarding, metering and vaporisation systems. The power plant will be commissioned on LPG during the fourth quarter of 1999. LNG will be delivered for cool down of the LNG tank and commissioning of the unloading systems during the summer of 2000.

Electric power will be generated at 18 kV and stepped-up to 230 kV in the power station's switchyard for transmission to PREPA's Costa Sur Thermal Power Station approximately 2-3 miles away. A 20-inch natural gas pipeline will also be built to the Costa Sur plant's boundary to facilitate natural gas delivery when the LNG terminal is completed. This pipeline spur will also play an important role in providing natural gas line pack (buffer storage) for the power station's combustion turbines. An 8 inch LPG transfer line will also be built from the ProCaribe terminal to the new EcoEléctrica project site about 3.5 miles away. Black and Veatch of Kansas City, Missouri, is providing detailed engineering for the power station to EECC.

The EcoEléctrica solution for Puerto Rico also includes an added benefit to the island: fresh water. The southern coast of Puerto Rico is naturally dry and the Puerto Rico Aqueduct and Sewer Authority (PRASA), as well as PREPA, have a need for new sources of fresh water supply. EcoEléctrica will construct and operate a 2.0 million gallon/day (7570 m3/day), multiple effect distillation (MED) desalinated water plant to meet its own fresh water needs and provide water to PRASA. Provisions have been made to add a future, second train of the same capacity. Potable water will be sold to PRASA for distribution in the nearby community of Guayanilla, and desalinated water will be sold to PRASA for distribution to PREPA for use in its Costa Sur Thermal Power Station. The desalinated water plant will be manufactured and built by Israeli Desalination Engineering (IDE).

Enron Engineering and Construction is building the project under an EPC turnkey contract with EcoEléctrica. EECC (and its NEPCO subsidiary) has completed 51 power projects with a total capacity of over 5000 MW in 15 countries, and currently has a backlog of 6000 MW in 10 countries. EECC is self-performing the contract in Puerto Rico, withy significant assistance from experienced civil, mechanical and electrical subcontractors from Puerto Rico. The guaranteed schedule for the power plant is 24 months from NTP, but site preparations proceeded well and the current target is 21 months. The schedule for the LNG terminal is 32 months from NTP, with LNG tank construction lying on the critical path.

Enron International's Asset Management company will provide operating and maintenance advisory services for EcoEléctrica. Kenetech will serve as administrative manager for EcoEléctrica.

FUEL AND FINANCING

Enron will serve as the LPG and LNG fuel manager for the project. EcoEléctrica has contracted with ProCaribe under a LPG Storage and Services agreement for the receipt, storage and redelivery of LPG for the project. Approximately 550 000 t/year of LNG will be imported from the 3 million t/year Atlantic LNG (Amoco/British Gas/Cabot/Repsol/National gas Co. of Trinidad and Tobago) project on the Island of Trinidad by means of a 20-year fuel supply agreement with Cabot LNG. Cabot LNG is refurbishing the LNG tanker "GAMMA" to service its offtake requirements with the Atlantic LNG project, and deliver to the EcoEléctrica project, as well as markets in the US Northeast (via Everette, Massachusetts). The GAMMA is a 125 000 cubic meter vessel, and will be renamed the "Matthew" when it's recommissioned.

The project faced another challenge in that negotiations for a long-term LNG fuel supply contract followed execution of the power purchse agreement. As both a world class producer and marketer of LPG, Enron was able to present the lenders with a credible track record in gas contracting and fuel hedging. This capability, together with strong project economics for the LPG fuelled scenario, convinced the project's lenders, ABN AMRO and Banque Paribas, that a long-term LNG supply arrangement would not be necessary to finance the project. Ultimately, the LNG fuel supply agreement was reached with Cabot LNG prior to financial close and EcoEléctrica was able to bring the entire deal together so that it could bring LNG to the project with the shortest possible interim fuel (LPG) period, determined only by the construction schedule limitations.

Project finance was arranged by lead banks ABN AMRO Bank and Banque Paribas, and the syndication was underway in February of this year, with a strong reception. Project costs are estimated to total $670 million. These costs will be financed during construction through a $603 million construction loan and a $67 million sponsor construction loan. Financing is on a non-recourse basis, so payment of the loans will be made entirely from the project's cash flow.

FUTURE PLANS

Elsewhere in Puerto Rico, Enron plans to market natural gas to PREPA for use in its existing thermal generation plants. With relatively minor additions and modifications, the EcoEléctrica project can handle considerably more natural gas throughput than is required for the power plant. Enron entered into a tolling agreement with EcoEléctrica for the receipt, storage and regasification of these future volumes, when they begin flowing. Work is under way to identify the best means for transporting natural gas to generating plants that PREPA may be interested in converting from fuel oil to natural gas.

Enron also hopes to reapply its experience in developing the EcoEléctrica project elsewhere in the Caribbean and Central American region. Finding the right combination of market needs was the key to a successful LNG project in Puerto Rico. Arranging the fuel supply was the greatest challenge. The environmental benefits of natural gas are not yet fully valued in many of the region's developing and increasingly private markets. This means that the small (yet diminishing) premium LNG fuel for power generation must demand makes it hard to compete with fully depreciated thermal generation burning inexpensive high sulphur fuel oil or coal. However, as in Puerto Rico, much of this generating capacity must soon be replaced, and with the improvements in combined cycle efficiency, new LNG fuelled capacity can compete with alternative fuels in new plants (as demonstrated in Puerto Rico). Fuel supply availability and contract structure will always be the lynch pin to complete success in these projects, but Enron's experience in Puerto Rico was that it needn't be a roadblock to success. More flexibility in LNG supply, shorter-term contracts, more spot cargo availability, more producers, smaller LNG trains, will all promote broader application of LNG for power projects.



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