An electric utility is selecting a company that will supply natural gas for power generation. The prospective supplier is expected to import LNG delivered at an onshore or floating terminal and send gas via pipeline to the client’s power plants. The client intends to select one of the shortlisted firms as a “Preferred Supplier” and commence negotiations. The client requested K&M’s commercial and technical advisory services during these negotiations and the contract implementation with the prospective gas supplier. The services K&M is providing in this project include estimating the LNG demand, analyzing the business case to switch from diesel to natural gas, analyzing the viability of various sites, developing the gas quality specifications, and advising throughout the process of negotiating a gas supply agreement (including setting a negotiation roadmap, developing an issues list, participating in negotiations, and providing support until the agreement is executed).

K&M’s scope of work includes:

1. Analyzing historical operational and dispatch information of power plants that will be converted to gas
2. Developing an hourly merit order dispatch model to estimate hourly generation for each plant during the next 25 years
3. Analyze the technical viability and costs of converting generation units to gas
4. Calculate the levelized-cost of electricity under various generation expansion scenarios and advise on the least-cost option
5. Develop gas quality specifications
6. Estimate the all-in cost of gas delivered at the power plant battery limit and benchmark it against similar projects
7. Actively support throughout the negotiation process