LNG-to-Power Feasibility Study
The Government of Kenya intends to create a domestic natural gas market for power generation and industrial use with the aim to help diversify the country’s energy mix, improve energy security, reduce the cost of electricity and reduce greenhouse gas emissions. The primary objective of this project is to conduct a feasibility study for the development and operation of infrastructure for importation of liquefied natural gas, conversion of the existing HFO (MSD) Power Plants and development of a natural gas power generation plant.
KenGen contracted K&M to analyze the technical, financial, economic, environmental and social feasibility of the development and operation of infrastructure for importation of liquefied natural gas, conversion of the existing HFO (MSD) Power Plants and development of a natural gas power generation plant to determine what, if any, options would be optimal for natural gas power generation in Kenya. As part of the study, K&M will complete the following tasks:
- Evaluate indicative LNG demand and where the demand is located
- Identify the least-cost LNG import and logistics solution to meet the demand
- Develop a business case for LNG at the cost estimated
- Evaluate LNG supply & infrastructure procurement strategy
- Develop preferred procurement option and conduct financial, economic and value for money analysis
- Conduct technical assessment of feasibility to convert 10 existing power plants from HFO/diesel to LNG
- Develop conceptual design and cost estimates for plants to be converted
- Carry out financial viability analysis for plants to be converted
- Prepare implementation schedule and risk assessment for plants to be converted
- Conduct technical assessment of a greenfield gas power plant
- Develop conceptual design and cost estimates for greenfield gas power plant
- Assess preliminary environmental and social impact of greenfield gas power plant
- Carry out financial viability analysis for greenfield gas power plant
- Prepare implementation schedule and risk assessment for the greenfield gas power plant
Vivo Energy is considering developing an LNG import terminal in Kamsar or Conakry to supply LNG by road to mines or other energy-intensive industries in Guinea (the “Project”). Using LNG rather than diesel or Heavy Fuel Oil (HFO) could reduce energy costs to these mines and industries. As an initial step, Vivo, working alongside the International Finance Corporation (IFC), will perform a preliminary analysis of the feasibility of the Project.
K&M was responsible for:
- Estimating required LNG trucks, ISO containers, customer-site storage, and customer-site regas and control systems
- Estimating logistics costs for in-country deliveries
- Analyzing the competitiveness of LNG available versus liquid fuels currently used by potential customers
- Supporting the analysis of a PV solar option including analysis of LNG-Solar hybrid solution vs LNG, fuel-switching economics, and LNG storage sizing
- Preliminary assessment of bankability for project or corporate financing.
K&M were hired by the IFC to support the creation of LNG projects pipeline, an LNG-to-power pricing framework and to analyze the competitiveness of LNG-to-power versus indigenous and imported coal, gas-fired plants that use indigenous gas as fuel and other sources of power (such as renewables) in Vietnam. The study will assess the optimal transposition of international LNG pricing into appropriate and competitive local power prices. The study will support individual LNG-to-power projects as well as the Government of Vietnam’s engagement with those projects.
K&M was hired to advise on the submission of a bid to build, own, and operate 1-2 large LNG terminals and a gas-fired combined cycle power plant in the Dominican Republic. K&M supported the planning and implementation of a comprehensive prequalification, reviewed the Request for Qualifications of Prequal documentation provided by the procuring entity identifying submission and qualification requirements and evaluating qualification criteria and methodology, and established a plan to collate all documentation, produce submission documentation, and successfully qualify for the proposal stage for both lots. K&M also submitted a Request for Information (RFI) and submission checklist, and drafted all documentation required.
K&M was contracted to assist a private client on the negotiation of the Regasified LNG Sale and Purchase Agreement (RLSPA). A draft version of the RLSPA was submitted to the client on March 31, 2021. In addition to the RLSPA, the LNG supplier proposed that the client and themselves enter into a Pipeline Interconnection Agreement (PIA) that will govern the construction of the pipeline from the LNG terminal to WEB’s battery limit. K&M will review and comment on the RLSPA and PIA.
CUC is considering LNG as a new fuel for power generation. There are several LNG import solutions that Cayman could consider, and the majority of them are likely to result in a cost of fuel that is lower than diesel. However, before proceeding with the development of a specific solution, CUC wants to develop an LNG-to-Power strategy that considers all the technically viable LNG-to-Power options, and narrows the options to two or three that have the lowest costs, a manageable level of risk, and could be implemented in a reasonable timeframe.
A U.S. based multi-billion dollar hedge fund was considering an investment in a new company that would provide small-scale LNG shipping and Floating Storage and Regasification (FSRU) services. K&M was hired by a hedge fund to identify and quantify the addressable market for small-scale LNG shipping and FSRU terminals in the Caribbean, West Africa, and Southeast Asia.
K&M was engaged to provide technical and commercial due diligence for a potential investor in a 380 MW Combined Cycle Gas-fired IPP which will use LNG from a Floating Storage and Regasification Unit (FSRU). K&M’s work included an analysis of the local and regional power markets, an assessment of the project’s dispatch and sales, forecasts of spot market prices, and a detailed review of major contracts, including the Power Purchase Agreement. K&M’s analysis was integrated into the financial model of the project and used for the client’s valuation and acquisition bid.
K&M was engaged by EIG Partners to provide technical and commercial due diligence services for EIG’s proposed investment in a 100 MW solar PV project north of Santiago, Chile. The project is designed to connect to a private transmission line to provide an optimal interconnection and low risk in Chile’s nodal pricing system. K&M reviewed all major project agreements (EPC, PPA, and others) and analyzed supply, demand, and spot prices the Chilean electricity market. K&M also evaluated the site’s solar resource assessments, the proposed PV panel technology, and the project’s expected power generation profile.
K&M was engaged by EIG Partners to provide technical and commercial due diligence services for EIG’s proposed investment in a 600 MW LNG to Power project in Chile. The project consists of a Floating Storage and Regasification Unit (FSRU), onshore gas receiving terminal, and a 600 MW combined cycle power plant using advanced Siemens “H” series gas turbines. The project would supply gas to the power plant and to industrial and other off-takers connected to the gas pipeline network. K&M advised EIG on all aspects of the project, including its technical design and feasibility, commercial structure, economic competitiveness, and its construction and operational risks. K&M’s due diligence includes a review of all major project agreements (EPC, PPAs, Gas Purchase Agreement, FSRU Lease, and others) and an analysis of the Chilean electricity market. K&M also supported EIG by providing inputs to the project financial model as needed.
K&M was retained by WEB Aruba N.V., Aruba’s main power producer, to review the business case (Phase 1), identify the optimal power generation technology and configuration (Phase 2), and competitively procure supply of LNG (Phase 3) for an LNG-to-Power project. WEB Aruba N.V. is planning on developing an LNG-to-Power project to help reduce the cost of electricity from HFO-fueled power plants.
As part of its work during Phase 1, K&M performed an independent review of the business case to ensure consistency and coherency throughout the document, as well as a review and audit of the economic and financial models. During Phase 2, K&M performed technical due diligence on the existing generation system, identified eight technology and configuration options (including reciprocating engines, gas turbines in simple and combined cycle) for improving the efficiency of the existing system, calculated the levelized cost of each option (with HFO and natural gas), and recommended the optimal option.
After confirming that there is a business case and selecting the optimal generation technology and configuration, K&M commenced work on Phase 3, which consists of assisting WEB manage a process for competitively selecting an LNG supplier. The process includes three steps: discovery (prospective suppliers are identified and consulted on their interest on the project), prequalification, and a request for proposals. K&M is performing, under a separate contract, a pre-FEED study of the terminal for receiving, storing and regasifying LNG.