Summit lines up China financing for Texas power project

Confirming a recent report, Summit Power Group said Sept. 12 that it is getting financing support for its coal gasification power project in Texas from Chinese sources.

At the 12th annual U.S.-China Oil & Gas Industry Forum in San Antonio, Summit introduced major new project participants who will advance and help assure the financing and construction of its Texas Clean Energy Project (TCEP). The news was announced at an industry luncheon. After remarks by federal, state, and local elected and appointed government officials, the event culminated with the signing of a Memorandum of Understanding by representatives of Summit, Sinopec Engineering Group and The Export-Import Bank of China (Chexim).

TCEP, a coal gasification power/polygen project that Summit is developing near Odessa, Texas, will capture 90% of CO2 for use in enhanced oil recovery (EOR) by producers in the Permian Basin of West Texas, boosting U.S. oil production by some 7 million barrels per year, Summit noted in a statement. TCEP will also produce more than 700,000 tons per year of urea as fertilizer for U.S. farmers and a long-term, 200-MW supply of ultra-clean and low-carbon electric power for CPS Energy, the municipal electric and gas utility of San Antonio.

At the event, Summit also announced that Minnesota-based CHS Inc. is the purchaser of TCEP’s entire urea output, which is expected to reduce annual U.S. imports and U.S. dependence on foreign urea fertilizer by more than 10%. CHS also announced that it will make a small equity investment in the project. TCEP will boost U.S. domestic production of urea fertilizer for American farmers by about 20%.

Major transactions now in progress and memorialized in the memorandum of understanding signed by the parties include a new engineering, procurement, and construction (EPC) contract for TCEP’s gasification and chemical block, which Summit intends to award to the Sinopec Engineering Group (SEG). SEG is the newly consolidated engineering subsidiary of Sinopec Group, one of the world’s largest companies. SEG will select U.S. construction contractors for the TCEP chemical block, which like TCEP’s power block, will be built by U.S. construction workers.

Siemens and Selas will continue in their project roles

Under a previously-signed EPC contract for the power block, Siemens will provide a state-of-the-art Siemens high-hydrogen combustion turbine to be manufactured by U.S. workers in North Carolina. Selas Fluid Processing Corp., a U.S. affiliate of Linde, will continue to provide key equipment and otherwise support SEG in the chemical block EPC contract.

To support SEG’s new EPC contract, Summit and SEG said that Chexim is expected to be the sole financial lender to TCEP, subject to completion of the EPC contract and Chexim’s due diligence. Summit said the Chexim loan amount, which will be based on a percentage of the dollar amount of SEG’s EPC contract, will be enough to satisfy all of TCEP’s needs for project debt.

Whiting Petroleum Corp. previously executed a contract to purchase a major portion of TCEP’s captured CO2 for use in Whiting’s EOR operations in Texas. TCEP’s total sales of captured CO2 for EOR will be about 2.5 million tons per year. In Texas EOR operations, the captured CO2 is effectively a solvent that helps release trapped oil for recovery. No “hydro-fracking” is involved, and any injected CO2 that comes to the surface with the produced oil is re-captured, re-compressed, and re-injected, Summit noted. Houston-based Shrieve Chemical Co. has a contract to purchase TCEP’s output of sulfuric acid.

The total cost of TCEP will be more than $2.5bn. Out of that, $450m will be provided by a cost-sharing award announced in 2010 by the U.S. Department of Energy (DOE) under its Clean Coal Power Initiative. TCEP has been repeatedly described by DOE officials as one of the agency’s flagship projects that will prove the commercial viability of carbon capture, utilization and storage.

Summit said it is in discussions with a number of potential U.S., European, and Asian sources of equity to accompany Chexim’s provision of project debt for TCEP. Summit’s bankers and financial advisors include the New York office of Royal Bank of Scotland, the New York and Beijing offices of the China International Capital Corp. (CICC), and Washington, D.C.-based Wellford Energy.

TCEP has already obtained all the permits and contracts needed to allow financing and construction of the plant. Financial closing and start of construction for the project are now targeted for the end of 2012 and the beginning of 2013 respectively. The project will require between three and four years to be built, commissioned, and achieve commercial operation.

“This is a milestone event for TCEP,” said Donald Hodel, the Chairman of Summit and a former U.S. Secretary of Energy and U.S. Secretary of the Department of the Interior under President Ronald Reagan. “Because of its full commercial scale and its exceptionally clean use of coal as a chemical feedstock instead of a fuel, TCEP has always been recognized as a project of true global significance. The coming together in San Antonio of so many U.S., European, and Asian entities to help ensure that TCEP is financed and built underscores the full extent of domestic and international support for TCEP. We are pleased to have created a global, collaborative initiative that will not only create U.S. jobs and so many valuable products to meet U.S. needs, but raises the bar in clean energy and supply chain innovation.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.