By Ron Genereux and Don MacDiarmid
The purpose of this presentation is to provide a very brief case history of the Millennium Cogeneration Project that Suncor Energy Inc. ('Suncor') has recently contracted with TransAlta Energy Corporation ('TransAlta') to have constructed at the site of its oil sands extraction and processing plant located near Fort McMurray, Alberta (the 'Suncor Plant'). The Millennium Cogeneration Project, which is to be owned and operated by TransAlta, is currently being constructed in conjunction with a major expansion of the Suncor Plant (the 'Project Millennium'), which will see the synthetic crude oil production capacity of the Suncor Plant double to 210,000 barrels per day (or 'bpd').
The discussion which follows will focus upon certain of the technical challenges which needed to be addressed with respect to the Millennium Cogeneration Project, including:
- the coordination of its construction with the multi-billion construction of the rest of Project Millennium;
- the integration of the Millennium Cogeneration Project facilities with the existing thermal and electrical generation facilities at the Suncor Plant and with the operation of the Suncor Plant generally; and
- certain aspects of the design requirements of the Millennium Cogeneration Project from the perspective of Suncor as project host.
Operations at the Suncor Plant
The optimal characteristics for any cogeneration project from the perspective of a host can only be understood in the context of the host's requirements for thermal energy or both thermal and electrical energy. Therefore, it is useful to have an understanding of the operations of the Suncor Plant as it exists now and as it is contemplated at the conclusion of Project Millennium.
Through its predecessor, Great Canadian Oil Sands, Suncor commenced operations at the Suncor Plant in 1967. The Suncor Plant is situated in the midst of large deposits of oil sands. The Suncor Plant extracts crude bitumen from oil sands and then upgrades the crude bitumen into synthetic sweet crude oil which can be processed by refineries. Oil sands consist of a mixture of sand, clay, water and hydrocarbons in the form of crude bitumen. Operations at the Suncor Plant consist of three main activities. To begin with, oil sands are mined from deposits at or near the surface from lands held by Suncor pursuant to Crown leases obtained from the Government of Alberta. Next, crude bitumen is extracted from the mined oil sands by a series of processes which use steam and/or hot water. Finally, the tar-like crude bitumen is upgraded by high temperature cracking and sweetening processes in order to produce a synthetic sweet light crude oil which can be processed by refineries.
The extraction and processing of crude bitumen are energy intensive processes. Currently, the energy requirements of the Suncor Plant are met by a series of boilers which are fired by one or more of coke or coker gas (each of which are process by-products) or natural gas. These boilers are used to generate steam. This steam is used directly to meet all of the thermal energy requirements of both the extraction and upgrading operations. In addition, such steam is used to generate electrical energy through two steam turbine generators.
In early 1996, the output capacity of the Suncor Plant was 79,500 bpd of synthetic crude oil. Following the commencement of operations at the Steepbank Mine, and the completion of some smaller capacity improvements at the Suncor Plant, the output capacity increased to approximately 105,000 bpd. The opening of the Steepbank Mine was only the first of the ambitious expansion plans that are to be undertaken by Suncor in respect of the Suncor Plant. Currently, Suncor is in the process of implementing a major expansion (called 'Project Millennium') in two phases. The first phase, called the Production Enhancement Phase (or 'PEP'), is in fact a package of small independent projects to increase output capacity, improve operational reliability and eliminate process restrictions (or bottlenecks) in the existing production train at the Suncor Plant. The PEP phase of Project Millennium is forecast to increase the productivity of the existing production train from the current levels to 130,000 bpd by mid-2001.
The second and more significant phase of Project Millennium consists of the construction of an entirely new production train at the Suncor Plant. This second phase of Project Millennium is scheduled to be completed by the start of 2002. Upon completion of both phases of Project Millennium, the output capacity of the Suncor Plant will have been increased to approximately 210,000 bpd.
Not surprisingly, the expansion of the Suncor Plant by more than 150 per cent from the output capacity of early 1996 results in an increase in the thermal and electrical energy requirements of the Suncor Plant.
The Electrical Energy Market
in Alberta
While the Suncor Plant currently generates onsite all of the thermal energy required for its operation, it generates only a portion of its electrical energy requirements. The remaining electrical energy requirements are met through purchases from a local electrical utility. The electricity industry in Alberta is in the process of being deregulated. Currently in excess of 90 per cent of electrical energy consumed in Alberta is generated by regulated generating stations owned by one of three utilities. The remaining electrical energy is obtained through imports from British Columbia and Saskatchewan, or from unregulated independent power projects (such as the Millennium Cogeneration Project).
The Government of Alberta has set in place a legislative and regulatory framework for the deregulation of the regulated generating facilities to commence in January, 2001. This deregulation process is still very much at its formative stage. The deregulation program commenced in 1996 with the introduction of the Power Pool of Alberta (the 'Power Pool'). The next key step in this deregulation process is the imposition of legislated power purchase arrangements which will govern the sale of all electrical output from each of the separate regulated generating units. Marketers will bid at auction for the right to become the purchaser of all electrical output that has been made subject to a particular legislated power purchase arrangement. Auction proceeds will then be distributed to customers through reductions in their power costs. The marketer which succeeds at auction will have the right to offer the electrical energy output of the particular unit or units into the Power Pool. By introducing a large number of marketers into the Power Pool supply offering process, the Legislature of Alberta is attempting to avoid potential market abuse which could result from having only the current three regulated utility owners offering electrical energy from the currently regulated units. These legislated power purchase arrangements are not scheduled to take effect until January 1, 2001 and each will have a term which is the lesser of 20 years or the remaining useful life of the particular unit. The specifics of these power purchase arrangements and the rules which are to govern the attendant auction of them have yet to be finalized.
It is difficult to forecast with certainty what the impact of this deregulation process will be upon both electrical generating capacity and electrical energy prices in the short, medium or long term. What is certain is that the demand for electrical energy in Alberta has in recent years outstripped the addition of new generating capacity. During peak demand periods, if one or more key generating stations is out of service, the available electrical generating capacity may be inadequate to meet the instantaneous demand. This type of supply shortfall not only results in system curtailments but can, even in the absence of an actual curtailment result in very high hourly prices in the Power Pool.
All electrical energy that is sold through the regulated interconnected electrical system or 'grid' in Alberta is sold through the Power Pool. The Pool Price in any hour is the marginal price offered by the last generating unit dispatched to meet demand in each minute of the hour. As system-wide demand increases without offsetting increases in the creation of new capacity, the marginal price of the last unit dispatched (and hence the Pool Price) will tend to be higher in peak demand periods.
In the face of its own increased requirement for electrical energy, coupled with uncertainty in both the availability and the price of electrical energy purchased through Power Pool, Suncor determined that it would be in its interests to pursue a cogeneration project in conjunction with Project Millennium. Such a project would not only meet its substantially increased thermal energy requirements, but would also meet all of the electrical energy requirements of the expanded Suncor Plant in a manner which protected it from upsets in both supply and price to which it would otherwise be subject as a participant in the broader deregulated Alberta electrical energy market. In effect, the Millennium Cogeneration Project provides Suncor with a long-term hedge against fluctuations in the Pool Price.
Thermal and Electrical Energy Requirements
The Suncor Plant requires approximately 3.5 million pounds of steam per hour to support the current output capacity of approximately 105,000 bpd. Upon the completion of Project Millennium, the steam requirements of the Suncor Plant will increase to approximately 5.0 million pounds per hour. The fact that the steam requirements do not double to 7.0 million pounds per hour with the doubling of output capacity to approximately 210,000 bpd is due in part to various energy efficiency projects which are being undertaken in respect of the existing production train as well as similar energy efficiencies which are being incorporated into the design of the new Project Millennium production train.
The current electrical demand of the Suncor Plant is approximately 100 MW. Approximately 55 MW of this demand is met by the existing steam turbine generators located at the Suncor Plant, with the remaining 45 MW being supplied by a local electric utility. Following the completion of Project Millennium, the electrical energy demand for the Suncor Plant will increase to approximately 200 MW.
Energy Services Equipment
The existing energy services facilities at the Suncor Plant consist of the following major pieces of equipment:
- 3 - 1,000 klbs/hr 790 psig superheated steam delayed coke fired boilers
- 1 - 250 klbs/hr 790 psig superheated gas fired boilers
- 2 - 300 klbs/hr 425 psig superheated gas fired packaged boilers
- 2 - 180 klbs/hr 150 psig gas fired packaged boilers
- Electrostatic precipitators for each solid fuel boiler
- 2 - 38.25 MVA extraction/back pressure steam turbines
- 4,400 usgpm reverse osmosis make up water facility
- Chiyoda CT 121 flue gas desulphurization facility
- Honeywell DCS control system
- all related ancillary equipment
The developer/owner of the Millennium Cogeneration Project, TransAlta, will install at a total cost of approximately $315 million the following equipment:
- 2 - ABB 11N2 combustion gas turbines
- 2 - 1,000 klbs/hr Heat Recovery Steam Generator's c/w duct firing
- 1 - ABB 65 MW condensing steam turbine to the hot water heat recovery loop
- 1 - ABB 70 MW condensing steam turbine to the hot water heat recovery loop
- 240 kV transmission line and related electrical substation
- boiler feedwater storage and pumping
- compressed air and drying facilities
- all related ancillary equipment
The equipment to be installed by TransAlta as the Millennium Cogeneration Project adds thermal and electrical energy capacity well in excess of the incremental energy requirements of the Suncor Plant arising out of the expansions brought about by Project Millennium. This has a number of positive consequences. First, the redundancy or over capacity of these facilities allows for a measure of reliability in energy services that is not currently available at the Suncor Plant. Not only can all of the electrical energy requirements of the Suncor Plant be satisfied without the need to obtain electrical energy from the broader Alberta electrical market, but such electrical requirements can be met even if any one of the generators to be installed by TransAlta is unavailable. Even in the event of multiple generator failures, it will still be possible for electrical energy to be imported into the Suncor Plant from the Alberta integrated electric system to which the Suncor Plant will be connected.
As noted above, the expected electrical demand of the Suncor Plant following the completion of Project Millennium is approximately 200 MW. The facilities to be installed by TransAlta are expected to add approximately 355 MW of capacity at the site of the Suncor Plant. When added to the average capacity of 55 MW of the existing steam turbine generators owned by Suncor, there will be Ñ when all generators are available Ñ site electrical capacity of approximately 410 MW. From TransAlta's perspective, this large excess electrical capacity at the site provides an opportunity to produce electrical energy in excess of the requirements of the Suncor Plant and export such excess electricity for sale through the Power Pool of Alberta. During periods of low Pool Price, the output of one or both of the ABB 11NC into gas turbine generators can be reduced. If the output of the gas turbine generators has been reduced, the output of the Heat Recovery Steam Generators ('HRSGs') can nevertheless be maintained through natural gas duct firing of such HRSGs.
As a final comment, in respect of the new TransAlta Facilities, the redundancy in steam generation capacity between the new TransAlta facilities and the existing Suncor facilities, allows for certain of the less efficient boilers within the existing Suncor facilities to be retained for standby rather than primary use.
Construction of the Millennium Cogeneration Project
The Millennium Cogeneration Project is a very significant project from the perspective of both Suncor as host and TransAlta as project developer/owner. At the same time, however, the entire rationale behind the cogeneration project depends upon its integration within the larger Project Millennium and the overall Suncor Plant. The integration of the Millennium Cogeneration Project (to be owned by TransAlta) must be considered both in a context of coordinating its construction along side the contemporaneous construction of Suncor's Project Millennium as well as the coordination of its ongoing operation with the expanded Suncor Plant. Because the activities of Project Millennium involve expansion of all mining activities, bitumen extraction and bitumen upgrading, a variety of equipment and services is necessary to effect the engineering, procurement and construction of Project Millennium. In addition to TransAlta, seven other firms have contracted with Suncor to provide all services in respect of the engineering procurement and construction of the Project Millennium. Unlike TransAlta, these other seven firms have entered into an alliance (the 'Alliance') to act jointly in their engineering, procurement and construction activities. Each of these seven firms share a common risk/reward scenario for key performance indicators such as cost, reliability and construction schedule.
Notwithstanding the fact that TransAlta is not a member of the Alliance, it was crucial to establish key milestone dates for the completion of various components of the Millennium Cogeneration Project as well as to coordinate specific construction activities in both the Millennium Cogeneration Project and otherwise within the Project Millennium which could adversely impact upon one another. To a significant degree, construction procedures governing safety, work permits and various administrative issues have been resolved between Suncor and TransAlta in a manner consistent with those established between Suncor and the Alliance.
Operation of the Millennium Cogeneration Project
The Millennium Cogeneration Project is to be constructed and owned by TransAlta. At the same time, however, its output is an essential component to the ongoing viability of the Suncor Plant. Suncor and TransAlta have made contractual arrangements to insure that the electrical and thermal requirements of the expanded Suncor Plant are satisfied. In addition to providing Suncor with rights to certain of the electrical and thermal output of the Millennium Cogeneration Project, these arrangements also address the coordination of the operation of the Millennium Cogeneration Project with the operations of the entire Suncor Plant. As is necessary for all multi-party cogeneration projects, these arrangements also deal with issues relating to the interconnections necessary for water, steam and electrical energy to be transferred between the host and the cogeneration project developer/owner.
The Millennium Cogeneration Project also required certain additional operational arrangements between the host and the cogeneration developer/owner because of the manner in which the project is being incorporated into the Suncor Plant. The thermal energy that is to be generated by the Millennium Cogeneration Plant will in many cases use facilities which are to be shared with the existing energy services facilities of the Suncor Plant. This necessarily requires coordination between the pre-existing Suncor facilities and the new TransAlta facilities of the Millennium Cogeneration Project. As a result, in addition to its role as developer/owner and operator of the Millennium Cogeneration Project, TransAlta will also become the contract operator of the existing energy services facilities of the Suncor Plant. In this way, a single operator, TransAlta, will be responsible for the effective management and control of all energy services upon the site of the Suncor Plant.
Summary and Conclusion
The expansion of the Suncor Plant that will have been effected upon the completion of Project Millennium will have increased the synthetic crude output capacity of the Suncor Plant by more than 150 per cent during the 6 years prior to 2002. Through the operation of its own energy services facilities during the past three decades, Suncor has developed significant expertise in the provision of energy services at the Suncor Plant. Since the operation of energy services facilities is not Suncor's core business, however, it made imminent good sense for Suncor to turn to TransAlta to provide the increased energy services that it will require following the expansion of the Suncor Plant. The Millennium Cogeneration Project will not only be capable of meeting all of the thermal and electrical energy requirements of the expanded Suncor Plant, it will also provide Suncor with enhanced reliability in the delivery of these services. In addition, TransAlta as developer/owner was able to size the Millennium Cogeneration Project's facilities in a manner which will allow TransAlta to utilize those facilities to deliver electrical energy into the broader Alberta electricity market from the site of the Suncor Plant. This commercial opportunity for TransAlta could not have been as effectively exploited by Suncor itself.
The future success of Suncor as a corporation is very much tied to the success of its ongoing operations in respect of the Suncor Plant. Obviously such operations are themselves tied to the success of Project Millennium. Suncor is confident about its future and confident that the arrangements that it has struck with TransAlta in respect of the Millennium Cogeneration Project will insure that the thermal and electrical energy requirements of the Suncor Plant will be met for the next generation.
Don MacDiarmid is with the legal firm of Bennett Jones in Calgary and Ron Genereux is with Suncor Energy Inc. ET