Water Market Insights No

Water Market Insights
No. 108 July 25, 2014

WELCOME

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· Market for Water and Wastewater Treatment Chemicals in China Will Be $5.7 Billion Next Year

The picture changes day by day in the oil and gas industry. Some recent developments promise to alter many of the forecasts. The developments include:

These new developments have been incorporated into the latest forecasts in McIlvaine Oil, Gas, Shale and Refining Markets and Projects. (www.mcilvainecompany.com)

Turmoil in the Middle East: The strife in Gaza, Iraq, Syria and other Middle East countries continue to threaten the supply of oil and gas from the entire region. EIA boosted the forecast for Brent crude to $109.55 for this year from $107.82. Next year’s forecast was raised to $104.92 from $101.92. Price forecasts were raised primarily because of the problems in Iraq.

Uncertain Russian Gas Supply: Europe and China are both counting on substantial gas imports from Russia. The downing of the Malaysian airlines plane caused oil prices to surge to $3/barrel and reflected concerns about the future of Russian integration into the world market.

Regulations on flaring and green completion: Environmental concerns relative to the emission of methane, CO₂ and organic hazardous air pollutants are resulting in regulations which will change the industry. North Dakota has a new rule to prohibit flaring. This gas will be captured and converted to products adding $100 million/month to oil and gas revenues in the State.

Chinese coal-to-gas program: The various government forecasts of Chinese oil and gas supply and demand have not taken into account the magnitude of Chinese plans to use syngas derived from coal. The following chart compares the industry forecasts to those compiled by McIlvaine.

Gas Use In China in 2025 (bcm)
Source	Industry Forecast	McIlvaine Forecast
Conventional extraction	100	100
Shale gas extraction	60	50
Pipeline imports	70	50
LNG Imports	80	40
Coal-to-gas including CBM and UCG	80	200
Total	390	440

The Chinese government has decided that it is much more attractive to convert coal in western and northern China into gas and pipe that gas across country. The projects already underway plus those in the planning stages would result in 200 billion cubic meters per year (bcm) of domestically produced gas in 2025. That would be twice as much as would be extracted conventionally and would equal the combined conventional, shale and pipeline imports.

With the McIlvaine forecast based on the very recent announcements by the Chinese government, long-term LNG imports would be lower by more than 40 bcm. This has major implications for LNG exporters in the U.S. and Australia.

Development of small scale LNG and gas-to-liquids plants: The lower demand for LNG in China will lead countries such as Australia to divert a portion of the gas supply from large to small LNG plants. The iron mining industry in Australia can take advantage of stranded shale gas supplies near the mines and can convert this gas to LNG to operate the mining vehicles and supply fuel for heating and power.

Movement toward gas-fired vehicles: The movement toward LNG fired vehicles is accelerating It is lower in cost and emissions. Demand is coming from the trucking, marine and rail industries.

There is the potential to upgrade existing gas turbine plants by converting them to combined cycle operation. The cost will be $200 billion and will add 160,000 MW of additional capacity while reducing CO₂ and other pollutants per unit of power produced. This is the conclusion reached by the McIlvaine Company in Gas Turbine and Combined Cycle Supplier Program. (www.mcilvainecompany.com)

The United States has been upgrading existing power plants and reducing emissions per unit of energy produced. CO₂ emissions from U.S. power plants in 2013 were 20 percent lower than 1997 levels, thanks to the shift to CCGT technology. Reductions in NO_x and SO₂ emissions were even greater, dropping 40 percent and 44 percent, respectively. This is due to the installation of additional emission control equipment.

The GRF Tracy San Joaquin County conversion from 169 to 314 MW cost approximately $232 million or 1372/kW based on the simple cycle rate. From a different perspective, 145 additional MW will be generated at a cost of $1600/kW. The average cost, worldwide, is forecast by McIlvaine at $1000/kW of single cycle operation. There are presently 1.1 million MW of installed gas turbine capacity in the world. There is the potential to add combined cycle operation to 200,000 MW at an investment of $200 billion.

The Rolling Hills Generating Facility in Vinton County, Ohio is proposing to convert from a simple cycle. The current facility utilizes five natural gas-fired combustion turbines. The conversion would require expansion and redevelopment of the current generating facility, adding four heat recovery steam generators and two steam generators to four of the combustion turbines. One combustion turbine would remain as a simple cycle unit. The capacity will expand from 860 MW to 1,414 MW. The proposed conversion is estimated to cost $865 million ($1000/kW). Conversion of the plant would use all five of the existing Siemens 501FD2 natural gas-fired combustion turbine generators. The combustion turbine remaining in simple cycle configuration would have a nominal output of 172 MW. Four of the five combustion turbines would be coupled to Heat Recovery Steam Generators (HRSGs) and each would be equipped with 550 million British thermal units per hour (MMBtu/hour) duct burners. Each pair of gas combustion turbines would be combined with HRSGs and a steam turbine generator set to create 2 x 1 power blocks, each with a nominal output of approximately 621 MW. This company is affiliated with Tenaska Capital Management LLC.

Tampa Electric Polk station is converting four units to combined cycle operation and will increase generating capacity to 1400 MW. SCR will also be installed on all units. The project started earlier this year and will be completed in 2017.

The Empire District Electric Company (Empire District) owns and operates the Riverton Power Station) located in Riverton, Kansas. It currently consists of two boilers and four simple cycle combustion turbines. The combined cycle unit will have a nominal capacity of 250 MW. This will require the addition of a heat recovery steam generator (HRSG) with supplemental natural gas duct firing (duct burners) and a condensing steam turbine generator. The project also includes a cooling tower and an emergency diesel generator. An SCR will control NO_x and a CO catalyst will control carbon monoxide (CO) and volatile organic compound (VOC).

Siemens has been awarded the contracts for the combined cycle conversion of two simple cycle power plants in Argentina by Unión Temporal de Empresas (UTE) a joint venture between Isolux Ingeniería and Inversora Andina Ibérica. The simple cycle plants, Ensenada de Barragán and Brigadier López, were originally designed and supplied by Siemens and are owned by Argentina's national energy company, ENARSA. Siemens will supply the power island equipment to close the combined cycles for these two plants, which will result in an additional 140 MW of power for Brigadier López and 280 MW additional for Ensenada de Barragán with no additional fuel consumption. The power plants are scheduled to achieve commercial operation in the fall of 2014.

AES Dominicana has selected Tecnicas Reunidas of Spain to lead the project to convert Dominican Power Partners’ (DPP) power generating asset to combined-cycle. The conversion project will raise the current plant output from 210 MW to 324 MW.

In Saudi Arabia the 1300 MW Riyadh City simple cycle plant is being converted to combined cycle operation. Some units are already installed and the rest will be operating by middle 2015. The upgrades include:

Kawasaki has converted a number of plants from simple to combined cycle. These include:

Malaysia/Gelugor
GE Frame 9E x 2 converted to Combined Cycle
Myanmar /Ahlone
GEC-Alsthom Frame 6 x 3 converted to Combined Cycle

Black & Veatch has executed the design and construction of several combined cycle conversions

including a conversion to a 2 x 1 configuration in California involving “F” class turbines and a conversion to a 3 x 1 configuration in Malaysia involving “E” class turbines.

For more information on the Gas Turbine and Combined Cycle Supplier Program, click on:

Market for Water and Wastewater Treatment Chemicals in China Will Be $5.7 Billion

China will be the leading purchaser of water and wastewater treatment chemicals in 2015. Purchases will exceed $5.7 billion according to the latest forecast in McIlvaine Water and Wastewater Treatment Chemicals World Market. Corrosion inhibitor purchases alone will exceed $1.4 billion. (www.mcilvainecompany.com)

Subject	2015
Total	5,751
Activated Carbon	151
Chelants	175
Corrosion Inhibitors	1,442
Defoamers	121
Inorganic Flocculants	607
Ion Exchange	209
Odor Control	250
Organic Flocculants	800
Other	258
Oxidizers & Biocides	584
pH Adjusters	270
Scale Inhibitors	884

One of the big drivers in China is the coal sector. Here is the Chinese coal production for last year compared to a very approximate estimate of coal production in 2025:

Chinese Coal Consumption
Coal Use	Million Tons 2013	Million Tons 2025
Large electric power	2,500	3,000
Residential	50	0
Industry	300	50
Heating	100	50
Steel and other ( coke)	400	700
Coal-to-gas including CBM and UGG	50	700
Coal-to-chemicals and fuel	120	800
Total	3,520	5,300

To put this forecast into perspective, the U.S. is the second largest coal producer at 1 billion tons per year. China is building a number of coal-to-chemicals and fuels plants which will use 1.5 times as much coal as the entire U.S. power industry. The total coal consumption in 2025 will be more than five times that of the U.S.

The Chinese program for conversion of coal to pipeline gas involves large treatment chemical expenses. The coal is being mined in relative arid northern and western regions. Zero liquid discharge will be a high priority, so flocculants, scale inhibitors and pH inhibitor expenses will be substantial. Corrosion control chemical expenditures will be very sizable. The main conversion technology will utilize indirect gasification which creates a number of corrosion control challenges.

For more information on Water and Wastewater Treatment Chemicals World Market, click on:

· B&W awarded Contract for Dominican Republic Coal-fired Boiler Project

· MHI receives Order for Combustion CO₂ Capture System for EOR Project in Texas

· Fuel Tech awarded Air Pollution Control Orders totaling $2.8 Million

· Coal-fired Power Generators to spend $400 Billion on New Plants and Upgrades Next Year

· Asia will account for 43 Percent of the Air and Water Monitoring Market Next Year

· Notice of Lodging of Proposed Modification of Amended Consent Decree under the Clean Air Act (Federal Register)

· LiqTech International, Inc. receives Order using its Silicon Carbide (SiC) Membranes for the removal of Heavy Metals from Power Plant Wastewater

· Gas Turbine Emission Control Webinar, July 17^th raised challenges with CO and Lower Quality Fuels

On Thursday at 10 a.m. Central time, McIlvaine hosts a 90 minute web meeting on important energy and pollution control subjects. Power webinars are free for subscribers to either Power Plant Air Quality Decisions or Utility Tracking System. The cost is $300.00 for non-subscribers.

See below for information on upcoming Hot Topic Hours. We welcome your input relative to suggested additions.

DATE		SUBJECT
	July
	31		Mercury Sorbent Options
	August
	7		MATS Timing and Technology Options
	14		Industrial Boiler and Cement MACT Timing and Compliance Options
	21		MEGA Symposium
	28		Demineralization and Degasification
	September
	4		Hot Gas Filtration
	11		Power Plant Pumps
	18		Power Water Monitoring
	25		Power Plant Water Treatment Chemicals

· B&W awarded Contract for Dominican Republic Coal-fired Boiler Project

· Fuel Tech awarded Air Pollution Control Orders totaling $2.8 Million