Integration of the natural gas value chain into power generation · In January 2017, Siemens...

Integration of the natural gas value chain into power generation

-

Siemens AG All Rights Reserved©

Integration of the natural gas value chain into

power generation:

a holistic approach to establishing an energy

system with high efficiency clean energy, low

emissions, and secure fuel supply under open

conditions

China Development Forum 2017 Report

March 2017

Siemens AG

Executive Summary

In this report, Siemens has analyzed the status and future trends of global gas

to power generation and its implication for China. Siemens believes these trends

are conducive to the development of the Chinese energy sector. Specific

recommendations are suggested for China with regard to policy making.

Global Oil & Gas markets enter an era of ―New Normal‖ with the emergence

of competent, flexible US shale gas producers. Natural gas is the fastest-growing

fossil fuel with 1.9% CAGR1until 2040 according to the International Energy

1 CAGR - Compound Annual Growth Rate


-


Outlook 2016 by EIA1. Coal is the world's slowest-growing energy source, rising

by 0.6% per year through 2040.

Abundant clean burning (relatively to many alternative fuels) natural gas

resources and robust production - including rising supplies of tight and previously

deemed stranded gas, shale gas, and coal-bed methane - contribute to the strong

competitive position of natural gas. According to IHS2, the global supply of natural

gas surpasses demand in the near future，e.g. in 2020 natural gas supply will be

3,827 BCM3while demand will be just 3,810 BCM.

Overall, the strong growth of natural gas production between 2015 and 2040

can effectively meet rising demand without major upward price disruptions.

Global LNG4is being commoditized and reshaping the global natural gas market.

The attractive pricing of Natural Gas makes it a good choice for new fossil

generating. By 2040 coal, natural gas, and renewable energy sources will provide

roughly equal shares (28%-29%) of world electricity generation - a significant

change from 2012, when coal provided 40% of all power generation.

1 EIA - U.S. Energy Information Administration 2 IHS - IHS Markit Ltd. (INFO, Information Handling Services) 3 BCM - Billion Cubic Meter 4 LNG - Liquefied Natural Gas


-


The recently announced China 13th FYP1sets ambitious goals for gas fired

power generation with 50GW2of added generation over the 2016-2020 periods.

Meanwhile gas consumption in TPEC3is expected to grow from 5.9% to 8.3%10%

by 2020, aiming to address the challenges in emissions, coal reduction, and

renewable development faced by the China energy revolution.

Despite the low global gas prices, it is still difficult to keep gas fired

electricity prices low due to the lack of competitive access to the midstream

infrastructure required to import cheap oversea LNG. The LCOE4for CCPP

6 is

~0.8 RMB/kWh, approximately 2.5 times of coal. Around 75% of the LCOE

comes from the cost of Natural Gas.

Therefore, in order to fulfill the ambitious target of the 13th

FYP it is

necessary to leverage the best practices from other countries and to employ a

holistic approach to the integration of the Gas to Power Value Chain (hereafter

referred to as G2P Value Chain).

Countries like Morocco, Mexico and Brazil are already committed to develop

low emission gas fired power generation by optimizing and integrating the total

1 FYP - Five Year Plan 2 GW - Giga Watt 3 TPEC - Total Primary Energy Consumption 4 LCOE – Levelized Cost of Electricity 6 CCPP Combined Cycle Power

Plant


-


G2P Value Chain via institutional reform, innovation in business models, and

adopting advanced technologies etc.

One of the main opportunities in maximizing the most efficient use of natural

gas is to evaluate a ―business model integration‖, which connects the

up/midstream gas project development (e.g. Liquefaction plant) with the

downstream power generation project, and employing ―technology/System

Integration‖ in the liquefaction/regas/power generation process, which provides a

lower cost over the whole G2P Value Chain.

Siemens offers a comprehensive portfolio of products and solutions integrated

in upstream exploration and production, midstream liquefaction and pipeline

transmission, downstream power generation, transmission and distribution along

the G2P Value Chain

For LNG, Siemens has been offering advanced technologies, modular designs

with a proven track record in ranges of liquefaction technologies including Micro

LNG (up to 0.003 MTPA1), Medium LNG (0.1-2.0 MTPA), Floating LNG, and

large LNG (>2.0 MTPA). In the Russian Yamal LNG project in which CNPC owns

20% share and Silk Road Fund to purchase 9.9% stake, Siemens designed and

supplied the world’s largest (90m x 36m) and heaviest (2,500 MT) single lift E-

House module (supplying 29 E-Houses in total) for electrical power distribution

1 MTPA - Million Tons Per Annum


-


linking a Siemens supplied power island (SGT-800) as well as BOG1compression,

all subject to harsh arctic environment (perma-frost) conditions.

In addition to offering the most efficient mechanical drive gas turbine driven

Liquefaction solutions (Trent 60), Siemens was a pioneer in development and

supply of an all-Electric Drive solution (eLNG), which provides benefits to the

client via enhanced safety, longer continuous operation, and lower emissions,

offering up to 10 days of additional production per year at lower CAPEX2(under

grid connection conditions)

For gas fired power generation, Siemens has a portfolio ranging from 142KW

to 420MW gas engine/gas turbine complimented by in-depth integration expertise

on Distributed Energy (DE), Combined Heat and Power (CHP3/COGEN) and

Combined Cycle Power Plant (CCPP) technologies. Siemens has references

1 BOG - Boil Off Gas 2 CAPEX - Capital Expenditure 3 CHP Combined Heat and Power


-


covering over 3,000 gas turbines and 2,700 Gas Engines for power generation,

representing in excess of 260GW of large size Combined Cycle Power (CCPP) of

installed capacity.

The Siemens 8000H recently commissioned at Lausward Fortuna CCPP in

Düsseldorf (Germany), on January 22, 2016 set three new world records:

maximum electrical net output of 603.8 MW in a single-shaft configuration; ~61.5%

for net power-generating efficiency; and an overall CO21reduction in the amount

of 2.5 MTPA.

In January 2017, Siemens received the first 8000H Gas Turbine order in

China - the combined cycle unit in its Black Point Power Station in Hong Kong.

There are now a total of around 80 sets of SGT-8000H sold worldwide. The

customer is Castle Peak Power Co. Ltd. (CAPCO), a joint venture of China

Southern Power Grid International Limited and CLP Power Hong Kong Limited

(CLP Power). Scheduled to be in operation before 2020, the plant will have an

installed total capacity of more than 560 MW – enough energy to supply

approximately a million households with electricity.

Since 2003, Siemens has been successfully co-operating in technology of

large sized gas turbine (E, F and H-class) with its Chinese strategic partners, and

1 CO2 Carbon Dioxide


-


has supplied closed to 60 sets of E and F-class gas turbine for China with

manufacturing in Joint Ventures, and for export projects as well.

Starting from 2007, Siemens has also been successfully cooperating with

Zhuzhou Nanfang Gas Turbine Packaging and Installation Co. Ltd. (ZNGT, a

subsidiary of AVIC) on the localization of small gas turbines, and in 2015 with

Hangzhou Steam turbine Co., Ltd. (HTC) to kick off localizing medium size gas

turbines. Both gas turbines are applicable to distributed power generation. Siemens

is very much willing to share its experience achieved worldwide with Chinese

peers (e.g. Institutes, Universities) and the Chinese government.

In digitalization, Siemens provides unique value proposition for its customers

by providing domain know-how and expertise in combining Operating Technology

and Information Technology. In the Yuanba project for SINOPEC1, which is

dedicated to continuous pipeline monitoring in order to ensure safety and detect

leaks, Siemens provides redundant failure resilient Industrial Ethernet solution

with fiber-optical cables, a virtual private network (VPN), and industrial network

components capable of withstanding hazardous environmental and locational

conditions. The solution helped SINOPEC reduce leakages by continuous

surveillance, achieve higher uptime by continuous data availability, and reduce

1 Sinopec - China Petroleum & Chemical Corporation


-


OPEX1due to remote expert access. Siemens is also introducing its cutting-edge

Digital Power Plant (DPP) solution into China in a pilot project together with

SPIC. DPP provides with professional management of plant’s asset and is designed

to optimize rotating equipment economy and availability with continuous

surveillance and equipment status assessments etc.

Siemens would like to recommend the following aspects to be specially noted

for the Chinese government:

1) Encourage projects aimed at building up integrated G2P Value Chain

utilizing upstream, midstream, and downstream resources at home and abroad,

private and state-owned or mixed ownership from both a business model

perspective and/or a technology perspective

2) Improve Third Party Access to midstream SOE(State Owned Enterprise)

facilities, and ease approval of LNG Regasification Terminal construction for

Non-NOCs, thus to make full utilization of low cost LNG in global market

3) Define measures and take timely actions to encourage current gas power

enterprises to make full use of the advantages of gas power

4) Strengthen the economics of gas power generation via a feasible market

mechanism. e.g. to deregulate pricing in gas and electricity to enable effective

1 OPEX Operational Expenditure


-


business model construction, and speed up the electricity dispatching reform to

shorten the time to build up the market mechanism for Natural Gas

5) Accelerate the reform of electricity dispatching etc. that encourages gas

fired peaker and CHP applications

6) Adopt the most advanced technology on the whole Gas to Power Value

Chain.

7) Further controlled opening of the Chinese market may encourage

international companies with advanced technologies in planning, system design,

engineering, key equipment manufacturing (e.g. Gas Turbine), service and

R&D1to further enter into China, and cooperate with Chinese companies in

various ways.

Siemens believes these recommendations will bring more benefit and energy

to the long term successful development of the Gas to Power Value Chain in China.

1.Global Trend of Natural Gas Market

Abundance of Natural Gas Supply in Oil & Gas “New Normal”

Global Oil & Gas market enters an era of ―New Normal‖ with the emerging

of competent, flexible shale gas producers in US since the big price collapse of

crude in the last two years. Natural gas, as one of the most attractive fossil fuels

1 R&D Research and Development


-


being a high heating value fuel that is clean, environment protective, rich in

reserves, and economically viable, has become the fastest-growing fossil fuel in

the world energy consumption outlook.

According to International Energy Outlook 2016 by EIA, global natural gas

consumption grows by 1.9% per year until 2040. On the other hand, coal is the

world's slowest-growing energy source, rising by 0.6% per year through 2040. By

2030, natural gas surpasses coal to become the world's second-largest energy

source after liquid fuels.

Abundant natural gas resources and robust production—including rising

supplies of tight gas, shale gas, and coal-bed methane—contribute to the strong

competitive position of natural gas. According to IHS, global gas demand reached

3,430 BCM in 2015, and will reach 3,810 BCM in 2020. In the meantime, global

gas supply is estimated to reach 3,827 BCM in 2020.

Among the Natural Gas supply, LNG grows quickly. Global LNG capacity



will grow at an average annual rate of 4.6%, reaching more than 440 MT1by 2025,

therein North American LNG exports will rise rapidly, from 0.3 MT in 2015 to 75

MT in 2025.

Attractive Natural Gas Price for Downstream applications

With the high reserves of gas supply, gas price diverges from crude for the

first time. According to IHS, the nominal price of Dated Brent rose from

US$52/bbl in 2015 to US$80/bbl in 2020, to $122/bbl in 2030, and to $151/bbl by

2040, whilst Henry Hub price for Natural Gas is forecasted to remain relatively

flat with a slight upward trend, however still within the range of US$3-4 per

mmbtu during the same period. Thus Asian prices for Natural Gas moved

gradually away from oil-indexation and in the long-term became set by a hybrid

mix of oil-indexation and Henry Hub prices.

Emerging Global Natural Gas Market

Overall, the strong growth of natural gas production (and associated reserves)

between 2015 and 2040 can effectively meet the rising demand without major

upward price disruptions. Global LNG is being commoditized and the global

natural gas market is taking the shape. Market players are determined to boost

downstream applications especially in power generation and transportation, and

1 MT - million tons



make it a good fit during the global march towards renewable energy both from a

transitional and a compensational point of view.

Natural Gas for Power Generation for Lower CO2 Emission

With attractive pricing of Natural Gas, it becomes a more and more lucrative

choice for new fossil generating plants given its relatively high fuel efficiency, low

emission profile, and the moderate capital cost of gas-fired plants. Additionally, as

more governments begin implementing national or regional plans to reduce carbon

dioxide (CO2) emissions, natural gas is displacing consumption of the more

carbon - intensive coal and liquid fuels with around 55% CO2 emission per kWh

of coal and 70% of oil.

Along the course to more renewables, by 2040 coal, natural gas, and

renewable energy sources will provide roughly equal shares (28%-29%) of world

electricity generation—a significant change from 2012, when coal provided 40%

of all power generation.

2.Major Challenges in China Gas fired Power Generation



New Approach Required to Address Challenges in the Energy Revolution of

China

China is undergoing an energy revolution driven by efficiency, selfsufficiency,

and innovation in energy supply and demand to tackle the main challenges of

emissions, coal reductions and balance grid operation with renewable energy

development.

China’s power sector is the single largest air emission source in the world due

to the massive use of coal as fuel – generating 4 billion metric tons of CO2 vs. 2 in

US, 1 in Europe and generating 9 MMT1SO2

2while 11 MMT Nox

3.

Although over investment in coal fired power is now strictly controlled by the

government, coal consumption for power will keep increasing slightly until 2030

(12.7 Billion tce4in 2014 to 14.3 billion tce in 2030). On the other hand, rapid

development of renewable generation, especially Wind and Solar (26.2% CAGR

from 2010 to 2020), which have intermittent energy supply attribute, gives high

pressure to grid stability and demands more capacity for peak-follow. Additionally,

1 MMT – Million Metric Tons 2 SO2 - Sulfur Dioxide 3 Nox - Nitrogen Oxides 4 Tce - Ton of Standard Coal Equivalent



with the goal of decreasing at least 60% of CO2 emissions per unit of GDP1from

2005 levels by 2030, all in all would command an expanded use of natural gas as a

source of primary energy.

In the 13th FYP at the end of 2016, China planed ambitious gas supply goals

to make 12% CAGR until 2020 i.e. 360 Bcm in 2020, Gas consumption in TPEC

to grow from 5.9% to 8.3%-10% in 2020, meanwhile China also plans 50GW new

add of gas power during 2016-2020 (30 GW CCPP + 5GW SCPP2+15GW DG

3).

In the 2017 edition of World’s Energy Outlook, BP4estimates that China will be

consuming approximately 570 Bcm of natural gas in 2035 from almost 200 Bcm

in 2015.

Considering the increasing import dependency of Natural Gas in China (32%

in 2015 and 36% in 2016), fulfilling this ambitious target requires the country to

advance further into new regulatory and commercial business models in Natural

Gas in order to ensure Natural Gas is a competitive alternative to coal and other

fuels in power generation.

1 GDP - Gross Domestic Product 2 SCPP - Single Cycle Power Plant 3 DG - Distributed Generation 4 BP - British Petroleum



Obstacles to Cost-competitive Natural Gas-fired Power Generation

Although there is plenty of natural gas in the global market, gas fired power

generation in China is still expensive. The LCOE (Levelized Cost of Electricity)

for Gas fired power generation is ~0.8 RMB/kWh, 2.5 times of coal. Although low

and stable gas prices can incentivize more gas-fired power in mid to long term, by

far low gas price is still difficult to pass through to gas fired electricity prices.

Main obstacles are:

• Power generators lack access to midstream infrastructure (eg.

regas

facilities)

• Fuel costs and on-grid tariffs are regulated

• Grid companies decide on power dispatching

3.“Gas to Power”: A systematic and holistic approach for Gas fired Power

Generation

Sourcing the future supply of natural gas and achieving price competitive Gas

fired power generation calls for leveraging best practices from other countries and

employing a holistic approach to integrate the Gas to Power Value Chain

(hereafter referred as G2P Value Chain) i.e. connecting the dots between Gas Sales

Agreement (GSA) and Power Purchase Agreement (PPA) instead of merely

focusing on upstream or downstream power generation. Taking LNG to power as



an example, the G2P Value Chain comprises gas transport, liquefaction, shipping,

regasification and pipeline, transportation. Among the total LCOE of CCPP,

around 75% of the cost comes from the fuel, i.e. Natural Gas. Therefore it is

vitally important to take a holistic and systematic approach on the G2P Value

Chain to ensure access to the least cost of delivered natural gas, while securing a

sustainable gas supply in order to enable the quick expansion of a price

competitive Natural Gas fired power generation market in China.

Best Practices World Wide

Various countries are taking efforts to optimize their G2P Value Chains, e.g.

Mexico, Brazil, Pakistan, Egypt and Morocco, just to name a few, have diversified

their supply sources combining domestic resources with energy imports in an

effort to optimize their G2P Value Chains. Even though Morocco has had access

to natural gas via pipeline from Algeria, (soon to be terminated), the Government

is committed to develop more than 5 GW of new combined cycle power

generation with imported LNG. The new power generation plants will support a

LNG regasification facility on the coast which will further enable the development

of local natural gas distribution networks for residential, commercial and industrial

use.



Another best practice is that open-access LNG regasification terminals could

provide supply flexibility and efficiency to both generators and industry. Brazil,

abundant in Hydro power, has little or no underground gas storage and thus LNG

regasification terminals have served to provide fast natural gas supply to power

generators during periods of low rainfall to make up for the lack of run-of-theriver

hydro generation.

Since 2013, Mexico has undergone a transformation of its energy sector.

Looking to introducing efficiency and bringing down energy costs, the country has

reformed its Constitution, secondary laws and regulations to allow for open

competition in wholesale marketing and transportation of natural gas. Private

companies can import natural gas from the U.S. via pipelines or import LNG by

developing open-access regasification terminals. Hence, they can offer alternative

natural gas supply to power generators and industrial consumers to that of

Petróleos Mexicanos. The transportation and storage of natural gas remain a

regulated activity by the Government but the development of new infrastructure is

possible by obtaining the necessary permits and approvals. The ability to develop

competitive infrastructure becomes critical when small power generators benefit

from a common natural gas infrastructure optimizing the resulting cost of

electricity.



Finally, Malta provides a more recent example of a successful integration of

the G2P Value Chain. The local utility, Enemalta, ran a tender process to select the

best supplier of electricity and natural gas under long-term agreements. Siemens,

together with other team members, submitted the winning proposal whereby a

special purpose company would install a 200-MW combined-cycle power plant

underpinned by a new floating storage LNG (FSU) vessel of approximately

130,000 cubic meters in size. It’s worth noting that the regasification section of the

LNG terminal is onshore and separate from the vessel. Once in operation, Malta

will import about 1 LNG cargo per month to fuel the power plant and to supply

gas to neighboring demand centers. The uniqueness of this G2P integrated solution

is that not only this infrastructure project was financed on a stand-alone basis

using the existing regulatory and commercial frameworks set-up by the

Government of Malta and Enamalta but also by the close thermal integration

between the power plant and the regasification section. By cooling the air intake

into the combustion turbine, Siemens and its team members were able to extract

approximately 7% additional capacity and energy with the same fuel consumption.

Further, the development team used some of the cooling available in the

regasification section to reduce the intake of seawater for the steam turbine

condenser and have a more environmentally friendly operation.



Implications for China: Integration of G2P Value Chain

There are various players along the G2P Value Chain, e.g. IOCs, NOCs,

LNG Equity suppliers, Liquefaction players, shipping companies, traders, Power

IPPs and government Utilities. The dramatic change in Oil and Gas industry sees

new trends in both upstream and downstream gas.

In downstream, power offtakes are focused on guaranteeing PPAs, and fuel

supply strategy becomes more necessary and critical for project sanctioning. In

upstream, LNG suppliers are willing to provide development capital, sweat equity,

and equity financing to secure offtake.

There are increasing demands for ―business model integration‖ to connect the

up/midstream Gas project development (e.g. Liquefaction plant) with the

downstream power generation project to make bankable power projects by making

best use of capitals from various sources. There is also increasing demand for

―technology/System Integration‖ providing lower costs for the whole G2P Value

Chain from liquefaction, transportation (pipeline or shipping) to regasification,

power generation, and electricity transmission and distribution to reduce cost and

to improve overall efficiency, availability and performance.



4.Siemens Advanced Technology Benefits China Gas to Power Value Chain

Siemens offers a comprehensive portfolio and a technical leading solution

from upstream exploration and production to downstream power generation,

transmission and distribution. Siemens also provides Digital Benefits to customer

in multiple facets with in-depth Domain know-how and expertise in combining

Operating Technology and Information Technology. (see figure 1, 2)

Figure 1. Siemens solution for the whole G2P Value Chain



Figure 2. Siemens portfolio for the whole G2P Value Chain

For LNG, by utilizing advanced technologies, modular designs, and a proven

track record, Siemens is capable of providing a range of liquefaction technologies

including Micro LNG (up to 0.003 MTPA), Medium LNG (0.1-2.0 MTPA),

Floating LNG, and large LNG (>2.0 MTPA). For example, the Russia Yamal LNG

project in which CNPC owns 20% share and China's Silk Road to purchase 9.9%

stake, Siemens designed and supplied the world’s biggest (90m x 36m) and

heaviest (2,500 MT) single lift E-House module (29 E-Houses total) for electrical

power distribution incl. power island, GT genset (SGT800) and BOG compression

into harsh environment (perma-frost conditions).



In addition to the conventional gas turbine driven Liquefaction solutions,

Siemens developed an all-Electric Drive solution (eLNG) which benefits clients

via:

• Enhanced safety in operation. About 10 days of additional production

per year

• Continuous operation over a long period (6 years on stream possible)

• Capacity of LNG train can be designed to match exactly market

requirements

• Restart losses after plant trip can be reduced to minimum

• Shorter delivery schedule

• Lower CAPEX when a grid connection is available

For gas fired power generation, high efficiency power plants using

advanced gas engines or gas turbines are the key decisive factors to achieving the

grand mission of gas fired power in China. Taking gas turbines as an example;

advanced gas turbines include small (<16MW) and medium (16-60MW) size gas

turbines for distributed power generation, and large size gas turbines (>60MW) for

centralized power generation.

Ranging from 142KW to 420MW gas engine/turbine (see figure 3), Siemens



has a complete range of gas engine/gas turbine technology in its portfolio. This

includes a strong expertise across all power generation applications, including

Distributed Energy (DE), Combined Heat and Power (CHP/COGEN) and

Combined Cycle Power Plant (CCPP). Proven experience and reliability in power

supply is a key prerequisite for future economic development. Siemens has

experience on approximately 3,000 sets of gas turbines and 2,700 sets of Gas

Engines for power generation (including more than 1,400 sets of small and

medium gas turbines, and over 1,500 sets of large gas turbine globally, as well as

more than 260GW of large size CCPP).

As one of the leading operating examples for Siemens advanced gas turbine

technology, Siemens 8000H gas turbine is one of the most powerful, efficient, and

advanced large size gas turbines in the world. On January 22, 2016, Siemens

handed over the combined cycle power plant equipped with a Siemens 8000H gas

turbine at the Lausward location in the Düsseldorf (Germany) harbor area to the

customer and operator, the utility company Stadtwerke Düsseldorf AG (see figure

4). The turnkey plant sets three new records in world-wide comparison. During the

test run before acceptance, unit "Fortuna" achieved a maximum electrical net

output of 603.8 megawatts (MW), which is a new record for a combined cycle

plant of this type in a single-shaft configuration. A new world record of around



61.5% for net power-generating efficiency was also achieved. In addition, unit

"Fortuna" can also deliver up to around 300 MW for the district heating system of

Düsseldorf. The overall natural gas utilization achieves 85%, and CO2 reduction

to amount to 2,500,000 Metric Tons per annum. (see figure 5)

In January 2017, Siemens received the first 8000H Gas Turbine order in

China, and has now sold a total of 80 sets of SGT-8000H worldwide. The order

from China being the Castle Peak Power Co. Ltd. (CAPCO) project for the

delivery of a power block for a new combined cycle unit in its Black Point Power

Station in Tuen Mun, in the northwest of Hong Kong. CAPCO is a joint venture of

China Southern Power Grid International Limited and CLP Power Hong Kong

Limited (CLP Power). Scheduled to be in operation before 2020, the plant will

have an installed total capacity of more than 560 MW to supply approximately a

million households with electricity.

Since 2003, Siemens has been successfully cooperating in technology of large

sized gas turbine (E, F and H-class) with its strategic partner in China, and

supplied closed to 60 sets of E and F-class gas turbine for China with

manufacturing in Joint Ventures, and for some export projects as well.



Siemens has also been successfully cooperating with Zhuzhou Nanfang Gas

Turbine Packaging and Installation Co. Ltd. (ZNGT, a subsidiary of AVIC) on the

localization of small gas turbines, and cooperating with Hangzhou Steam turbine

Co., Ltd. (HTC) to localize medium size gas turbines. Both small and medium gas

turbines are applicable to distributed power generation. Siemens is very much

willing to share its experience achieved worldwide with Chinese peers (e.g.

Institutes, Universities) and the Chinese government.

Figure 3. Siemens portfolio for Gas Engine/Gas Turbine

Figure 4. 20 years of world-class combined cycle performance



Figure 5. Efficiency improvement enables reductions in fuel consumption

and CO2 emissions

For digitalization, Siemens provides a unique value proposition for

its customer by using in-depth domain know-how and expertise in

combining Operating Technology and Information Technology, and help



clients drive increased HSSE1

requirements, increase productivity and

improve value for capital expenditure. In the SINOPEC Yuanba project,

which is dedicated to continuous pipeline monitoring to ensure safety and

detect leaks, Siemens provides Redundant failure resilient Industrial Ethernet

solution with fiber-optical cables and virtual private network (VPN), and

Industrial network components capable to withstand hazardous environment

and location conditions. The solution is in fully compliance with standards

for electromagnetic compatibility and industrial control equipment. The

solution help SINOPEC reduce leakages by continuous surveillance, achieve

higher uptime by continuous data availability and reduce OPEX due to

remote expert access.

Siemens is also introducing its cutting-edge Digital Power Plant (DPP)

solution into China in a pilot project together with SPIC. DPP provides with

professional management of plant’s asset and is designed to optimize rotating

equipment economy and availability with continuous surveillance and equipment

status assessments etc.

5.Siemens Recommendations

China has set the direction for energy revolution to secure the energy supply

for high efficiency, green and clean energy under open condition by means of

1 HSSE - Health, Safe, Security, Environment



letting ―the market play a decisive role in the allocation of resources‖. To ensure

sustainable, cost-effective gas supply and speed up the development of gas power

generation, Siemens believes the holistic approach for an integrated Gas to Power

Value Chain from both the business model perspective and technology perspective,

will definitely help China achieve its ambitious goal in energy revolution. Siemens

would like to recommend the following aspects to be specially noted for Chinese

government:

1) Encourage projects aimed at building up integrated G2P Value Chain

utilizing upstream, midstream, and downstream resources at home and abroad,

private and state-owned or mixed ownership from both a business model

perspective and a technology perspective

The global supply of Natural Gas is plentiful, and LNG adds liquidity of the

market and improves the accessibility of cheap gas worldwide. Natural Gas price

is attractive in the mid to long term. More open opportunities (technology,

financing, resource etc.) will emerge when connecting the dots along the G2P

value chain. It will facilitate the effective and comprehensive use of social capitals

and speed up energy reform.



2) Improve Third Party Access to midstream SOE(State Owned Enterprise)

owned facilities, and ease approval of LNG Regasification Terminal construction

for Non-NOCs

Midstream facilities include Regasification Terminals, Gas Pipelines, and Gas

Storages etc. At present most of them belong to NOCs ， third party companies,

private or other SOEs are difficult to gain access to necessary facilities to import

oversea cheap LNG. Further opening and speeding up Third Party Access or

easing approval of Non-NOC LNG Regasification Terminal construction will

attract more players and help boost downstream gas applications.

The ultimate goal is to form positive competition among NOCs and Non-NOCs.

3) Define measures and take timely actions to encourage current gas power

enterprises to make full use of the advantages of gas power

Currently, quite a number of large CCPP’s in China do not have enough

operation hours for power generation, and the development of distributed gas

power in China also missed the target set in 12th

FYP. Therefore Siemens proposes

to timely take appropriate measures in terms of gas supply, feed-in tariff and active

co-ordination of the grid to encourage full use the advantages of gas power.

4) Strengthen economics of gas power generation via feasible market

mechanism， e.g. to deregulate pricing in gas and electricity to enable effective



business model construction, and speed up the electricity dispatching reform to

shorten the time to build up the market mechanism for Natural Gas

This includes, for example, establishing healthy pricing model for gas,

reasonable feed-in tariff mechanism and suitable subsidy system. Additionally,

quantifying the environmental cost, such as CO2 trading system in midterm, could

speed up promotion of environmental friendly (low greenhouse gas, low haze) and

high efficient gas power generation.

5) Accelerate the reform of electricity dispatching etc. that encourage gas

fired peaker and CHP applications

Including accelerating reform in access to grid, feed-in-tariff, electricity

selling and mixed ownership, especially for gas fired peaker and CHP applications

6) Adopt the most advanced technology on the whole Gas to Power Value

Chain

With years of development globally, the gas liquefaction, regasification, and

power generation technologies in the world are getting mature. Some of the most

advanced technologies are now well proven and in good deployment with low

emission and high efficiency, such as Siemens e-LNG solution with an all-electric

drive configuration, the advanced, highly efficient and proven Siemens H-class gas



turbine, the advanced high efficient small and middle size gas turbine for

distributed energy, the high efficient once-through HRSG1, the optimized CCPP

and COGEN system, Siemens Digitalization Portfolio, methodology and tools for

life cycle economic evaluation, etc. Through application of these well proven

advanced technologies, China may maximize the benefits brought by integrated

G2P Value Chain.

7) Further opening of Chinese market may encourage international

companies with advanced technologies in planning, system design, engineering,

key equipment manufacturing (e.g. Gas Turbine), service and R&D to further

enter into China, and cooperate with Chinese companies in various ways.

Siemens believes the recommendations may bring more benefit and energy to

the long term successful development of the Gas to Power Value Chain in

China.

Disclaimer

This document contains forward-looking statements and information – that is,

statements related to future, not past, events. These statements may be identified

by words as ―forecasts‖, ―expects‖, ―anticipates‖, ―intends‖, ―plans‖, ―believes‖,

―seeks‖, ―estimates‖, ―will‖ or words of similar meaning. Such statements are

1 HRSG - Heat Recover Steam Generator



based on our current expectations and certain assumptions, and are, therefore,

subject to certain uncertainties. Should one or more uncertainties materialize, or

should underlying assumptions prove incorrect, actual results may vary materially

from those described in the relevant forward-looking statement. Siemens does not

intend or assume any obligation, including but not limited to update or revise these

forward-looking statements in light of developments which differ from those

anticipated.

Integration of the natural gas value chain into power generation · In January 2017, Siemens...

Documents

Transcript of Integration of the natural gas value chain into power generation · In January 2017, Siemens...