Total acquires two 400 MW CCGT plants from KKR-Energas (France)

The French oil and gas company Total has acquired two gas-fired combined cycle power plants (CCGT) in France from the US-based private equity firm KKR-Energas.

The two plants have a total combined capacity of 825 MW (roughly 400 MW each) and are located in Toul (Meurthe-et-Moselle, France) and in Pont-sur-Sambre (Nord, France). They were previously sold by Verbund (Direct Energie) to KKR-Energas (Direct Energie) in 2014 for a total consideration of approximately €150m. The two assets experienced significant difficulties and their margins were squeezed by low power prices and high gas prices. Verbund considered mothballing the two plants but sold them to KKR-Energas instead.

With this acquisition, Total continues to integrate its activities along the gas and electricity value chain, from production to marketing. Once the acquisition is completed, it will have around 1.6 GW of gas-fired capacity in France and Belgium thanks to its 73% share in Direct Energie.

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EDF delays Flamanville EPR project startup by another year (France)

The French utility EDF has completed in-depth examination of 148 out of the 150 welds in the main secondary system of the 1,650 MWe Flamanville-3 EPR reactor (France): 33 have quality deficiencies that have to be repaired, while 20 fail to meet high quality requirements and will be reworked. The schedule and the construction costs of the project have been revised accordingly. The loading of nuclear fuel is now scheduled for the fourth quarter of 2019 instead of the fourth quarter of 2018, while the construction costs will increase to €10.9bn from the €10.5bn expected previously (up from a December 2012 estimate of €8bn).

The project is facing other challenges and even though the French nuclear watchdog (ASN) cleared the reactor pressure vessel (RPV) of the unit, it will have to be replaced by 2024 at the latest. Even if the reactor comes onstream in 2019 as planed, a planned maintenance will have to be scheduled before this date to replace the RPV once a new one has been produced.

The Flamanville project was initially expected to be commissioned in 2012 at a cost of €3bn; it will now start at least 7 years behind schedule, posting a cost escalation of nearly €8bn. This delay will also postpone the planned closure of the Fessenheim nuclear power plant by one year.

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Belgium establishes a capacity market system to offset nuclear phase-out

The Belgian government has agreed to subsidize new electricity capacity to offset the country's nuclear phase-out in 2025. A capacity remuneration mechanism (CRM) has been approved and is set to replace the strategic reserve program, which was implemented since the winter 2014-2015. A two-tier auction system should be implemented by 2021, to give enough time to project developers to build new gas-fired power plants (based on an average 4-year construction length) before the nuclear phase out of 2025. Both existing and new power plants will be able to participate in the scheme and no technology is excluded except nuclear power. According to the government, foreign capacity may also participate but under well-defined conditions.

The first auction should be organized in 2021. Besides, the government will also organize yearly auctions to adjust fluctuating needs for capacity. This scheme will enable the government to subsidize capacity in a bid to guarantee security of supply. By 2025, the scheme is estimated to cost Belgian consumers an annual €345m. According to a study unveiled by the domestic grid operator Elia, 3.6 GW of new thermal capacity will be needed to offset the closure of the country’s nuclear plants.

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AEMO expects Australia to phase out coal power in the next 20 years

The Australian Energy Market Operator (AEMO) has unveiled the new Integrated System Plan for the National Electricity Market, which forecasts the likely changes that will be occurring over the next 20 years across the domestic power market. Despite the anticipated electrification of the transport sector over the next 20 years, electricity grid demand will flatten, due to the growth of solar rooftop PV installations and energy storage coupled with energy efficiency efforts.

Existing coal-fired power plants that generate around 70 TWh/year - one third of the NEM's demand - will continue operating until the end of their operational life (by 2040 at the latest) as it would be uneconomical to retire them before the end of their operational lifespan. Replacing them later on with renewables - whose costs are falling -, gas-fired capacity, distributed generation capacity and energy storage systems (including pumped-storage) would be more cost efficient.

The domestic power grid will shift to a more decentralised system model: 28 GW of solar, 10.5 GW of wind, 17 GW of storage and 500 MW of flexible gas-fired generation will be set up along with a significant upgrade of the domestic power transmission system.

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Israel passes law to break-up monopoly of state-run power utility IEC

The Israeli cabinet has passed a law approved by the government in June 2018 which opens the domestic power sector to competition for private electricity producers and breaks up the monopoly held by the state-run power utility Israel Electric Corporation (IEC). This is the final chapter of a reform which began in May 2018, when IEC, the government and the main trade union Histadrut agreed to launch the process.

IEC has been managing the domestic power supply chain for decades but has agreed to sell five of its power plants over the next five years and will set up a new subsidiary for the development of two new power stations projects, which are yet to be built. IEC's system management and planning unit will be sold to another government-owned company, but the state power utility will retain its power distribution monopoly. However supply will be gradually opened to competition.

In recent years, the Israeli power generation market has been opened to competition and independent power producers (IPPs), such as Edeltech, IC Power or Dalia Power Energies, operate more than 3 GW, i.e. more than 20% of the total installed capacity.

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Russia's Novatek ships first LNG cargo from Yamal LNG to China

The Russian independent gas producer Novatek has shipped its first liquefied natural gas (LNG) cargo from the Yamal LNG project to China via the Northern Sea Route. This represents a new milestone and the number of such shipments are expected to increase in the future to meet the growing natural gas demands of the Asian-Pacific markets. Novatek already started to ship natural gas via the Northern Sea route in 2010 and currently uses a fleet of 15 Arc7 ice-class LNG carriers with cargo capacity over 170,000 cm.

The Yamal LNG project will consists of three liquefaction trains of 5.5 Mt/year each of LNG and up to 1 Mt/year of gas condensate. The first unit was commissioned in December 2017 while the second and third trains are expected in 2018 and 2019, respectively.

Yamal LNG's main shareholders are Novatek with 50%, Total with 20%, China National Petroleum Corporation (CNPC) with 20%, and the Chinese Silk Road Fund (10%, to be sold shortly by Novatek for the provision of a US$792m, 15-year loan to finance the project). Yamal LNG has already secured contracts for more than 90% of the total capacity with Gas Natural Fenosa (2.5 Mt/year), CNPC (3 Mt/year), Total (4 Mt/year), Novatek Gas & Power (2.9 Mt/year) and Gazprom (3 Mt/year).

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Iraq extends bid deadline for the Diwaniya 70,000 bbl/d refinery project

The Iraqi government has extended the submission bid deadline for the 70,000 bbl/d refinery project in Diwaniya (south of Bagdad, Iraq) from 31 July 2018 to 30 October 2018. The refinery is a key project for the country and its construction fits into the framework of a broader strategy, according to which the government aims at increasing the country's domestic refining capacity to more than 1.4 mb/d.

Diwaniya and other projects will contribute to it, including in particular: Maysan (150,000 bbl/d), Kirkuk (150,000 bbl/d), Karbala (140,000 bbl/d) and Bazian (46,000 bbl/d). In May 2018, the government also signed an agreement with two Chinese companies, PowerChina and Norinco International, for the construction of the 300,000 bbl/d Al Faw (also spelled Fao) refinery at the Faw port in the Basrah region.

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