• Combustion Industry News

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      Patrick Lavery

      Combustion Industry News Editor

Business Trends

China and Russia have agreed to closer cooperation in regards to energy, signing an inter-governmental protocol in December. It follows the establishment in 2008 of an energy negotiation mechanism, which covered oil, gas, coal and nuclear energy.  The protocol is aimed at increasing the trade of oil, establishing a new oil refinery in Tianjin, and the prioritisation of a new gas pipeline. The energy agreement was part of wider China-Russia talks aimed at further strengthening ties between the two countries.

The South African oil giant Sasol has moved to design work on a $US 14 billion//€10.7 billion gas-to-diesel plant which would be the first in the US.  The plant would convert low-cost natural gas (driven by the shale gas boom) to high-cost diesel, which is cleaner burning, with lower sulphur emissions. The project would become the largest ever single investment in the state of Louisiana if approved by Sasol’s board when they make an investment decision in 2014. The project marks a trend in the US, with a range of companies seeking to exploit cheap US natural gas by selling it or a derivative product in markets where energy is more expensive.  Shell is another company scouting for a gas-to-liquids plant in the US, while Exxon-Mobil and Cheniere Energy are both seeking to export natural gas.  Sasol is also considering other gas-to-liquids projects in the US, and with natural gas prices expected to remain low in the US for many years to come, the strategy seems a winning one.

Legislation and Regulation

Legislation aimed at promoting the growth of a low-carbon economy was introduced into the UK parliament in late November.  Ed Davey, the Energy and Climate Change Secretary, said of the legislation “The Energy Bill will attract investment to bring about a once in a generation transformation of our electricity market, moving from predominantly a fossil-fuel to a diverse low-carbon generation mix…Over the next decade, the investment needed to upgrade our energy infrastructure is almost half of the infrastructure investment needed in the UK.”  The bill is designed to support a mix of power generation, including renewables, nuclear, gas and coal-fired carbon capture and storage plants. It shall do so through a mechanism known as ‘Contracts for Difference’, where a government owned company will assure investors in power generation of revenues from their investments, thereby helping finance to be secured.  One of the stated aims is to shift to domestic sources of power, which points towards renewables, but also to potential shale gas production. Energy efficiency measures are also a major part of the legislation, and there is protection for energy intensive industries from power cost rises.

In November, the Tanzanian government announced a draft gas policy  which aims to boost domestic energy supplies and bring the country to a middle-income level.  Exploration by companies such as Shell, Petrobras, BG, Statoil and Exxon-Mobil has discovered around 934 billion cubic metres of recoverable reserves of natural gas, and a new round of gas licensing is expected. According to the Financial Times, the gas companies are somewhat disappointed that the draft policy was presented not to them, but to a group of diplomats, and there appears to be a lack of trust between the companies and the government, which refused an offer from the World Bank and the African Development Bank to assist in policy making and negotiating energy export deals.

China has released a plan to reduce air pollution, which targets a range of air pollutants across various regions. PM2.5 intensity is to be cut by 5% in most areas, PM10 intensity by 10%, SO2 intensity by 10%, and NO2 intensity by 7% by 2015, through stricter controls on industrial emissions and auto emissions. Offsetting is to be allowed, meaning that pollution arising from new projects must be balanced by cuts to pollution from existing projects.  The head of the Department of Pollution Prevention and Control, Zhao Hualin, said that as it stands, 70% of China’s cities do not meet the air quality targets laid out in the plan.  China has also announced that it is on target to meet this year’s targets for reducing greenhouse gas emissions and energy intensities, and that it will extend its pilot emissions trading scheme from several cities and provinces to the whole nation, starting in 2016.


The University of East Anglia (UEA) has compiled a report which shows that Indian greenhouse gas emissions rose by 7.5% over the past year, while those of the US and the EU declined 1.8% and 2.8% respectively.  China was the world’s largest greenhouse has emitter, at 23% of global emissions, with the US second with 16%, the EU third with 11%, and India fourth, with 7%.  According to the UEA, India’s growth rate has it on course to be equal with Chinese emissions by 2020, and the finding comes at an awkward time for India, with its government claiming prior to the United Nations climate summit in Doha that developed nations do not have the ambition to combat mounting emissions. That summit resulted in a weakened form of the Kyoto Protocol being extended until 2020, with New Zealand amongst the countries dropping out, and the United States continuing to refuse to ratify the protocol.

Company News

The Chilean government has given approval to a 740 MW coal-fired Punta Alcalde power plant to be built for the Chilean arm of Spanish energy company Endesa, which is 90% owned by Enel.  Approval for the $US 1.4 billion/€1.07 billion plant, which is to be built in the Atacama region in the country’s north, where mining is concentrated, had been suspended due to environmental concerns, but no information regarding the removal of the suspension has yet been given by the government.  The news was welcomed by Chile’s mining industry, which has reportedly been thirsting for additional power supplies.  Chile currently has a total energy generation capacity of 17,000 MW, and wants to add another 8,000 MW by 2020.

The Italian government has taken over the oversight of the overhaul of the Ilva steel plant in southern Italy.  The unusual move was made because of the plant’s strategic importance to Italian industry, as well as its status as an employer of 12,000 people in the province of Taranto.  There have been severe concerns over the health consequences of emissions from the plant, and the government’s period of oversight is designed to ensure that the environmental performance of the plant is significantly improved, a project estimated as costing €3 billion/$US 3.89 billion.  The plant had been identified as contributing to the deaths of hundreds of people from cancer and respiratory illnesses.

Russian state-owned power company InterRao is to buy out the Turkish subsidiary of US company AEI this year, which will deliver it 90% ownership of the 478 MW gas/oil-fired combined cycle Trakya power plant, which is situated 100 km from Istanbul.  The deal, which is reported to be no greater than $US 100 million/€77 million, has been close to being completed for some months, but has been held up by diplomatic tensions between Moscow and Ankara over the Syrian conflict.  Turkish government approval is yet to be obtained, but a visit by Russian president Vladimir Putin might help trigger the deal.

A fire on 29 November damaged a transformer at the 385 MW gas/oil-fired Unit 2 at the Gordon Evans power plant, 32 km northwest of Wichita in Kansas, USA, which is operated by Westar Energy Inc.  Fortunately, there were no injuries, but the damage was valued at between $US 5-8 million (€3.8-6.1 million), and is expected to mean a downtime of 8 weeks, with the company having a spare transformer at the site.  The fire came while the unit was shut down for maintenance.  The other units at the 835 MW plant were still available for service, though the plant is currently on reserve shutdown, being used mainly for hot summer months when power demand for air conditioning is high, and during cold winter months for heating.

German steelmaker ThyssenKrupp has announced that it will replace three members of its board at the end of the year, after allegations of corruption and after experiencing sizeable losses in the US and in Brazil.  A statement from the company said that it was “confronted with the disclosure of a series of corruption and cartel cases”.  They also reported that the decisions to invest in the US and Brazil had been based on inaccurate or overly optimistic assumptions.