Abu Dhabi seeks financing for Ruwais hydrogen power plant

25 January 2008
Multi-billion-dollar project is first of several aimed at cutting CO2 emissions

Banks will be approached early next year to finance the world’s largest hydrogen power plant, planned for Abu Dhabi, which will now also include a desalination element.

The plant, being developed by Abu Dhabi Future Energy Company (Masdar), is the first of several multi-billion-dollar investments to reduce the emirate’s carbon dioxide (CO2) output.

The estimated $2.2bn project, likely to be located at Ruwais, will be developed by a 60:40 joint venture of Masdar and Hydrogen Energy, itself a joint venture of BP Alternative Energy and Rio Tinto. It will be the world’s first hydrogen power generating project, with carbon capture and storage.

The plant will provide 420MW of electricity to the grid. The desalination element, likely to use reverse osmosis technology, will have a 20-25 million gallon a day capacity.

The plant will be supplied with 100 million cubic feet a day (cf/d) of natural gas by Abu Dhabi National Oil Company (Adnoc). This will be split into carbon monoxide and hydrogen, with the latter used to power the turbines to create electricity.

The carbon monoxide will be turned into CO2 and injected into the northern Bab oil field operated by Abu Dhabi Company for Onshore Oil Operations (Adco).

This will free up up to 60 million cf/d of gas currently used for reinjection, extend the lifetime of the oil field and increase the amount of recoverable crude by 10-15 per cent.

The plant’s project sponsors will form a special purpose vehicle and obtain project finance on an 80:20 or 85:15 debt to equity basis, with banks likely to be approached early next year.

A final investment decision will be taken in the first quarter of 2009, once a $45m front-end engineering and design process is completed by the US’ Foster Wheeler.

“Project finance is the preference,” says Vivienne Cox, chief executive officer of BP Alternative Energy. “But if not, we are prepared to fund it solely through equity.”

In the longer term, the project company could be listed on the stock market.

The first construction contracts, likely to be part of an engineering, procurement and construction management deal, are also scheduled to be tendered in early 2009. The US’ GE Energy will probably supply its Frame 9 turbines for the power element. Masdar says the preference is to go for lump-sum turnkey contracts.

The developers will buy gas feedstock from Adnoc and sell the electricity and water from the plant to Abu Dhabi Water & Electricity Company (Adwec), while the CO2 will be sold back to Adnoc. The build-own-operate concession will be for up to 25 years.

Doubts have emerged over the pricing of the water and electricity. BP says it expects a premium for its electricity because development costs are four times higher than for a conventional plant. Masdar says the electricity and water will be sold at market rates.

But the issue is expected to be overcome. “There is a huge commitment from all sides to do it,” says Cox. “It’s a flagship project.”

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