Sadaf co-gen creeps forward

19 July 2002

An agreement is now expected to be struck early in the fourth quarter between Saudi Petrochemical Company (Sadaf) and the US' CMS Energyto build a captive power plant at Sadaf's Jubail complex, says the company's president, Mosaed al-Ohali. 'I am very satisfied with the progress of this project, and can say that there have been no changes in our plans,' he told MEED. 'We should be in a position to conclude agreements at the beginning of the fourth quarter.' An agreement had originally been expected in the third quarter of 2001 (MEED 30:11:01).

CMS was chosen as Sadaf's preferred bidder for the 240-MW plant in April 2001. However, the company has since withdrawn much of its Middle East staff to concentrate on core US operations. This, combined with unforeseen difficulties in aligning the captive power with that bought from Saudi Electricity Company (SEC), has contributed to the unexpected length of discussions.

There are two aspects now under discussion with SEC. Firstly, Sadaf is seeking agreement over the sale of surplus electricity to SEC. It is also having to negotiate terms whereby SEC will provide standby power and ancillary services such as voltage control, which it had originally believed would be maintained. Says a senior power source in the kingdom: 'They need to keep the wire, but they can't have it free of charge.'

The project has been eagerly awaited by the kingdom's power sector because it will be the first independent power plant (IPP) to be developed in the deregulated market. If it can prove that private plants are economically viable, the project will provide a major psychological boost to private sector participation in power projects.

Sadaf, a joint venture between Saudi Basic Industries Corporation (Sabic)and the Royal Dutch/Shell Group, needs a guaranteed supply of power for its ethane cracker, which would be difficult to restart in the event of a power cut. Early indications suggested that a captive plant could reduce its electricity costs by up to 40 per cent.

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