By Corey Paul
Summit Power Group announced a new CEO Wednesday who said his team is “focused on, excited about and committed to the rapid closure” of the deal to build the Texas Clean Energy Project as local leaders who still want to see the $2.5 billion coal-based plant materialize remain in a state of wait-and-see.
The new CEO, Jason Crew, joins the company from General Electric, where he most recently focused on a range of energy projects including production of CO2 for enhanced oil recovery.
The Texas Clean Energy Project, or TCEP, would seek to burn coal for just that purpose at a 600-acre site about 15 miles outside of Odessa near Penwell. The 400 megawatt plant would capture 90 percent of the CO2 produced burning coal, with the main products being urea, the stored CO2 for oilfield production and electric power.
It is a project championed by local leaders as a boost to the employment and tax base along with the oil industry.
But cost overruns delayed the project in the six years since development began.
Crew cited new partnerships reached with Chinese companies in recent months as a source of confidence that the stalled project will materialize.
“We recognize and I think that our stakeholders recognize that these are complex projects — that this project at this stage of the technology depends on the right partners and putting the right package together,” Crew said. “. . . We have the strongest hand we can play on TCEP. We are going to have a great project and continue to work with our stakeholders to make sure that everybody is informed on where we are.”
Meanwhile, predecessor Eric Redman will also continue to work with Summit, focusing on TCEP and other carbon capture efforts as the co-chair of Summit’s board of directors. The company’s most recent target date to close financing of the project is April of 2015. Construction, for now set to begin in the second half of 2015 and accelerate the year after, would require an estimated 2,000 workers. Another 150 full-time workers would permanently staff the facility after the startup date in 2018. “We are still pushing through the development of this and hope to stick to and accelerate through that schedule,” Crew said.
The TCEP hit another setback last year when CPS Energy of San Antonio decided to allow their contract to expire with Summit. That would have secured a 25-year agreement to purchase electricity from the TCEP.
CPS Energy of San Antonio officials cited a vast supply of inexpensive natural gas to fuel power plants — a result of a shale boom that made natural gas increasingly competitive against coal.
But Summit officials argue the fuels are not “mutually exclusive” when coal is burned with the sort of technology TCEP proposes, Crew said.
“We continue to work with San Antonio on that issue and we are still optimistic that we can find the right off-taker and hope that is CPS and hope to have some good news for you soon,” Crew said.
The Summit project received a pledge for financing earlier this year from China Huanqiu Contracting and Engineering Corporation (HQC). HQC is the new lead partner working on a front end engineering and design study, or FEED, with the understanding that project must be in $2.5 billion range to be financeable.
It is the third FEED in the project’s history. But the development offered new hope for a project struggling with ballooning costs and delays, mostly related to the tight labor market amid the oil boom.
An initial proposal of an estimated $2.2 billion increased to about $3.5 billion estimate last year.
At the time, three primary contractors were handling the project: the German companies Siemens and Linde and the Chinese oil company Sinopec, one of the largest companies in the world that signed on with Summit in 2012.
Costs mounted under the arrangement as the three companies all sought bids for their portion of the project, said Laura Miller, the former mayor of Dallas who is a project director in Texas for the TCEP.
Developers also struggled with a constrained labor environment for such major engineering projects amid the oil boom. Summit could not find laborers to work at a fixed price building the plant and still cannot, Miller said.
“We can’t contain the labor pricing so we have to find efficiencies somewhere else,” Miller said. “And we are doing that.”
Miller said there is “more momentum today than when Sinopec signed on in 2012, and the reason is HQC is 100 percent invested.”
Examples of efficiencies she and Crew offered include the amount of concrete and steel required for the plant.
Plans still call for Sinopec to possibly have a role building infrastructure. And Siemens is still set to supply the gasifiers, combustion turbines and equipment that will supply the chemical block that removes CO2.
The addition of HQC as the lead engineering partner was one of two positive signs for the TCEP that emerged through memoranda of understanding signed in July between U.S. and Chinese officials. The memoranda called for the country’s share information on cleaner coal technology to reduce greenhouse gasses worldwide.
The second was a deal for Summit to collaborate with Huaneng’s GreenGen, which is China’s cleanest operating coal-based plant and one that does gasification and plans to add carbon capture, in planning and commissioning the TCEP.
By promoting carbon production for enhanced oil recovery locally and in China, the agreement means promoting the development and use of crude, which is a fossil fuel. Naysayers who already question the viability of carbon capture coal plants also point to the TCEPs relationship with dirtier burning fuels as a drawback to the project.
But this aspect is also a major appeal of the TCEP to local leaders as means to enhance the productivity of the booming Permian Basin.
“From what we are hearing from the producers out there, they would love if we could build 10 TCEPs to keep the CO2 going as natural CO2 declines,” Miller said.
Last month, Summit returned a $5 million grant from the Odessa Development Corporation to help fund the TCEP with the understanding that the company still considers the project viable. The ODC for now is keeping that money on the books for the plant.
“We’d love to see the project happen just because of the size and employment it brings to the Permian Basin and the technology that it would be proving up,” said Richard ‘Buz’ Browning, president of the ODC. “But we can’t do anything on our side to foster it. We just have to wait and see what they put together, and we’ve been waiting a long time, I guess.”
Contact Corey Paul on Twitter @OAcrude on Facebook at OA Corey Paul or call 432-333-7768.