The town of Medicine Bow, Wyo., population less than 300, has become the unlikely location for the next phase of China’s advance into the U.S. energy market. An arm of state-controlled Sinopec Group, also known as China Petrochemical Corp., is planning to build an advanced facility there that will convert coal into gasoline, which will capture and reuse carbon dioxide otherwise emitted into the atmosphere.
DKRW Advanced Fuels wholly owned subsidiary, Medicine Bow Fuel & Power has entered into a fixed price Lump Sum Turn Key (“LSTK”) Engineering Procurement and Construction (“EPC”) contract with the Sinopec Engineering Group (SEG) . Under the terms of the contract, SEG will provide turn‐key engineering, procurement and construction services for the DKRW industrial gasification and liquefaction facility located at Medicine Bow in Carbon County, Wyoming.
Using abundant and high‐quality bituminous coal from southern Wyoming, the Medicine Bow facility will produce 11,600 barrels per day of very low sulfur gasoline using General Electric gasification technology and methanol‐to‐gasoline (“MTG”) technologies. The project will provide up to 2,300 construction jobs and 400 full‐time jobs in Wyoming upon commercial operation. “America’s vast coal reserves represent an invaluable asset at a time when energy resources around the world are becoming increasingly strategic,” said Bob Kelly, Executive Chairman of DKRW. “Through the application of the most advanced clean coal technologies, the Medicine Bow Project will expand the supply of transportation fuels in the western United States; provide a source of concentrated CO2 that will be used to boost domestic crude oil production; and generate hundreds of permanent jobs and millions of dollars in tax revenues in southern Wyoming.
“Harnessing advanced technologies to convert domestic coal and gas into other useful products can greatly reduce our reliance on foreign sources of energy," said Kelly. “Moreover, we can accomplish this while at the same time producing a well‐to‐wheels CO2 footprint competitive with gasoline derived from traditional petroleum refining.”
SEG is a share‐controlled subsidiary of the Sinopec Group , one of the largest energy companies in the world. SEG was selected to build the Medicine Bow facility after an international competitive tender based on its extensive experience in coal gasification and liquefaction technology. Securing the EPC contract is a significant milestone for the Medicine Bow project. With this agreement, SEG joins other world‐class companies, such as General Electric, Arch Coal and Denbury Resources, whose partnerships with DKRW will ensure the Medicine Bow facility becomes a reality.
Previously MBFP announced the signing of an agreement for the purchase of all of the gasoline produced from the facility. Other firms have been contracted to develop and enhance necessary infrastructure, including the construction of a roughly 100‐mile pipeline from Medicine Bow to Cheyenne.
The project will capture 92 percent of the CO2 generated throughout the development process and provide the liquefied CO2 for use in the enhanced oil recovery market in the Rocky Mountain region.
Denbury Resources one of the leading producers of natural carbon dioxide utilized for CO2-enhanced oil recovery in the United States, has agreed to purchase all of the carbon dioxide captured by the plant. Denbury plans to use the CO2 to recover significant amounts of otherwise stranded oil from existing oil fields in the Rocky Mountain region while also providing a way to capture and store the CO2 .
The CO2 captured from the MBFP process will be used and stored in the depleted oil reservoirs resulting in a gasoline product with one of the lowest carbon footprints in the U.S. refining mix. The plant, once built, will be the first commercial‐scale project in the United States utilizing carbon capture and sequestration technology, and will use a fraction of the water needed by a pulverized coal facility of a similar size.
The Medicine Bow project is co‐located with the 180‐million‐ton Carbon Basin coal reserve owned by Arch Coal, which is also an equity investor in the project. The facility will convert one ton of coal into two barrels of traditionally oil‐based products, including gasoline, thus creating a 360‐million‐barrel‐ofoil equivalent reserve at the Medicine Bow site.
In September, Summit Power Group (introduced major new project participants who will advance and help assure the financing and construction of the Texas Clean Energy Project (TCEP and included remarks the signing of a Memorandum of Understanding by representatives of Summit, Sinopec Engineering Group and The Export-Import Bank of China.
TCEP, a large scale commercial coal gasification power/polygen project that Summit is developing near Odessa, Texas, will capture ninety percent (90%) of its carbon dioxide for use in enhanced oil recovery (EOR) by producers in the Permian Basin of West Texas, boosting U.S. oil production by some seven (7) million barrels per year and generating thousands of jobs in Texas and throughout the U.S. TCEP will also produce more than 700,000 tons per year of urea as fertilizer for U.S. farmers and a long-term, 200 megawatt supply of ultra-clean and low-carbon electric power for CPS Energy, the municipal electric and gas utility of San Antonio.
Summit also announced that Minnesota-based CHS. is the purchaser of TCEP’s entire urea output, which is expected to reduce annual U.S. imports and U.S. dependence on foreign urea fertilizer by more than ten percent (10%). across the United States, has signed a long-term off-take agreement with Summit., CHS also announced that it will make a small equity investment in the project. TCEP will boost U.S. domestic production of urea fertilizer for American farmers by approximately twenty percent (20%).
Major transactions now in progress and memorialized in the memorandum of understanding signed by the parties include a new engineering, procurement, and construction (EPC) contract for TCEP’s gasification and chemical block, which Summit intends to award to the Sinopec Engineering Group (SEG).
Under a previously signed EPC contract for the power block, Siemens will provide a state-of-the-art Siemens high-hydrogen combustion turbine to be manufactured in North Carolina. Selas Fluid Processing Corporation, a U.S. affiliate of Linde, will continue to provide key equipment and otherwise support SEG in the chemical block EPC contract.
To support SEG’s new EPC contract, Summit and SEG also disclosed that the Export-Import Bank of China (“Chexim”) is expected to be the sole financial lender to TCEP, subject to completion of the EPC contract and Chexim’s customary due diligence. Summit stated that the Chexim loan amount, which will be based on a percentage of the dollar amount of SEG’s EPC contract, will be sufficient to satisfy all of TCEP’s needs for project debt.
Whiting Petroleum Corporation has executed a contract to purchase a major portion of TCEP’s captured carbon dioxide for use in Whiting’s enhanced oil recovery operations in Texas. Denver-based Whiting is a publicly traded independent exploration and production company, and operates one of America’s largest EOR projects at its North Ward Estes Field in the Permian Basin.
TCEP’s total sales of captured CO2 for EOR will be approximately 2.5 million tons per year. In Texas EOR operations, the captured CO2 is effectively a solvent that helps release trapped oil for recovery. No “hydro-fracking” is involved, and any injected CO2 that comes to the surface with the produced oil is re-captured, re-compressed, and re-injected, resulting ultimately in permanent geological sequestration of CO2.
Because of TCEP’s high carbon capture rate, the power CPS Energy buys from TCEP for San Antonio consumers will have less than one-tenth the CO2 emissions per kilowatt-hour of power from a plant that burns coal and less than one-quarter the CO2 emissions per kilowatt-hour of power from a plant that burns natural gas. CPS Energy is the first utility in the U.S. to enter into a PPA that will provide power with such ultra-low CO2 emissions from a commercial scale, hydrocarbon-based power plant. Shrieve Chemical Co. will market all of the approximately 50,000 tons per year of merchant-quality sulfuric acid that would otherwise have been vented to the atmosphere as sulfur dioxide in the absence of TCEP’s low-emissions gasification technology.
The total cost of TCEP will be more than $2.5 billion. Of this amount, $450 million will be provided by a cost-sharing award announced in 2010 by the U.S. Department of Energy (DOE) under DOE’s Clean Coal Power Initiative (CCPI), a Congressional program to aid development of power projects that capture their carbon dioxide. The Siemens and Linde equipment used at TCEP are commercially proven and allow CO2, sulfur, and mercury to be removed from the project’s gas stream prior to combustion, leaving only a high-hydrogen/low-carbon clean “syngas” as the sole fuel that is burned.
Summit is in discussions with a number of potential U.S., European, and Asian sources of equity to accompany Chexim’s provision of project debt for TCEP.