Summit Power group has cleared yet another hurdle after introducing major new participants that will assist with funding of the Texas Clean Energy Project, moving the project closer to construction.
On Tuesday, a delegation from Odessa met with a delegation from China during the 12th Annual U.S. China Oil & Gas Industry Forum in San Antonio and as a result, the Texas Clean Energy Project is one step closer to breaking ground in Penwell.
During the event, a “memorandum of understanding,” was signed by officials from Summit and Sinopec Engineering Group and the Export-Import Bank of China or Chexim, paving the way for project to move forward with construction.
The 400-megawatt plant is designed to capture 90 percent of the carbon dioxide it produces. Summit plans to sell the CO2 as enhanced oil-recovery, which will help companies bring more oil out of the ground. The plant will also produce and sell electricity and fertilizer.
The $2.5 million coal gasification plant will be located in Penwell and will create four sellable by-products for Summit including electricity, CO2 and urea fertilizer and sulfuric acid and contracts have been signed for the sale of all four products.
Of the total $2.5 billion cost, $450 million will be provided by a cost sharing award provided by the Department of Energy under the DOE’s Clean Coal Power Initiative.
Once Sinopec Engineering Group executes the engineering, procurement and engineering contracts with Summit, the Export-Import Bank of China is expected to provide over $1 billion in debt towards the financing of the project, said Summit Project Manager Laura Miller.
Miller said Tuesday’s events definitely put the project closer to financial closing.
“The only piece is the equity – right now Summit and Clayton Williams have the major equity in the project, with the exception soon of our fertilizer purchaser, which announced yesterday that it will be making a small equity contribution to the project,” Miller said.
Miller said negotiations are ongoing with potential investors for the project, from American, European and Asian sources. Miller said the financial closing for the project is expected to occur by the end of the year, with groundbreaking to follow in early 2013.
The world is watching Odessa as plans progress for the TCEP designed to capture 90 percent of the carbon dioxide, 99 percent of the sulfur and 95 percent of the mercury it produces, while also cutting water use by 30 percent by using air-cooling instead of conventional water cooling. The captured CO2 will be sold for enhanced oil recovery in the Permian Basin boosting oil production in the US by 7 million barrels a year and creating jobs in Texas and the US.
“Anything that is this big and this ground breaking there are many steps that have to take place and all of the steps haven’t taken place,” said State Rep. Tryon Lewis who attended the forum. “We are getting closer to this project becoming a reality.
During the luncheon previously announced contracts were announced including the long term power purchase by CPS Energy of San Antonio and a contract with Houston-based Shrieve Chemical Company to purchase TCEP’s output of sulfuric acid. Plus Summit entered into a 15-year agreement with Whiting Petroleum Corporation to buy 60 percent of the CO2 captured by TCEP for advanced oil production and a contract was secured with CHS, Inc. based in Minnesota to purchase the urea fertilizer.
Another milestone was reached in December when TCEP was issued its final air quality permit from the Texas Commission on Environmental Quality.
Tuesday’s forum was described as yet another milestone.
“Because of its full commercial scale and its exceptionally clean use of coal as a chemical feedstock instead of fuel, TCEP has always been recognized as a project of true global significance,” said Donald Paul Hodel, chairman of Summit Power Group and a former U.S. Secretary of Energy and secretary of the Department of Interior under Pres. Ronald Reagan.
An eight member delegation from Odessa, attended the forum.
“We got a very positive feeling that Summit (TCEP) is going to become a reality,” said Mayor Larry Melton, who attended the event. “This will put Odessa on the map. People will be coming from all over the world and it will be good for Odessa.”
“It was fascinating for me to see how interested everyone was and (that) there were other major industry groups from all over the world interested in seeing this project coming through to fruition,” Lewis said.
Miller said the Odessa delegation made a huge impact on the proceedings. Lewis presented the Chinese delegation with Texas flags that had flown over the capital that day. Plus Melton presented the group with leather binders with “Odessa,” emblazoned on the front. Miller said it was the first time all everyone involved in the project – including representatives from Europe, Asia and the U.S.
“It could not have been a better welcome wagon,” Miller said. “Odessa really hit it out of the park."