By: Dietmar Pracht, Project Director, Termozulia I, MAN Ferrostaal
Venezuela is potentially a very rich country. It has greater proven conventional oil reserves than any country in the western hemisphere: 77 billion barrels. Taking into account its large quantities of oil sands, the total reserves amount to 350 billion barrels, more than any country in the world, even Saudi Arabia. But Venezuela is far from paradise.
Poverty is still an issue in Venezuela, and the oil industry, which accounts for 85 per cent of the country’s exports (3 million barrels per day), is hit by blackouts that diminish the production and export of oil. Blackouts affect the population too. They are a daily problem. They extinguish electric lights and cause telecommunications to break down, which affects small businesses. In the long run, the government would like to be able to export not only oil, but also electricity. Transmission lines to neighbouring Colombia are part of this plan. For these reasons the government is expanding the national grid.
Seawater intake at Termozulia I
Venezuela is ahead of its neighbours in establishing a stable power network. Total power capacity installed in Venezuela today is, according to official sources, 22 GW. Some 70 per cent of this comes from six hydropower stations, the rest being produced by 24 thermo-electric units. The biggest power plant in the country is in fact a hydropower station at Lake Guri that has been built across the Caroniàƒ River. The station is the second largest operational hydroelectric plant in the world, with an installed capacity of 10 GW. But hydropower works only as long as there is enough water.
Venezuela suffers recurring disruption in the dry season, from December to April. Chronic power supply problems in rural areas force large projects, especially in the oil industry, to invest in independent power generation. In urban areas, many large businesses, such as shopping malls, have their own generators. Also, theft of electricity is a cause of losses. These thefts have been growing at twice the rate of demand in recent years, and there is no visible intervention by the state to stop them.
Today, it is evident that the country has under invested in thermal capacity. Overall, investment has been running at around two-thirds of requirements over the past couple of years, but there are plans to expand the thermal capacity by around 2 GW. Scheduled for the near future are six power stations with capacities of between 90 MW and 500 MW, eight substations and two transmission lines. One of these projects is Termozulia I, which is an extension of an existing gas fired, open cycle power station on Lake Maracaibo. The plant, with an original capacity of 320 MW, was turned into a combined-cycle station with a capacity of 490 MW and recently went into service. The operator of the plant is Energia Electrica de Venzuela, the fourth largest of the 14 companies producing and distributing electricity in Venezuela. The investment is about $200 million. Financing for these projects comes mostly from two funds set up by the government: FONDEN (national development fund) and FONDESPA (special development fund). Both are funded by contributions from Energàƒa y Petràƒ³leo y presidente de Petràƒ³leos de Venezuela, the state-owned corporation responsible for oil exploitation and sales.
The steam turbine generator and condenser at Termozulia I
On a political level, Termozulia I is a success for the Venezuelan government because 170 MW, which was formerly being wasted is now being used. This is equivalent to nearly 2 million barrels of diesel per year. The project is part of a bigger plan and will provide a quick gain in the expansion of Venezuela’s power infrastructure. In his inauguration speech, the country’s President Hugo Chavez Frias said that he viewed the power station as a “milestone in the development of the Venezuelan power sector”.
Challenging business conditions
But doing business in Venezuela can be a challenge for foreign companies. The government is doing everything to maximize the state’s influence in the country’s key industries. First, telecommunications were nationalized, followed by the oil industry. In May 2007, thousands of workers occupied oil refining plants after a government decree. Large corporations like BP and Exxon had to accept that their companies would be turned into joint ventures with local companies in which the foreign organizations would hold a minority stake.
In June 2007, the power sector was nationalized too. State-held company Edelca, which integrates the 14 companies active in the generation, transport and distribution of electricity, now controls power stations and transmission capacities. And in terms of distribution, the country was re-organized into six new areas. Against this background, it is clear that many companies are reluctant to do business in Venezuela or even to invest. Business is easier in Venezuela for those companies which focus on industrial services and which do not have too many assets in the country.
The demineralization tank at Termozulia I
Many companies feel that the risks of doing business in Venezuela – which include insecurity, a lack of knowledge of the legislation, challenges from the unions and the fear of crime – are too great today. Companies that have existing knowledge of Venezuela, which are used to dealing with state or governmental institutions and which conduct their business as if they are local companies, have a clear advantage. MAN Ferrostaal is one such company. It focuses on building plants and working with local partners as a general contractor. Any help a company can get in Venezuela is highly welcome.
However, all activities which Venezuelan companies can take-over tend to remain in state control. Termozulia I is the first combined-cycle power plant in Venezuela and therefore, technologically speaking, is virgin soil for the country.
It also has an impact in terms of raising the reputation of the country because it has produced extra power without any additional pollution. Environmental issues were until recently not important in the country, but pointing out that the power station is helping to protect the environment now receives a positive response in Venezuela.
Clearly, the most important argument for adding a heat recovery system to an open cycle power station is the way it quickly makes available an extra 170 MW of power. The plant is in the middle of Venezuela’s oil industry zone and can be a reliable source of power for oil producing processes. The project started in 2005, and the erection time of the heat recovery system took 30 months, executed by general contractor MAN Ferrostaal of Germany, which has had a long-standing presence in Venezuela.
The government demands that all major investments in the country should have high local content, i.e. local workers must be employed and local material must be used. Although the main equipment – two heat recovery boilers, a steam generator, the main transformer and a distributed control system – came from abroad, a large part of the project originated in Venezuela.
Some 40 per cent of the total order volume, both material and services, came from Venezuelan companies. The project is therefore perceived by many as Venezuelan.
The erection works by DSD Venezuela, a subsidiary of MAN Ferrostaal, were handled entirely locally. At peak times from August to October 2006, the site employed 1300 local workers, 90 per cent of whom came from La Caàƒ±ada, a city close to the power station. Besides the local workforce benefiting from the creation of jobs and the consequent money they bring to local families, most of the workers also received training during erection. This resulted in a significant increase in the qualifications of the people involved and has therefore given them better job prospects for the future. This is why the project has a long-term social impact, which is important because La Caàƒ±ada has high unemployment and a high crime rate to go with it.
The training of the local workers focused on technology and the equipment employed, the aim being to allow the operator to work with local personnel exclusively. Termozulia II, now under construction, will therefore benefit from this educational work having already been carried out. Astonishingly, the availability of a reliable power supply also has social consequences in Venezuela. Power cuts in certain areas are dangerous because they result in crime, which in Venezuela is mainly theft but is also drug-related and includes kidnapping and murder. A signpost at the entrance of the construction site of the power plant reads: “No arms allowed on these premises.”
The social situation in Venezuela also influences the work of foreign companies in the country. The trade unions have a strong influence on the progress of works. For Termozulia I, project strikes were a daily reality. Workers would refuse to work because of rain, even after the sun had dried the ground, and even in covered areas. The ratio of unionized to free workers is set by the government, which makes it difficult to obtain qualified personnel at the start of a project, so the training of local workers is a necessity if project management is to be successful.
A Site specific challenge
Another big but very specific challenge for companies erecting power stations on Lake Maracaibo is the presence of llemna, an algae, the growth of which affects the cooling system of the plant. Growths appear mainly in the rainy season and cover large areas of the lake surface. The algae has since 2004 grown excessively each year in the rainy season from April to October. During this period, wind and tidal movements have moved around the lake the huge fields of lemna that were found floating on it. In the rainy season, around 20 per cent of the lake’s 13 280 km2 surface is covered with the plant. This amounts to about 120 million tonnes of organic material. Lake Maracaibo’s swirls of llemna are even visible from space.
The algae does not like saltwater. Lake Maracaibo contains areas of varying degrees of salinity: low in the south, where many rivers drain into it, but high near the city of Maracaibo, where sea water enters the lake from the Caribbean. So the more rain that falls, the more llemna grows on the lake.
Llemna is an environmental problem. Industrial waste pollutes the rivers with nitrates and phosphates, which encourage the growth of the plant when the rivers flow into the lake. Lemna can double in size in just 48 hours. When it dies, after 48 hours, it sinks to the lake bottom, from where the power plant’s main cooling water pumps suck it up through an intake channel. The duckweed then affects the screening and filtering equipment, which means that much of the project’s work has focused on dealing with this problem. A number of filter systems have been installed to handle the large amounts of the plant. It is at night that the highest concentrations of lemna enter the filter area. The most that has been collected is 36 containers in 12 hours, or 9 m3/hour. Plant processes reduce the amount of duckweed entering the intake channel, which reduces the strain on the filter systems. Among the filtering measures is a lake-bottom barrier made of sand-filled permeable hoses, or geotubes. They strengthen the travelling band screen equipment. Findings like this are of value to companies which plan to build other power stations on the lake.