Venezuela's Pdvsa struggling to meet Orimulsion goals

Early in 1997, Orimulsion-Vene- zuela's patented boiler fuel, looked like it was going to become an important new source of income for state petroleum company Petroleos de Venezuela SA (Pdvsa).

But the new fuel-made from bitumen, water, and a surfactant-took a heavy beating in recent months when two major orders in the U.K. and the U.S. were either canceled or delayed indefinitely.

Orders hobbled

Bitumenes Orinoco SA (Bitor), the Pdvsa unit that oversees the production and marketing of Orimulsion, had planned to sell 4 million metric tons/year to National Power plc in the U.K.. However, the British utility in September 1997 decided not to convert its mothballed Pembroke power station in southern Wales to burn the Venezuelan fuel.

National Power had sought to extend the life of the oil-fired plant by using Orimulsion but dropped its plan, fearing costly delays, after Britain's Labor government called for further studies on the environmental effects of the Venezuelan fuel.

At about the same time, the governor of Florida and his cabinet voted to delay-for the second consecutive year-the commercial use of Orimulsion at Florida Power & Light's (FPL) Manatee power station near Tampa, on the Gulf of Mexico. Bitor and FPL have already signed a 20-year agreement under which the Florida utility will purchase 4 million tons/year of Orimulsion. The contract remains in effect, but FPL cannot begin burning Orimulsion until the state executive branch grants a final go-ahead, and no one knows for sure when that will happen.

FPL wants to use Orimulsion at the underutilized Manatee plant because it is cheaper than fuel oil. The utility says Orimulsion will save about $3.5 billion in generating costs over a 20-year period.

Earlier, Bitor lost another important U.K. client when PowerGen plc shut down the two power stations-Ince B and Richborough-it had adapted to burn Orimulsion.

While Orimulsion's situation in the U.K. seems irreversible, at least in the near future, Bitor executives are confident that the Florida executive branch will eventually approve FPL's petition to burn Orimulsion at the Manatee plant. New public hearings on the petition are scheduled to begin in Florida on Jan. 15, and the governor and cabinet could decide to vote again as early as April, according to optimistic projections.

Projections reevaluated

These setbacks have forced Bitor to reevaluate its ambitious export projections.

The company, which exported a record-high 4.17 million tons of Orimulsion in 1996, planned to raise exports to 14 million tons/year by 2000 and to 32 million tons/year by 2006. Sales to FPL and National Power alone would have provided an 8 million ton/year boost.

But Bitor is not sitting on its hands. The company continues to sell Orimulsion in several international markets and is planning-or already is carrying out-trials in others.

Bitor recently opened a new door in the U.S., potentially its most important market, when Illinois Power recently began a test burn at Unit 1 of its Hennepin coal-fired power station near Chicago. Illinois Power is using reburn technology and a mix of 80% coal and 20% Orimulsion at Hennepin in an effort to reduce nitrogen oxides (NOx) emissions. While the Illinois utility plans to continue using mostly Illinois coal in its power system, Orimulsion is an attractive possibility for reburn units, because it offers a low-cost alternative to reducing NOx emissions. Orimulsion is priced internationally to compete with coal.

Bitor also has contracts-or is conducting trial burns-in Canada, China, Denmark, Italy, Japan, and the U.S. It has commitments to supply 800,000 tons/year to a new, 350-MW power plant at Japan's Hokkaido Electric Power (Shiriuchi Plant Unit 2), starting in 1998. It also is at various stages of negotiations with other potential clients in Bulgaria, Germany, the Netherlands (a cement plant), India, Taiwan, and Turkey, as well as parties in countries where it already has firm contracts.

Opposition

Both in the U.S. and U.K., Orimulsion has faced stiff opposition from a powerful combination of environmental groups and business interests.

In the U.K, for example, British coal producers-fearing they would lose business-lobbied heavily against Orimulsion. Environmentalists waged a withering campaign in the media, labeling Orimulsion "the world's filthiest fuel."

In Florida, environmentalists are also maintaining a media barrage, despite the fact that FPL's Orimulsion plan has met or exceeded state and federal pollution and emissions standards.

One of two major business opponents is CSX, which fears that Orimulsion might replace coal at some power plants and thus reduce its coal shipping business (Manatee itself cannot use coal). In addition, Tampa Electric-a utility serving areas adjacent to FPL's business area-is worried that FPL will become too competitive if it substantially reduces generating costs with the help of Orimulsion.

Defending Orimulsion

In defense of Orimulsion, executives at Bitor and FPL point out that the Venezuelan fuel is already being used commercially at power plants in Denmark and Japan, countries that have strict environmental laws, and that it has been tested successfully in other countries.

When burned with advanced pollution control equipment, they say, it represents a "clean energy" source. (About $293 million will be spent to convert the 22-year-old Manatee plant to Orimulsion; pollution and emission control equipment will come from Pure Air Corp., a joint venture of Air Products & Chemicals Inc. and Mitsubishi Industries.)

Orimulsion's supporters also point out the the Venezuelan fuel will prolong the productive life of older, oil-powered plants, providing significant savings over fuel oil.

In addition, it will allow coal-fired utilities to simultaneously maintain generating capacity and lower NOx emissions by using both coal and Orimulsion.

Such economies should be important as the U.S. electric utility industry is forced to become more efficient and more competitive under accelerating deregulation.