Midland Cogeneration Venture (MCV) has completed a little more than 1 year of operation, consuming 66 bcf of gas at its site in Midland, Mich.
Placed on line in March 1990, it is the world's first conversion of a nuclear power plant to a gas fired cogeneration plant (OGJ, Apr. 2, 1990, p. 36).
MCV gas usage is expected to increase to more than 70 bcf/year by 1995, said Rodney E. Boulanger, MCV president and chief executive officer.
An expansion could boost fuel needs at the Midland site to more than 100 bcf/year by 1996.
Power generation is the most important new market for U.S. gas, said LeRoy W. Smith, MCV vice-president of gas supply.
Smith cited estimates released by the Gas Research Institute showing that while other markets for U.S. gas will have extremely low growth rates, use of gas for power generation will show dramatic gains. A new market for gas-driven by gas use for emission control in coal fired plants, installation of gas fired electrical peaking capacity, and cogeneration plants like MCV-will account for an increase of more than 2 quads (2 tcf)/year by 2010.
"MCV shows how quickly this new market for natural gas can become a reality," Smith said.
Project construction started Apr. 4, 1988. Gas turbines and heat recovery boilers were installed, modifications were made to steam turbines inherited by MCV from the idle Midland nuclear plant, and all other construction was completed in less than 2 years.
GAS SUPPLY
Parallel to construction, MCV signed long term gas supply and transportation contracts to ensure the core fuel requirements of the venture. MCV has signed gas transportation contracts with five interstate and two intrastate pipelines for firm transportation.
MCV relies on Canadian and U.S. gas producers, obtaining supply from two provinces, five states, and fields off Texas and Louisiana.
Like other power generators, MCV requires long term gas supply contracts with known prices throughout the term of the contracts. Price escalations are determined in the contracts, not left to an open ended price redetermination.
A project like MCV must have a predetermined price for the term of the contract to obtain financing, Smith pointed out.
The requirement for long term contracts stems from the need to assure MCV's long term power purchasers that electricity will be available for the term of the power contract. The last four long term gas supply contracts MCV has signed have been for 14-20 year terms.
MCV has found two ways to agree with gas producers on security of supply under a contract.
In the first way, the producer furnishes a corporate warranty.
The second way is a reserve dedication.
Low permeability sandstone, fractured shale, and coal seam reservoirs with their long productive lives are ideally suited to match the productive life of the MCV plant, Smith said. Gas suppliers who have signed contracts with MCV see these contracts as an important part of an overall portfolio, he said.
"OXY USA Inc. has been extremely pleased with the performance and the relationship established by MCV over the past year of operations," said Don Romine, manager of natural gas at OXY. "Like many other major producers, OXY is continually evaluating opportunities to participate in longer term supply agreements with end users. The existing contract with MCV has proven to be an effective, compatible addition to this long term strategy."
PLANT OPERATIONS
MCV began commercial operation Mar. 16, 1990, on time and under budget.
The plant met its long term contractual obligations during its first year of operation and met 95.5% of its contract capacity requirements. Available power went to Ontario Hydro during a 4 month period, and MCV provided power to the Michigan area. During the first year of operation, more than 6.7 million megawatt/hr of electricity were produced.
The MCV partnership was formed in 1987 to acquire the usable portion of the uncompleted nuclear plant and build a gas fired, combined cycle cogeneration plant. The plant is capable of producing 1,370 megawatts of electricity and as much as 1.35 million lb/hr of process steam for industrial use.
Partners in MCV are CMS Midland Inc., a subsidiary of CMS Energy Corp.; The Dow Chemical Co. (limited partner); Source Midland Limited Partnership, an affiliate of Panhandle Eastern Corp.; Coastal Midland Inc., a subsidiary of Coastal Corp.; MEI Limited Partnership, an affiliate of Asea Brown Boveri Inc.; Micogen Limited Partnership (limited partner), an affiliate of Fluor Corp.; and CE Midland Inc., (limited partner) a subsidiary of ABB-Combustion Engineering Inc.
Major customers are Consumers Power Co. and Dow's Michigan division.
Copyright 1991 Oil & Gas Journal. All Rights Reserved.