Venture
into the world of industrial turbomachinery and oil & gas solutions
Issue 9 | July 2008
Focus
A quantum leap in testing
Spotlight
Going full-thrust oil and gas
Monitor
Fitting GTs for a new business model
s
Dear Reader,
Welcome to this summer edition of Venture. I will keep my words brief since I reappear
in a feature interview in the magazine where I answer some questions on the new
Oil & Gas division of the equally new Energy Sector of Siemens.
There has been some concern that the restructuring means that the Division will
desert its industrial power and process-compression customers. Do not be concerned.
We are just as committed now as we have always been to our full portfolio of technologies. In this issue we even showcase the heat-pump technology which had its
heyday in the nineteen-eighties — and is still going strong where conditions are
favorable.
But technology is also finance. We introduce you to a business model where a conventional power plant is an investment commodity, and also welcome you to our own
latest investment — the fully inaugurated new Mega Test Center in Duisburg, where
we assure you and ourselves of the service-worthiness of our compression solutions.
Enjoy reading!
Dr. Frank Stieler, CEO
Siemens Energy Sector, Oil and Gas Division
Inside
Inside
06
18
05 News flash Around the world
A midsize LNG plant in Indonesia, a joint business venture and a pipeline
project in Peru.
06 Focus A quantum leap in testing
Located at Duisburg, Germany, the newly opened Siemens Mega Test
Center is one of the largest of its kind in the world.
12 Spotlight Going full-thrust oil and gas
An interview with Dr Frank Stieler, CEO Siemens Energy Sector, Oil & Gas,
about the strengthened focus of the division.
14 Off limits Heat pumps — A hidden technology lives on
14
Sustainable heat-pump technology has found its niche in Sweden and is
resuscitating interest in both Europe and Asia.
18 Monitor Trading power
Gas turbines at a Dutch industrial power plant are being overhauled to
match owner Morgan Stanley’s new business model.
22 Faces Patricia Gutierrez and Gordon Fraser
Executive Directors with the “Fixed Income” division of Morgan Stanley’s
Commodities Trading business.
IMPRINT
Publisher: Siemens AG, Energy Sector, Oil and Gas Division, Wolfgang-Reuter-Platz, 47053 Duisburg, Germany Responsible: Dr. Uwe Schütz Editorial team: Lynne Anderson (Head),
Manfred Wegner Contact: lynne.anderson@siemens.com Contributing editor: Colin Ashmore Design: Formwechsel Designbüro, Düsseldorf Photography: Florian Sander,
Georg Lukas, Hartmut Müsseler Lithography: TiMe Production, Mülheim Printing: Köller+Nowak GmbH, Düsseldorf.
© 2008 Siemens AG. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical
photocopying, or otherwise, without prior permission in writing from the publisher.
July 2008 Venture 03
Vista
A R O U N D T H E W A L L S — Siemens in numbers, June 2008
04 Venture July 2008
News flash
Around the world
1. Siemens’ first all-electric LNG compressor trains
destined for Southeast Asia
Siemens has been selected to supply motor-driven main-refrigerant
compressors for four natural-gas liquefaction trains to be installed in an
LNG plant owned by Energy World Corporation (EWC) in Indonesia.
The supply covers four 27-MW electric-motor-driven in-line centrifugal
compressors along with a Siemens Robicon frequency converter, to be
used for starting the motors.
The four 0.5 million tonnes per year (mtpa) liquefaction trains will provide LNG to meet the growing demand in Southeast Asia, primarily
in Indonesia and the Philippines and possibly also to China and Japan.
The first two trains are scheduled to come on stream in the second
quarter of 2009. Siemens will also be supplying a 65-MW gas-turbine
generator to provide additional support to the local grid for supply of
power to the LNG plant.
These orders represent the largest application to date of Siemens
compressors in an LNG refrigeration cycle, and the combined skills and
experience of the contract parties will enable the successful implementation of this project in an important and expanding section of
the market.
2. Teaming up to monetize gas reserves
Energy World Group, Chart and Siemens have teamed up to offer a
repeatable solution specifically tailored for monetizing small and midscale natural-gas reserves through liquefaction (LNG). Distinguished
global players in their own right, the three companies contribute general
project management plus financing, technology and process expertise.
The liquefaction plant concept of the proposed solution complements
the benefits of small-scale, standardized, repeatable 0.5 mtpa liquefaction trains with the productivity and efficiency advantages of the
E-LNG concept, where the refrigerant compressors are powered by
electric drives rather than gas turbines.
3. Energy for South America
In January, Siemens Industrial Turbomachinery in Houston, USA,
received an order from Transportadora de Gas del Peru for four SGT-400
pipeline compressor trains. The Argentinian company, Techint, based
in Buenos Aires, is responsible for the engineering, whereas the Siemens
facility in Houston is responsible for the packaging of the compressor
trains. Decisive factors in winning the order were the promise of a short
delivery time — twelve months for the first two units — and the conditions of the service and maintenance contract.
The gas-turbine-driven compressors force the natural gas via a pipeline
from the Camisea fields in Peru’s Amazon region out to the west coast
at Lima. The compressor station is located in the remote Andes valley
of Chiquinterica. The gas pipeline feeds the power generation units
in Lima, including two SGT-700’s from Finspong to be installed in the
Sudamericana de Fibras Cogeneration Project and three SGT6-5000F
gas turbines from Orlando to be installed in the Chilca, Kallpa and Santa
Rosa power plants. The gas pipeline also feeds a new Peruvian LNG
plant for which Siemens is supplying two boil-off-gas compressor trains
with electrical drives. Power supply for the LNG temporary facilities
is provided by three SGT-300 gas turbines.
July 2008 Venture 05
Focus
A quantum leap in testing
Located in Duisburg, Germany, the newly opened Mega Test Center is one of the
largest of its kind in the world, built in response to an increasing customer demand
for large-scale compression technology.
As the Chinese might well observe, we live
in ‘interesting’ times. Increasing industrial and
social development on a global scale has led
to unprecedented demand for energy, the vast
majority of which continues to be met through
the exploitation of the world’s finite reserves of
fossil fuels, leading to the release of ever more
carbon dioxide into our planet’s already overloaded atmosphere. The need to balance a
seemingly insatiable demand against dwindling
fuel reserves is forcing the pace of development of new and innovative solutions. In tandem, innovative pre- and post-combustion
‘Carbon Capture and Storage’ (CCS) technologies are being developed, both to enhance
production from depleting wells and to provide
a long-term storage solution for this ‘greenhouse’ gas.
Supersizing
One of the answers to the growing problem
of supply security is the construction of new
pipelines for the bulk long-distance transportation of oil and gas across national and international boundaries, linking a number of small
fields. Another solution for the economic
06 Venture July 2008
exploitation of natural gas is to convert it into
a liquid, reducing its volume 300-fold and enabling the resulting super-cooled cryogenic
Liquefied Natural Gas (LNG) to be transported
in sea-going bulk carriers. In both cases, the
process is totally dependent on the use of largescale compression technology, either to ensure
continuous flow in a pipeline, or to refrigerate
the gas to form LNG. Although the basic technology is relatively mature, the combination of
continually increasing demand and economic
pressure is driving the trend towards the use of
ever-larger compressor-trains, enabling the
industry to achieve greater operating efficiency
and increased productivity.
The same economic pressures are being felt
in downstream petrochemical applications,
where hydrocarbon feedstock is converted into
hydrogen-rich synthetic gas for the production
of clean fuels and chemical products. Similar
growth in demand is leading to the parallel
development and implementation of complex,
high-powered, supersized compressor trains,
where economy of scale is giving maximum
benefit for increased production. Large-scale
compression technology is used as part of
Focus
Focus
Impressions from
the inauguration of the
Mega Test Center, March 6
and April 18, 2008
08 Venture July 2008
Focus
current CCS systems for carbon injection and
sequestration, where carbon dioxide released
directly from the combustion of natural gas
or from the reforming process for the production of hydrogen-rich syngas, is forced at high
pressure into fast-depleting or exhausted onshore or subsea reservoirs, providing longterm storage, reducing emissions and enhancing production.
Response to market needs
As one of the largest and longest-established
developers, manufacturers and suppliers of
leading-edge compression systems for the
energy industries, Siemens has had to remain
responsive to the continuously evolving needs
of its customers. The demand for ever-larger
machines incorporating evermore complex
technologies, coupled with increasingly rigorous test programs and performance specifications, shorter delivery schedules and greater
manufacturing flexibility, has led to the requirement for a larger, centralized and more
comprehensive assembly and test facility. Designed to meet current needs for the full range
of machines currently supplied by the Siemens
Energy Sector Oil & Gas division, as well as for
A 1950’s bird’s eye view of today’s Mega Test
Center site, framed by the Rhine and Ruhr rivers.
next-generation compressors and associated
systems under development, work started in
mid-2006 on the construction of a giant new
‘Mega’ Test Center (MTC) adjacent to the manufacturing plant in Duisburg. With a total length
of 180 meters, a span of 40 meters and a height
of 35 meters, the huge new building, covering
an area of more than one and a half full-size
football pitches, was completed in less than two
years and represented a capital investment of
some EUR100 million, the largest single investment ever made by Siemens in Europe.
Inside the MTC two high-level traveling gantrycranes each provide a combined lifting capability of up to 700 tons to a height of 25 meters,
allowing the assembly and testing of ultralarge compressor trains. No fewer than six of
these giant machines, each comprising a gas
turbine, steam turbine or electric-motor drive,
compressor and ancillary systems can be installed and tested at any one time. The building
also includes three intermediate-level cranes
each capable of lifting up to 100 tons to 23 meters, with a further six 10-tonne cranes with
a lifting height of 19 meters. Far from being a
big shed containing some heavy lifting equipment, the MTC incorporates a sophisticated
infrastructure and bespoke utilities, purposedesigned to support testing up to full load
on the largest and most complex machines. Gas
can be supplied to fuel large industrial gas-turbine compressor drives of up to 160 megawatt
(MW) at flow rates up to 10 kg/s, with future
upgrades to allow almost double this volume
for even higher-powered prime movers if
required. A state-of-the-art, high-voltage highpower pulse-frequency converter station
provides a comprehensive range of outputs for
testing the largest electric drive systems at
power ratings up to 100 MW. The new facility is
also able to test steam turbine-driven compressor strings up to coupling power ratings of
35 MW with steam conditions of 100 bar/500°C
and flow rates of 140 tons per hour. High pressure water for machine cooling can be supplied at flow rates up to 7,500 cubic meters per
hour, enabling full-load testing of closed-loop
compressor strings with coupled drive power
ratings up to 100 MW and partial-load opencycle testing of large air compressors. The new
building also provides direct rail access to
heavy-lift ship-loading facilities at the city’s
The same site today, now home of Siemens global
Oil & Gas headquarters and the Mega Test Center.
A cargo train (front) emphasizing the vast dimensions of the Mega Test Center.
Comprehensive facilities
July 2008 Venture 09
Focus
The inauguration party is over. From August on,
this will be the space for testing largest-scale
compression technology for the oil-and-gas and
processing industries around the globe.
nearby docks which form the largest inland
port in Europe with onward links to the main
sea ports of Rotterdam, Antwerp and Amsterdam, enabling even the largest and heaviest
machines and compressor-strings to be shipped
to their final destinations around the globe in
the shortest time possible.
Testing, testing
The new Mega Test Center has been designed
specifically to assemble and test the large, custom-built systems for tomorrow’s mega-scale
plants currently planned or under construction
by the oil, gas and petrochemical industries
worldwide. A veritable alphabet soup of
processes — GTL, CTL, LNG, PTA, IGCC, IRCC,
CCS — as well as ethylene, methanol and olefin
plants, all demand massive mega-machine
trains to provide the highest possible outputs,
efficiencies and economies of scale. Responding to industry trends, Siemens now has the
ability to carry out full-load testing of both
electric motor-driven and gas turbine-powered
compressor strings for LNG production plants
and part-load testing of gas-to-liquids compressor strings fitted with steam-turbine drive
systems. Large compressor-strings for PTA
Preparing the test hall for inauguration. Note the
three gantry cranes at top.
10 Venture July 2008
production — the basic feedstock for the manufacture of polyester plastics — powered by electric motors, steam turbines or gas expander
drives can be routinely assembled and tested
in the MTC. Compressors designed for a variety of applications in olefin plants, compressors
for large-scale air-separation processes, together with virtually all types and sizes of heavyduty industrial compressors and steam turbines can also be tested in the facility. Methodology employed includes mechanical running
tests to American Petroleum Institute Specifications API 617/612 under no load, part-load
and full-load conditions and performance tests
in accordance with ASME Performance Test
Codes PTC 10 Type 1 or 2. These include the
facility for compressor testing with inert gases
at 40 bar and 250°C in a permanently installed
test loop at power ratings up to 100 MW. Alternatively, machines can be tested using air at
suction volume flows in excess of one million
cubic meters per hour, connected to permanently installed flow-metering lines and blowoff stacks, or with hydrocarbon gases in
individually installed closed-loop systems, or
indeed with virtually any customer-specified
test method.
Size is not all
White and light — the MTC’s employee quarters.
Quaint aesthetics — array of cooling fans for
gas turbine exhausts.
With the low-hanging fruit all but picked by
the oil and gas companies, they are becoming
more dependent than ever before on the development of new technologies to provide economic solutions. For Siemens this has meant
that its compressors and drive systems have
not just grown bigger, they have also grown
smarter. Ground-breaking new developments
in design, materials and manufacturing technologies have led to the development of totally
new concepts in gas compression. One example of this is the ECO-II, a seal-less, emissionsfree, totally enclosed, centrifugal compressor
and integrated electric drive already in service
at an onshore gas field in the Netherlands
(see Venture Issue 7). As Frank Stieler, CEO of
Siemens Oil & Gas commented during the
opening ceremony at the new Mega Test Center,
“The principal driver for the oil and gas industry can be summed up as ‘Easy is over’. The
challenge for producers is to supply greater
volumes of oil and gas from fewer and smaller
reserves, leading to a higher demand for
world-class technology.” Clearly, Duisburg’s
new MTC will help the company meet the
challenge.
Focus
Spotlight
Going full-thrust oil and gas
Venture Dr. Stieler, can you explain why Siemens has launched an Oil & Gas
Division?
FS This is a strong response to new trends in the market. Those trends
call for applications and integration of products and solutions, which
were distributed among our organisation before.
What are the implications for Siemens?
Siemens has clearly identified Oil & Gas as one of its core businesses.
And we want to give a clear signal to the market that we intend to
strengthen our oil and gas business. Our new Mega Test Center in Duisburg, for example, is currently the biggest single investment of Siemens
AG in Europe.
How do you intend to give that signal?
Siemens already had a comprehensive and diverse portfolio, but this
launch means that we can now offer all of our oil and gas products and
solutions under single leadership. The concentration of resources will
increase flexibility and efficiency and reduce lead times to produce maximum customer value.
What does ‘maximum customer value’ mean to you?
In a nutshell: To allow our customers to be more successful in their business. This requires best quality, technical excellence and speed. It is our
desire to be a trusted partner of our customers.
Can you give some examples for your offerings which are recognized for
those features?
Specifically, we are the market leader in boil-off gas compression and
we have a very strong portfolio for pipelines from compressors to motors
to automation. Other very competitive offerings are compressor trains
and power generation solutions for E-LNG plants and the so-called
E-house, which provides automation and power generation on Floating
Production Units.
E-house — is this something new?
For the old rotating machinery division, yes, for Siemens, no. It is one of
the competitive solutions which has recently entered the division portfolio, but the competence is already fully developed.
Dr. Frank Stieler, (b.1958) Head of the Oil and Gas division of the Siemens
Energy Sector, joined the company in November 2001 to manage the initial
mergers which substantially shaped the division of today. Dr. Stieler studied
law at the Johann-Wolfgang-Goethe University of Frankfurt (Main), Germany,
where he also took his doctorate. He is married and has five children.
12 Venture July 2008
Is this on a par with your main competitors, GE for example?
Our objective is not to win a race with our competition. Our objective is
to add value for our customers. We are convinced that we have a unique
portfolio of products and solutions and the expertise to continue to refine and expand upon them.
And how are you planning to do that?
Well, one way that we have found particularly successful and rewarding
is to initiate partnerships with our customers to develop innovative
Spotlight
technology tailored to their specific requirements. Together with Shell,
FMC and StatoilHydro, for example, we are developing and testing a
completely new seal-less compressor unit that could ultimately be used
for subsea gas compression.
What are your growth plans in the oil and gas business?
Currently the oil and gas market worldwide is growing at a rate of seven
percent per year. Our target is to grow substantially faster than the market
and to gain further market share.
I see that this benefits Siemens, but how does it benefit the customer?
Siemens is and has been a strong technology company. We now add an
increasing understanding of market needs and additional competence.
Our global presence allows us to be available to our customers around
the globe.
What do you see as the current trends in the oil and gas business?
Firstly, easy oil is out. This is true for gas as well. Future resources are
often located in isolated or harsh environments like the deep sea or
the Arctic. This makes enhanced oil recovery a major topic since we will
have to get the most out of existing oil and gas fields. Going one step
further, to be able to produce enough oil and gas for the growing worldwide demand, we need major investments in new technology. Some
of these will be technologies which can operate reliably even subsea.
Secondly, the industry needs more technology per barrel. This results
in bigger sizes, new features or just more. And then we need to respond
to the time pressure — and develop scale adapted off-shelf solutions
like our new all-electric mid-size LNG train. Scale-adapted solutions are
also needed, and here we have an off-the-shelf mid-size LNG solution.
What are your key markets and how will these markets develop in the upcoming years?
There is no part of the oil-and-gas value chain which is not growing.
The biggest growth rates are in the upstream markets to explore and
produce more hydrocarbons. Remote locations, adverse environments,
extreme climates, limited space are the challenges. As project scopes
widen, the benefits of a single-source supplier increase substantially,
since it will reduce complexity of project management as well as CAPEX,
tightening schedules and enabling earlier payback to be realized.
How important is the Siemens service business for the oil and gas industry?
This is where we have the most intimate contact with our customers, so
customer-tuned service business is essential for us to guarantee
maximum reliability and availability. This is obviously all the more true
as our installed fleet continues to expand. As well as benefiting from
the backing of the global services and associated products of the worldwide Siemens network, our global presence enables us to react swiftly
to our customers’ needs.
We have talked a great deal about the oil and gas industry, but what about
the “Industrial Applications” that you used to provide for. Are these relegated
to the past?
Absolutely not! We still maintain our full rotating-machinery portfolio
of turbines and compressors for all kinds of industrial generation and
compression solutions. This has not changed. But a name to incorporate
all those elements would be long even for a German-based company …
I think the topics of this magazine will show that we still have a tremendous breadth in our portfolio and that we do not forget any of our loyal
customers!
The I & S portfolio
The products, solutions and services of I & S (Instrumentation and
Systems) Oil & Gas now complete the former rotating-machinery
product range. The business activity is divided into two parts, offshore and onshore.
Offshore
The worldwide offshore business is based in Norway, and has responsibility for offshore solutions for electronics, automation and processes
(EAP) in the following areas:
• Drilling platforms and vessels
• Floating Production Systems (FPS) including E-house (automation
and power generation on Floating Production Units)
• Electrical Power on Sea (EPOS)
• Enhanced Oil Recovery (EOR) — extraction methods where the
remaining oil is recovered from exhausted fields
• Subsea (underwater installations on the seabed)
• Life-Cycle Management overview of the customer’s installation
• Front-End Engineering Design (FEED)
Onshore
The onshore business is managed from Germany, providing support to
regional bases around the world. The focus is on onshore solutions for
EAP such as:
•
•
•
•
•
•
Life-Cycle Management and Service
Onshore exploration
Compressor stations
Pipelines
Tank farms and oil terminals
Solutions for LNG (Liquefied Natural Gas) and regasification plants
July 2008 Venture 13
Off limits
Heat pumps — A
hidden technology
lives on
Now well past its 20th birthday, the district heating plant serving Hammarby, a showcase ecodevelopment on Stockholm’s waterfront, is anything but a quaint example of mature Swedish
technology. One of around 50 similar installations
built and serviced by Siemens, this heat-pumpbased, super-efficient, environmentally friendly
energy system is now attracting interest from
engineers and urban planners, not just from
Europe but as far away as China.
*
* 1,000 MW heat, 40 MW cooling
14 Venture July 2008
Off limits
For those people who have actually heard of
heat pumps, the concept will most frequently
be regarded as no more than a rather odd scientific curiosity, something to do with running
a refrigerator backwards to produce heat instead of ‘cold’. For a few, it might represent a
small but relatively expensive domestic installation for environmentally conscious people
seeking an energy-efficient alternative to conventional central heating systems. This unfamiliarity and the general low profile of heatpump-based thermal energy systems is not entirely unsurprising, as this thermodynamic
niche technology has never achieved the same
popularity or widespread use as its direct
equivalent, refrigeration. Following the first
demonstration of a heat pump in 1853 by
Scottish mathematician and physicist William
Thomson, later to become Lord Kelvin, the
technology remained relatively dormant until
coming into selective use during the 1980’s
as a cost-effective, electrically-driven system of
heat production, due mainly to the escalating
price of oil as a fuel for industrial and domestic
heating applications.
Uphill work
Although it is not well understood, basic heatpump technology is relatively simple. Using
the analogy of heat as a fluid, which flows naturally from a higher to a lower temperature,
heat pumps operate by using a modest amount
of energy to force the flow in the opposite
direction, in effect pushing the heat flow uphill.
This means that heat can be transferred from
almost any source for use in domestic or industrial heating applications, although the majority of practical systems harvest low-level heat
from large, naturally occurring, constanttemperature reservoirs such as the air or the
ground, or as in the case of industrial installations, the sea or other large bodies of water.
Heat sources can also include artificially generated sources of waste heat, derived from
industrial processes or the wastewater from
sewage treatment plants. The basic system of
heat transfer can also operate in the reverse
direction, albeit with slightly less efficiency to
allow cooling, acting in exactly the same way
as any domestic fridge or freezer where heat is
made to flow from an insulated container to
an external radiator to be dissipated into the
surrounding air. Operating in this mode, the
heat pump normally causes heat to flow from
the industrial or domestic cooling application
into a closed circuit or district cooling system,
where the heat pump cools the water before it
is distributed again to the customers. The heat
thus generated is distributed by the district
heating system. If a large cooling power is required, the heat can be discharged into the
virtually infinite heat-sink ‘radiator’ represented by the subsoil, lake or sea.
Compression-expansion operation
As the majority of heat pumps are based on
the vapor-compression cycle, the main elements
at the heart of these systems are an electricmotor-driven compressor, expansion valve and
two heat exchangers known as the evaporator
and the condenser. These components are
interconnected to form a closed, hermetically
sealed circuit filled with a low boiling-point liquid usually referred to as the refrigerant or
working fluid. In operation, the temperature of
the liquid working fluid in the evaporator is
reduced, causing heat to flow from the heat
source and converting the liquid into a vapor.
The vapor is compressed, raising both the pressure and temperature. The hot high-pressure
vapor flows through the condenser, releasing
useful heat which can either be used directly
to heat the air or in the case of larger systems,
to heat water which can then be circulated to
heat one or a number of buildings, depending
on system capacity. The vapor is finally forced
through the expander valve, returning it to its
original cool, liquid state, re-entering the
evaporator to start the full cycle once again.
Mean, lean and green
In theory, the total heat delivered by the heat
pump is equal to the heat extracted from the
heat source plus the electrical energy supplied
to drive the system. Adding an input of 100
percent drive energy to 200 percent from the
‘free’ heat-source will provide a useful heatenergy output of 300 percent. Operating the
system in reverse cooling mode will also produce 200 percent cooling. In terms of energy
gain, heat pumps can provide at least 3.5 to 4
times more heat-energy output than the electrical energy input, depending on the difference in temperature between the low-level heat
source and the heat-pump output, a measure
of efficiency more accurately known as the COP,
or Coefficient of Performance. Even the largest
industrial-type units, such as the multi-megawatt systems manufactured and supplied by
Siemens for large-scale district heating and
cooling applications, are as eco-friendly as the
The Hammarby waterfront district, one of Stockholm’s newer quarters, attracts global attention for its
all-green environmental policy.
July 2008 Venture 15
Off limits
*1
*1
latest all-electric town cars. Producing zero
emissions and virtually silent, they can be sited
unobtrusively in urban areas, close to available
sources of waste heat and to their customers,
using existing district heating networks. In
addition, as electrically-driven heat pumps use
less primary energy than conventional fossilfuelled heating systems and far less than for
electrical resistive heating, they have a much
smaller overall ‘carbon footprint’ and reduce
the volume of other harmful emissions,
although their total environmental impact
depends very much on how the electricity is
produced. Heat pumps driven by electricity
from nuclear or hydro plants for instance, or
from renewable energy-sources such as wave,
wind or solar power, reduce emissions to negligible volumes compared with those using
electricity generated by conventional fossilfired thermal power stations.
Peak popularity
Spurred by the soaring price of oil during the
early 1980’s and a climate demanding significant amounts of heat in winter and cooling in
summer, industrial users and municipal authorities in Sweden and other Baltic Rim countries
opted increasingly during the following years
to replace oil-fired boilers and heating systems
with heat-pump-based installations. As a leading specialist manufacturer of turbomachinery
based in Finspong, trading at that time as ABB
STAL and now the principal in-country production facility for Siemens, the company designed, manufactured and supplied the majority
of large-scale, high-capacity, state-of-the-art
heat pumps now currently in use, to meet the
increase in demand for these systems as their
popularity increased. The first heat pumps,
16 Venture July 2008
*2
*2
supplied in sizes ranging from 5 megawatt
thermal (MWth) to some 30 MWth, incorporated
compressors manufactured to the company’s
design specifications by an external supplier,
although subsequent units were manufactured
entirely ‘in-house’, using HPC centrifugal turbocompressors built at the Siemens Finspong
factory. A total of 50 heat-pump installations
complete with fully automated control systems
were established by the company in capacities
from single 5-MW units, up to high-output
multiple-unit systems, the last major heatpump plant being completed in 1991. Given
the requirement to site the heat pumps as close
as possible to both a suitable heat source and
a district-heating network, the greater proportion of these systems were designed specifically
to supply hot water for existing medium- and
large-scale networks in urban centers in Sweden, with some ten heat-pump installations
also designed subsequently to provide district
cooling. The low-level heat input for most installations is provided from cleaned wastewater
from locally sited sewage-treatment plants,
at a temperature between 10 and 20ºC, using
either a tube or panel-type evaporator depending on water volume and temperature. Some
12 installations use heat from seawater, which,
at a depth of around 15 meters, remains fairly
constant at between 1 and 10ºC.
Stockholm’s Hammarby showcase
As a leading international energy utility supplying both power and heat throughout the
Scandinavian region, Finnish-based Fortum
not only provides some 20 percent of the country’s total electrical demand, but also provides
virtually all the requirement for district heating and cooling from its power and heating
*3
*3
installations in the Stockholm area, including
the heat-pump-based plants engineered and
maintained by Siemens. In operation since 1986
as part of Stockholm’s southern-district heating network, the Siemens heat-pump plant at
Hammarby is located in the center of a former
docklands and industrial area of the city. In
1995, work started on a major clearance and
reconstruction project designed to convert the
run-down and heavily polluted area into a
completely new, modern, 200-hectare waterfront ‘eco-district’ called Hammarby Sjöstad —
‘Hammarby Lake City’. Environmental and
infrastructural planning of this radically new
development project, designed to provide
around 10,000 apartments for some 25,000 residents, was undertaken jointly by Fortum,
Stockholm Water Company and the city’s Waste
Management Administration. With innovative
sustainable solutions for transport, building
design and construction, demonstrating the
interaction between waste treatment and
energy provision, the showcase development,
now known as the ‘Hammarby Model’, continues to attract interest from urban designers,
architects, engineers and planners on an
international scale.
*
City heat
The original five-unit heat-pump installation at
Hammarby supplied to Fortum by Siemens in
1986 to help supply hot water to Stockholm’s
800 km of district heating networks, has been
extended subsequently to seven units, with
a district cooling facility added in 1996. With a
COP of more than 3.3, the plant, which recently
hosted a visit from a delegation from the
People’s Republic of China, currently supplies
some 1200 gigawatt-hours (GWh) of heat and
Off limits
*4
*4
*1 Designed to catch the light and
warmth of the sun: typical
appartments of the Hammarby
waterfront district.
*2 One of 50 industrial heat pumps
installed by Siemens in Sweden.
And three of four Siemens service
engineers exclusively dedicated
to industrial-heat-pump service.
*3 Nicknamed “Bridge of Sighs” for
its excessively high air temperatures, this bridge connects two
of the facility's buildings.
*4 Panorama of the Hammarby heatpump facility.
100 GWh of district cooling per year, using just
369 GWh/year of electrical energy at a cost of
less than even biofuel-based heating. Sited
close to the center of the new development and
taking its input heat from the adjacent wastewater treatment facility at a mean temperature
of 13ºC, the plant is a role model for goodneighborliness, supplying hot water to the
City’s southern district network at between 70
and 120ºC as well as cooling water for both domestic and industrial use, including cooling
for large computer-server installations, with
minimal environmental impact.
The heat-pump process
1.
2.
3.
4.
5.
6.
Waste water pump
Evaporator
Turbo-compressor
Electric motor
Step-up gear
Condenser
7.
8.
9.
10.
11.
District heating pump
District heating pipe
Control valve-HP
Flash box
Control valve-LP
New dawn?
Although the market for large heat pumps has
reached a virtual saturation point in Sweden
with Siemens currently providing Fortum with
routine planned maintenance and service, the
Finspong facility retains a full manufacturing
capability and a small force with engineering
expertise for a complete range of products and
systems based on modern heat pump technology. Despite the high initial cost of the necessary infrastructure, countries such as Norway,
Austria, Italy and Turkey are continuing to expand their urban district-heating networks,
although the UK, Germany and France have yet
to adopt centralized systems to any great extent. With the Chinese currently examining the
possible use of this type of clean, green, largescale district-heating technology, the price of
oil on world markets rising to record levels
and the increasingly urgent need to address
the issues surrounding climate change and
global warming, the prospects for a resurgence
of interest and a bright new dawn for low-cost,
low-emissions, renewable-energy powered
heat-pump systems have seldom been better.
8
6
7
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5
M
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3
3
9
2
1
10
11
July 2008 Venture 17
18 Venture July 2008
Monitor
Trading power
A former dedicated cogeneration plant has been added recently to the portfolio of
power plants held by US-based banking giant, Morgan Stanley. Initially designed to
supply process heat to the dairy business and electricity to the Dutch grid, the plant
is currently refitted for a new business model. Venture looks in a little more detail at
this snapshot of the world of energy, economics and high finance.
In the years following the deregulation of the
electricity supply industry, pioneered in the UK
during the 1990s when the market was opened
to full commercial competition, the UK example
provided a blueprint for a steadily increasing
number of countries worldwide. Domestic consumers are now quite accustomed to settling
their electricity bill not just with a regional supply company as before, but now perhaps with
a nuclear-based generation company, a gas supplier or even a supermarket group. Smaller,
dedicated industrial power stations designed
originally to supply independently generated
energy for a production process have frequently
changed ownership, being operated by separate
privately run companies. The principal owners
of many of these small-to-medium generating
plants have only a tenuous connection with the
industry, regarding the facility simply as a device to generate revenue and a return for their
shareholders. Within the liberalized energy in-
dustries, electricity is traded on the wholesale
market in exactly the same way as gas, oil, corn,
cheese or any other commodity.
Dutch dairy power
In 1995, prior to deregulation of the electricity
market in the Netherlands, Borculo Domo, a specialist dairy products manufacturer, part of the
Royal Friesland Foods group based at the small
town of Borculo in the east of the country,
formed a joint venture with Dutch power utility
Nuon to build, own and operate a dedicated
industrial power plant. Located adjacent to the
dairy factory, the so-called Berkelcentrale onsite cogeneration plant was designed specifically
to supply Borculo Domo with process heating
for the production of its whey-based products
for food and pharmaceutical applications, while
feeding virtually the entire generated electrical
output to the Dutch grid as a revenue-earning
commodity. Although it was not possible for in-
dependent power-generating plants to compete
directly with the state-controlled energy companies in the highly regulated market in the
Netherlands at that time, the Berkelcentrale
strategy was widely mirrored elsewhere in the
country, as by 1998, dedicated industrial cogeneration installations were allowed by newlycreated state-owned national grid operator
TenneT B.V. to feed surplus power to the transmission network.
The Siemens connection
The new power plant was designed from the
outset to provide very high operating flexibility,
employing a standard configuration consisting
of two generating units powered by SGT-600
industrial gas turbines — then known as
GT10B — manufactured at the Siemens facility
at Finspong in Sweden. With a nominal ISOrated output of 25 MWe and a simple-cycle efficiency of more than 34 percent, the SGT-600 is
July 2008 Venture 19
Monitor
Herbert Otten, plant manager at Berkelcentrale, pondering
times of change.
a heavy-duty machine particularly well suited
to highly flexible, arduous operating regimes
such as the frequent start-stop cycling required
at the Berkelcentrale plant. A control system
was installed to allow exhaust heat from either
one or both gas turbines to be fed through a
heat-recovery boiler system to produce steam
as required. The heat-recovery steam generator
(HRSG) was not only designed to supply steam
to the dairy factory for process heating applications at a rate of up to 60 tonnes per hour, but
also to drive a steam turbogenerator producing
additional electrical power, giving a combinedcycle electrical generating capacity of 58 MW.
Break-up
Although the new power plant was successfully
operated as a joint venture by the power utilitydairy products partnership for the six years
from 1995 to 2001, mainly under state-controlled, price-regulated conditions, the major
3-year restructuring of the Dutch electricity
industry following the introduction of initial
legislation in 1998 to allow market deregulation, had a profound effect on profitability. The
influx of some thirty independent power producers into the wholesale electricity market,
20 Venture July 2008
Even under the new business model Morgan Stanley’s Berkelcentrale power plant delivers
process steam to Friesland Food, its whey-products manufacturing neighbor.
together with the existing operators of large
base-load generating plants, resulted in overcapacity and a significant fall in electricity
prices. Although excellent news for Dutch consumers, falling revenues were a major problem
for smaller independent industrial power generators such as Berkelcentrale. In spite of the
high performance of the Siemens gas-turbinepowered cogeneration plant, by 2001 a combination of plummeting profitability and excess
power capacity forced the joint venture company into bankruptcy, splitting the power partnership. Nuon subsequently acquired sole
ownership of the power plant, with the dairyproducts factory reverting to its original
arrangements for electrical power while continuing to meet its process heating requirements with steam from Nuon’s on-site generating facility.
Power to the bank
Following its purchase of the combined heat
and power facility, Nuon arranged for Siemens
to undertake a major redesign and refurbishment of the SGT-600 gas-turbine based plant,
the new configuration allowing the exhaust
from just one of the two turbines to be fed
through the HRSG. This enabled the maximum
steam output, which was significantly in excess
of the dairy factory’s needs, to be reduced
while allowing electricity production to be varied widely according to daily price and demand
on the open power-market, aligning plant operation more closely with the power utility’s
core business. Nevertheless, with demand in
the Netherlands generally well below national
installed base-load generating capacity, Nuon
decided in late 2005 to retreat from small industrial power generation, offering the Berkelcentrale facility for sale. By the start of 2006
the power plant changed ownership once more
with its purchase by international financial
services organization and US-based investment
banking giant, Morgan Stanley.
Trading commodities
Founded in 1935 by Henry S Morgan and Harold
Stanley, Morgan Stanley has grown to become
a world-leading international financial services
organization and investment bank, with more
than 600 offices in 33 countries around the
globe and assets under management of USD 749
billion as of the end of February 2008. The
firm’s Commodities group has a global market-
Monitor
The industrial gas turbine generator under replacement.
leading position in both energy and metalstrading, with specialists trading in actual
physical commodities as well as in associated
derivatives and futures, taking advantage of
an active market presence to obtain market
opportunities and manage price risk. Energybased commodities include oil, natural gas,
electricity and ‘carbon-credit’ trading, where
companies in energy-intensive industries wishing to emit more than their permitted quota of
carbon dioxide must buy carbon credits from
companies with spare permits. The carbon trading market alone is currently valued at around
USD 64 billion, with the EU Emissions Trading
Scheme (EU ETS) forming the bulk of this
growth market. Physical commodities traded
by the group also include a fleet of seagoing
tankers and a growing portfolio of small, wellmanaged and efficient power plants, including
the Berkelcentrale cogenerating station in
Holland.
Flexible friends
To meet the demands of the completely new
business model being implemented by Morgan
Stanley, Siemens is currently undertaking an
operational upgrade of the combined heat-and-
Matching operating parameters and market opportunity by
mouse click upon the daily morning call.
power plant to provide the maximum-possible
degree of operating flexibility. The new configuration will allow one of the two SGT-600 gas
turbines to operate in combined cycle on a daily
basis, the station bidding into the wholesale
market under a day-ahead forecast arrangement
and feeding power to the grid during the daytime when demand and revenues are highest.
The second machine will operate in intermittent peaking mode as required, with a percentage of the generated steam being supplied to
the dairy processing plant during the working
day. This type of operating regime allows a
huge degree of flexibility, enabling the operator
to maximize revenues from power sales into
a relatively unpredictable wholesale market
when prices are highest. However, with its daily
start-up and shutdown, it also puts the gas
turbines and associated plant under maximum
thermal and mechanical stress, ultimately
reducing their working life by a significant
margin. Working in close partnership with
both Morgan Stanley and the plant operator,
Siemens demonstrated an equally high degree
of flexibility, providing no fewer than five possible engineering design and maintenance
solutions. The selected option involves a major
overhaul of both SGT-600 machines, replacing
the gas generator, comprising compressor and
combustion stages, on the combined-cycle
turbine with a completely new, high-efficiency,
low-emissions upgrade, while replacing selected first-stage components on the second
machine.
Keeping the wheels turning
The technical refurbishment will substantially
extend the operational life of both gas turbines
while enabling them to operate under a demanding regime. At the same time, the need to
match the generated power output to the
movements of the electricity market, which can
produce large and frequent price swings, can
also lead to the postponement and rescheduling of planned routine maintenance, thus
keeping the wheels of industry turning, power
flowing and maximizing return on the new
owner’s investment.
July 2008 Venture 21
Faces
People in power
Patricia Gutierrez and Gordon Fraser are Executive Directors with Morgan Stanley’s
Commodities Trading business. Venture met the two executives at the investment bank’s
London office in the high-rise financial district at Canary Wharf. Patricia and Gordon
took time out from their schedule to explain just why a global investment bank should
want to own a small industrial combined heat and power plant in Holland.
Venture Patricia, I guess the main question foremost in mind for most of our
readers is — why? Why exactly does a huge financial organisation like Morgan
Stanley want to own a power station, why in Holland and why now?
Patricia Well, the simple answer is that the energy sector is becoming
an increasingly important area of operation for the company and since
we trade in physical commodities such as electrical power, the plants
which generate this product are an obvious and logical extension to our
existing trading business. The acquisition in the Dutch market gives us
an additional presence in mainland Europe, which fits excellently with
all other energy-related commodities.
Gordon We are always considering opportunities that will allow us to
gain access and exposure to commodity markets that we are interested in
being active in. The investment in a power plant is one alternative open
to us to achieve this.
Venture So does the cogeneration plant in Holland represent Morgan
Stanley’s initial entry into the sector as an independent power producer?
Patricia Actually, no, far from it! We have been active in this commodity
trading-sector for more than 20 years and are steadily building a portfolio of power generating plants. The bank made its first power plant investments in the US during the early 1990s. Whilst Berkelcentrale was
our first acquisition in Europe, we have been active in the physical electricity markets since 1992, including purchasing the power offtake from
power producers and being active in the cross border market. We have
also made a subsequent acquisition of a power plant in Spain and are
looking at others.
Venture Now I understand better the reasons why Morgan Stanley is a
player in the power generation sector, but shouldn’t you be setting your sights
a bit higher in terms of plant capacities, going into larger baseload power
production, perhaps?
Patricia We do not rule out possible larger acquisitions and we are
looking continually at all available opportunities to purchase power
22 Venture July 2008
plants of all types and sizes, including large baseload generating facilities,
but these do not come onto the market very frequently and there can be
disadvantages.
Venture Such as?
Patricia The market for the few large, modern and efficient plants can
be intensely competitive, leading to high purchase prices and a lower
return on investment.
Venture So purchase price is the main factor?
Gordon No, not at all. What we look for are well-managed, well-maintained plants, capable of being operated with maximum flexibility to
provide the best fit within the market and the best return on our investment. This generally means for example, generating plants in the smallto-medium power range, with existing established contracts for steam
off-take as well as power, such as the Berkelcentrale industrial cogen
installation.
Venture And what about your contact with Siemens — has this been useful?
Patricia Yes indeed, very much so, Siemens has given us every possible
assistance. As Gordon said, flexibility is one of the most important factors for us in power plant operation and Siemens not only offered a wide
choice of engineering solutions to meet our requirements, including
undertaking all the necessary upgrades to extend the operating life of
the two gas turbines, but is also supporting us with flexible options for
long-term service and maintenance to ensure maximum plant availability.
Note: Since this interview, Morgan Stanley have published the acquisition
of another generating plant in the Netherlands, Wapenveld in the province
of Overijssel. This 69-MW plant was attached to a paper mill, which ceased
production in October 2007.
www.siemens.com