Brazil thermoelectric generators propose bigger role for LNG

Brazil's Abraget thermoelectric generators association is urging the government to build natural gas-fired base load power plants using liquified natural gas (LNG). In an interview with BNamericas, Abraget president Xisto Vieira Filho said the initiative would allow depleted hydroelectric dams to recover while capitalizing on lower LNG prices. 

BNamericas: Why does Abraget believe the Brazilian government should invest in base load thermoelectric plants?

Vieira Filho: Peak load [or standby] power plants run according to demand. They help stabilize power supply for the Brazilian national grid. However, these plants alone can't supply the amount of power needed to recover our water reservoirs.

What is happening right now is that Brazil has peak load power plants running, it's raining and yet the northeast reservoirs are at 38% of their capacity, and in the southeast they're close to 56%. That's why we need base load power plants to recover water storage levels. Since the Brazilian energy matrix is super diversified, thermal plants should serve as security spots on the grid.

BNamericas: And why LNG?

Vieira Filho: When LNG is used for flexible power plants, there are two options for the buyer: get it on the spot market or enter a long-term supply contract. Sometimes prices are lower on the spot, sometimes they're higher. It varies over time. But when the goal is to bid on a power project in a federal auction, at least 15 years of proven natural gas reserves [or a supply contract] will be needed.

Absolutely no one would like to buy 15 years of LNG on the spot market and, if they do, they'll raise the price of the plant and it will become more expensive. On the other hand, it's risky to close a long-term supply contract; after all, the player doesn't know when his plant will be dispatched.

BNamericas: What would be the ideal capacity of base load thermal power plants, in MWs, to recover water reservoirs in Brazil?

Vieira Filho: We are working on different test runs. One of those is based on the recovery of Furnas hydropower plant's reservoir, which is the biggest one connected to the Brazilian national power grid. So how many MWs would be needed to match Furnas' reservoir? Our first result is about 2,000MW, but we don't have a final figure yet.

BNamericas: Has Abraget already submitted any formal proposal on the matter?

Vieira Filho: We're currently working on that. Abraget gathered its entire research team to come up with a strong proposal. We've been in talks with EPE [Brazil's federal energy planning company] and now we're finishing this document. I believe in about two months it will be ready.

BNamericas: Have you had the opportunity to talk with the energy minister, Fernando Bezerra Coelho Filho, about this?

Vieira Filho: I did not know the minister [previously]. Last week, I had a brief conversation with him during a break at a electric power conference. The minister seemed to me a market-thinking person, just like Paulo Pedrosa, the appointed executive secretary of MME [energy ministry], who is a former Aneel [national power regulator] director with a great deal of experience in Brazil's power sector. But we will have to wait and see how these matters will evolve, because the electricity and oil and gas industries are in a terrible situation. Brazil truly needs a revolution of major proportions in this area.

BNamericas: One of the challenges involving LNG [based] plants is the availability of regasification terminals (FSRUs). Today, Brazil has three FSRUs, all in Petrobras' hands. Do you think Pedro Parente, as the new president of Petrobras, will lead towards an opening, with the sale of these terminals?

Vieira Filho: Petrobras just won a valuable gift called Pedro Parente. In the early 2000s, I was the national secretary of energy and Parente was the chief of staff. We worked together and I feel comfortable saying that he is extremely qualified for this task. About the sale of FSRUs, he will have to conduct an in-house study covering all related matters. People over criticize Petrobras, but everything the company has done so far, it has done so very skillfully. In 2001 and 2002, for example, Petrobras' thermal power plants saved the Brazilian grid from an energy crisis. Anyhow, I do believe Parente will do everything he can to recover the company.