| 2008-04-22 |
Published: The Gas Business Magazine |
ITERA, a known oil and gas Company, concentrated on developing its business in three major areas including production and sales of natural gas, gas chemistry and power generation.
The Company is actively addressing problems of smaller power industry within the framework of its energy related programs. The demand is obvious: deficit of energy resources is present in all areas where industry is gaining momentum. ITERA established Power and Gas Company ENECO last August. This Company is going to implement projects of smaller power industry in the Sverdlovsk Region to improve reliability of energy supply to local consumers in the near future.
Vladimir Makeyev, Chairman of the Management Board of ITERA Oil and Gas Company, Ltd., Chairman of the Board of Directors of ENECO, the power and gas Company, describes the plans and prospects of the Company in his interview to the Magazine.
- Vladimir Pavlovich, first, how do you assess the situation in power industry?
- Generally speaking, problems of the power industry are obvious to everyone. It is a known fact that the industrial production growth rate determines a corresponding electricity demand. In this country, it is not going to be just some growth; it is going to be a sweeping growth. Leaders of the country had sited the threat of an electricity deficit many times.
This problem is not to be solved, should we say, at a stroke. The electricity supply system formed in 1960ies -1980ies. At that time, the expectation was that large enterprises were to receive electricity through a centrally controlled supply system, through a United Power Grid, and to produce heat at their own boiler equipment. Service life of such equipment (before an overhaul) does not exceed 25 to 30 years. Today most enterprises of metallurgy, chemical and primary processing industries have faced the deficit and lack of guarantees for reliable supply of heat and electricity, especially with a view of the RAO UES reform. I would like to point out that decommissioning of generating capacities with the used service life would be 51.8 gigawatts until 2020, including 47.8 gigawatts at thermal power plants and 4 gigawatts at nuclear power plants.
- At that, the need in installed power generation capacities is many times higher in Russia!
- There is no doubt about that. Say, according to expertly assessment, the demand shall be 246 gigawatts within two or three years to come, and 349 gigawatts in 2020. Therefore, the need in commissioning power-generating capacities within the basic variant in Russia shall be 186 gigawatts in the period of 2006-2020. The prices on electricity go up 15 to 20% a year in the country. This makes the electricity price comparable to its price in European countries. Should we compare internal Russian prices on natural gas and electricity in terms of heat equivalent, than we would see that electricity is 8 to 17 times the price of gas depending on the region, while the technically sound excess should not be over four times.
- Does it mean it is much more profitable to sell electricity than natural gas in Russia?
- It is exactly so. For example, most enterprises use outdated equipment to supply heat to technological process. Coefficient of useful natural gas utilization at such equipment is less than or equal to 30-35%. Naturally, this leads to significant increase in the cost of the "own" heat, while the cost of gas is constantly increasing. Today it is possible to raise energy efficiency of natural gas utilization to 80-90% thanks to modern equipment.
-There is a good reason in this situation to …
- …switch from just trading gas to production and the sale of energy within a single business scheme: natural gas supply - processing – sale of product (heat and electricity) to ultimate consumers. Why should not we do it, if it is profitable for us and for consumers? This is what ENECO, the company we had established, is involved in. It develops construction projects for smaller generating capacities and innovative schemes for complex energy supply to enterprises and municipalities.
- Is it being done mainly in the Urals?
- So far, to the Sverdlovsk Region, which we have been cooperating for years. We value the fact that ITERA is the only private company that has been supplying the entire natural gas demand of this region. Energy is very important for this region. The growth of a real sector of economy directly depends on it. This growth means prosperity of the citizens of Sverdlovsk. A stable trend for buoyancy and gradual growth of the economy accompanied by increased consumption of electric power up to 38.6-40 billion kWh a year emerged during the winter of 1999-2000. The forecast is that this index is going to go up 3 to 4% a year to reach the level of 67.7 billion kWh a year by 2015. The expected growth is 68% if compared to the current level. Such a quick development of industry may cause electricity deficit.
- If that is the case, what then may ensure a change to the better in this area?
- Primarily, this is the development of the smaller power industry based on cogeneration plants that produce heat and electricity. Commissioning of such plants takes 12 to 18 months while production cost of electric power is below the price offered by electricity supply companies. At that, the payback period is about one-fifth the large power-generating facilities that require much bigger investment into infrastructure.
- Something else is also very important: the usage of smaller power industry makes it immediately accessible to consumers.
- This reduces electricity transmission loss, improves its quality. This means that the natural gas use factor goes up. For example, the resolution of the Regional Government "On Guidelines for Installation of Low Capacity Combined Heat and Electricity Production Facilities in the Sverdlovsk Region for 2006-2008" the commissioning of over 60 facilities of this kind with a total capacity of at least 170 megawatt is envisioned.
- In any case, the priority is given to the smaller power generating industry instead of constructing, say, new State Regional Thermal Power Plants and power generating units with a capacity of over 300 megawatt or more?
- The problem is that regional generating companies do not necessarily find investors. Another obvious reason is terms: construction of the big-size power generating capacities takes years, while the deficit of energy resources is already there.
- What is the difference between the costs of energy supply from a network and the energy supply from the own source?
- Where you purchase a co-generator, your capital expenditure is going to be paid back. The so-called links up expenses are irrevocable losses. Expenses on construction of a co-generator are compensated by low cost price of energy generated. Normally they are fully paid back within four to five years of their operation. Operation of a proprietary mini-co-generator allows for reduced expenses on heat and electricity supply if compared to energy supply from an energy supply network. It is true though, that in this case (where a co-generator is operated in a basic energy generation regime) a co-generator is operated throughout a year at 80-95% capacity. An electricity supply network is interested to link up a co-generator: in this case, it gets an additional generating capacity without capital investment into construction of a power plant.
- To implement such projects, sufficient volume of natural gas is required...
- We have them at hand. ITERA Oil and Gas Company supplies consumers with the volume of gas they need on an annual basis. For example, the Sverdlovsk Region will get over 20 billion cu m of natural gas this year alone. It has received over 140 billion cu m of natural gas within nine past years. The supply was in progress without single disruption!
- Is it why Governor Edward Rossel called cooperation with ITERA a unique one?
- It cannot be denied, this was a gratifying assessment. Our cooperation truly deserves good praise, because it is gaining momentum from year to year. At that, in addition to stable natural gas supply, it expands to new areas. These include construction of apartment houses, cultural, business and trade centers in Yekaterinburg and a wood-working combine in Vyisk, a methanol production chemical complex in Nizhni Tagil...
- It was quite recently that a new site of cooperation emerged. This is Serov ferrous alloys plant.
- It is not just a site. It is a new area of activity of ENECO in the energy resources market in the Sverdlovsk Region. Electric-power production without a modern control over record keeping and spending is at least irrational. Serov plant served a springboard for ENECO to implement modern measuring system for commercial record keeping of energy supply. The plan is to install such systems at other enterprises, as well as in municipalities. This will allow to determine exactly the areas where heat and electricity are lost and to provide for energy saving.
As far as the smaller power industry is concerned, it is only it that can promptly build up an overall production of electricity and ensure a breakthrough to the future for domestic economy.
- Vladimir Pavlovich, journalists of the Gas Business Magazine join the numerous congratulations on your 60th jubilee and wish you new achievements in business and strong health!
- Thank you. I take this opportunity to express through your magazine sincere gratitude overall organization and colleague for congratulations on my anniversary.
Top of page
