PHILADELPHIA GAS WORKS

Transcription

1 PHILADELPHIA GAS WORKS REQUEST FOR INFORMATION ( RFI ) REGARDING PGW LNG SALES EXPANSION PROJECT RFI ISSUANCE DATE: June 17, 2015 RFI RESPONSE DUE DATE: July 30, 2015 RFI #29752

2 Request for Information Regarding Introduction The Philadelphia Gas Works ( PGW ), is issuing this Request for Information ( RFI ) to solicit responses regarding a potential LNG sales expansion project (the Project ). Specifically, PGW management would like to understand the full range of options and opportunities available to facilitate increased sales of liquefied natural gas ( LNG ) by using or developing new PGW assets, including through means of a public-private partnership ( P3 ) arrangement. This RFI is intended to solicit responses from entities that have experience with the energy and/or energy infrastructure development sectors, and: provides general background information related to the Project; and solicits input on a variety of issues, including potential scope of the Project itself, viable financing models, market information and schedule considerations. There are a number of drivers for this request, including, to determine if third party project involvement could: be more cost-effective and efficient than through PGW solo-effort expansion; reduce PGW s development and financial risk; encourage added sales growth by opening new LNG market sectors or customers to PGW; and make other services and opportunities available to PGW. PGW encourages responses from knowledgeable Respondents who may, should PGW elect to pursue private involvement in the Project, wish to participate in a subsequent competitive process for the Project either as a developer, financing entity and/or in some other role. This RFI is intended solely to obtain information to assist PGW to evaluate potential options for the Project, including an analysis of financial and operational alternatives that may include publicprivate participation. However, this RFI is an inquiry only. No contract or agreement will be entered into as a result of this process, nor does this RFI initiate a formal procurement or represent a commitment to issue a Request for Quotations ( RFQ ) or Request for Proposals ( RFP ) in the future. Respondents choosing to respond to this RFI will not, merely by virtue of submitting such a response, be deemed to be bidders or proposers on the Project in any sense, and no such Respondent will have any preference, special designation, advantage or disadvantage whatsoever in any subsequent activities related to the Project. The information contained in the responses to this RFI, however, will help PGW to advance evaluation and development efforts for the Project, which may result in the launch of a formal Project and

3 associated procurement activities. Responses to this RFI (including presentation materials, questions and answers) are not confidential and may be used, at PGW s election, to develop strategies and development options for the Project. It is the express purpose of this RFI to assist PGW by, without limitation, providing information that may be included in a public competitive solicitation, if any. Instructions to Respondents Responses to this RFI should be submitted on or before July 30, 2015 in electronic.pdf format via to Anthony Mauro, PGW Supply Chain Department, Anthony.Mauro@PGWorks.com with a copy to: procurement@pgworks.com. Hard copies may be sent in addition to the electronic version, attn: Mr. Mauro, PGW Supply Chain Department, 800 W. Montgomery Avenue, Philadelphia, Pennsylvania Responses should be no longer than twenty-five (25) pages. Any questions concerning this RFI shall be directed in writing to Mr. Mauro at the address above. Respondents may not contact other PGW personnel regarding this RFI. Questions and answers to all questions will be shared with all Respondents. On July 9, 2015 from 10 to 11 AM Eastern Time, PGW will conduct a non-mandatory Question and Answer session via teleconference. The dial in number is , code Not later than July 7, 2015, Respondents should submit via any questions they would like to discuss at the Q&A session. To the fullest extent possible, Respondent s submission should provide answers to the questions set forth below in Information Requested. Entities who submit written responses may be invited to PGW headquarters in Philadelphia to make oral presentations regarding their Project vision and participate in a question and answer session with management during the weeks of August 10, and August 17, PGW LNG Overview PGW is a municipally-owned natural gas distribution company managed by the Philadelphia Facilities Management Corporation (hereafter referred to as PFMC ). PGW provides natural gas service to approximately 500,000 active accounts within the city of Philadelphia, using 6,000 miles of natural gas mains and services. PGW is the only utility currently distributing gas within the city of Philadelphia. The mission of PGW is to provide safe, reliable natural gas service to the citizens of Philadelphia at a reasonable cost. PGW currently operates one of the nation s largest LNG facilities at its Richmond Plant located in the Port Richmond section of Philadelphia. Existing plant facilities include two storage tanks

4 (allowing for over 4 billion cubic feet of storage capacity), 16 million cubic feet of daily liquefaction, over 4,500 million cubic feet of vaporization capacity and LNG truck/trailer loading capabilities of 20 million cubic feet per day. PGW has been operating all of the mentioned LNG components since 1969 with many current PGW employees having over three decades of LNG plant operations and maintenance experience. PGW s plant is located across the street from the Tioga Marine Terminal, which is operated by the Philadelphia Regional Port Authority. The plant is ideally located close to the Delaware River, rail lines, and Interstate 95. PGW also operates an LNG storage and vaporization facility in South Philadelphia ( Passyunk LNG Facility ), situated on 59 acres near the Schuylkill River. The LNG storage and vaporization facility at the Passyunk LNG Facility receives its liquefied gas supply from the Richmond Plant via cryogenic trailer trucks. Storage at the Passyunk LNG Facility is necessary to meet PGW s peak shaving needs. The Passyunk LNG Facility consists of one LNG storage tank of 3,066,000 gallons (i.e., the equivalent of 253,300 Mcf of natural gas) and two (2) LNG vaporizers. The original and primary current purpose of the Richmond LNG facility is to provide supply for firm residential, commercial and industrial customers during the winter operating season (November through March). The LNG plant provides a full one third of Philadelphia s demand for natural gas on a design day. In addition, the facility provides supply throughout the winter operating season, particularly on days where customer demand exceeds available supply from interstate pipelines. The facility is clearly an integral component of PGW s ability to provide a reliable supply of natural gas and cost savings. Over the past decade PGW has experienced shrinking firm demand requirements due to the increased efficiency of natural gas equipment and a much greater attention to conservation. Therefore, PGW presently requires 50 percent less LNG during a design winter. This equates to half of PGW s LNG storage capacity, or 2 billion cubic feet of capacity, not needed by firm customers even if design winter conditions occur. PGW has initiated an interruptible LNG supply service that has produced strong sales results. During the 2014 and 2015 winter months, the combination of regional demand for LNG and PGW s smaller firm demand for natural gas has enabled PGW to develop this robust interruptible LNG supply business. In fiscal year 2013 and 2014, and into 2015, PGW filled and sold over 2,000 trailers, each holding 10,000 gallons of LNG. PGW s LNG sales service is an interruptible LNG service because PGW sales of LNG are subject to interruption at PGW s discretion. This is not due to a lack of available storage capacity (i.e., 2 billion cubic feet of available capacity) but rather to a limitation on the volume of LNG that can be produced by PGW due to current limited liquefaction capability of approximately 1.8 billion cubic feet per year. Effectively, PGW has capacity to store LNG but very limited ability to produce LNG, with an annual average production of 82% of the required LNG to meet its design winter customer demands. PGW is interested in increasing LNG sales revenues by fully optimizing its LNG storage capability.

5 To that end, PGW has been exploring expansion of liquefaction capabilities that can be used to enable firm LNG sales with the potential to sell 5.3 billion cubic feet (bcf) or an additional 65 million gallons of LNG per year FOB at PGW s Richmond facility. The current LNG market demand is predominately for long-haul trucking and high horsepower equipment, which PGW currently supplies through the aforementioned trailer loading at its Port Richmond Plant. PGW would like to embark on a sales expansion timeline that would result in increased sales during 2018 or sooner. PGW is also open to and interested in considering other solutions. The Richmond Plant location offers potential for marine bunkering and bunkering barge loading options on the Delaware River, easy access to rail lines and is located along I-95 on and off ramps. The Passyunk Plant also offers access to rail lines and major highways. Other projects or variations to the model project described below may require facilities to be constructed outside of the current property lines of the Richmond Plant. Existing facilities may also be considered for use to leverage sales of LNG. Approximately 25 million gallons of spare storage capacity is available in the LNG storage tanks at the Richmond Plant. PGW has firm capacity on the Transco Williams and TETCO Spectra pipelines. Approximately 10,000-20,000 mcf is released in the winter months and 45,000 mcf in the summer months on Transco Williams. Approximately 20, mcf is released in the winter months and 70,000 mcf in the summer months on TETCO Spectra. All released capacity is recallable. The winter releases are recalled on the coldest days of the winter. Interruptible transportation may be available on these pipelines for third party suppliers. The Richmond Plant has existing storage, piping and equipment that can meet the operational demands of a new liquefaction plant within the Richmond Plant property lines. PGW s existing LNG facilities are governed by Federal Regulation 49 CFR, Part 193 and are not under FERC jurisdiction. Model Liquefaction Expansion Project Description To inform Respondents in greater detail, PGW is providing preliminary information regarding a liquefaction expansion effort that PGW has considered undertaking on its own in order to increase LNG sales capacity: a 21 million standard cubic feet per day (MMSCFD), 250,000 gallons/day liquefaction plant that could begin producing LNG by However, Respondents should not be constrained by this model in their responses and may respond to the RFI with variations and alternative solutions to PGW s project objectives. Tables 1 and 2 (pp. 8 and 9, below) provide estimated operating expenses, capital costs, production and use estimates for the aforesaid model LNG liquefaction expansion project. PGW does not guarantee the accuracy, adequacy, completeness, legality, or reliability of information presented, as all data is merely indicative. Respondents should use their own best judgment in evaluating the information

6 provided and responding to this RFI. Aerial views of the two LNG facilities follow the tables. Natural Gas Supply A new liquefaction plant would have the potential to be operated year-round, but pipeline contract delivery entitlements must be considered when determining supply for new LNG production. The Williams Transco Richmond Gate Station, which currently supplies high pressure gas typically over 450 psig needed for liquefaction processes to the Richmond plant, cannot exceed 130 MMSCFD during summer months and 142 MMSCFD during winter months without variances. The existing expander cycle plant requires, on average, 100 MMSCFD to be operated at full liquefaction rate while the new liquefaction plant, if sized at 21 MMSCFD, could require a raw feed rate of approximately MMSCFD. The sizing options considered include up to 24 MMSCFD or 300,000 gpd of new annual production, within supply entitlements of the Williams Transco Richmond Gate Station. The proposed liquefaction facility could be operated during the days spanning March to December; bringing the facility offline for maintenance activities in the winter and subsequently allowing the current expander liquefaction facility to operate at full rate when winter operating conditions permit. During summer months, the existing expander liquefaction facility would be taken offline for maintenance activities. Alternatively, it may be possible to install a feed gas booster compressor capable of utilizing feed gas from the Spectra-owned TETCO pipeline which supplies 100 psig gas into the Richmond Plant. This supply pressure could be compressed to over the 450 psig which is required for liquefaction, resulting in higher operating and maintenance costs but adding the ability to purchase additional and potentially lower priced supply from the Marcellus Shale region. Operating Parameters To meet safety regulations imposed by the Federal Department of Transportation on the construction of new LNG plants, PGW must utilize existing transfer piping to the LNG Tanks This would limit the size of the new plant to 300,000 gpd or 26 MMSCFD. These same safety regulations also require that the accidental release of any flammable refrigerants and LNG must be examined prior to any new LNG-related construction. The thermal and vapor dispersion zones created from these accidental releases must be analyzed and shown to stay within the property lines prior to construction. Although vapor dispersion and thermal exclusion zones will still need to be modeled for a potential LNG leak or ignition, PGW believes, after reviewing preliminary models, that these dispersion zones can be mitigated and kept within the property lines. Sizing Some sizing options are set forth as follows: Option A: One 21 MMSCFD facility with a feed gas booster compressor

7 Options B1 and B2: One 12 MMSCFD facility, without (B1) and with (B2) a booster feed gas compressor Options C: One 12 MMSCFD facility designed and constructed (Phase 1) to allow for a second 12 MMSCFD liquefaction unit to be added at a later time (Phase 2), both with a feed gas booster compressor A liquefaction facility consistent with standard industry modular sizes would be preferable. Using a standard industry size would decrease capital costs for design and construction, and would lower the cost of spare parts since most equipment would be analogous to equipment used in other facilities. PGW evaluated the construction of a 21 MMSCFD (250,000 gpd) plant or an alternative plan of constructing one or two smaller liquefaction units over a longer time span. The first phase would be capable of liquefying 12 MMSCFD (150,000 gpd) but would enable a second liquefaction unit to be added at a later time by conducting site design and layout, feed gas pretreatment and other components sufficient to handle the final total liquefaction rate. Winter Load Requirements PGW relies heavily on LNG for winter sendout due to the high winter to summer sendout ratio. Currently, a total usable storage volume of 2.2 Bcf is required for a design winter (and annual LNG tank boil off). The average production from the existing expander liquefaction plant is between 1.2 Bcf and 2.0 Bcf annually, averaging about 1.8 Bcf annually. The addition of a new liquefaction plant would provide the added production, if necessary, to ensure security of supply and help guarantee PGW could produce sufficient LNG for a design winter. The current average LNG production capacity is 82% of required volumes. The additional liquefaction facility would also serve as redundancy to the existing expander facility, which has been in operation for over ten years with a cyclic mode of operation that potentially could shorten the lifespan of the core exchangers. Modifications to LNG Trailer Loading Bays Based on the potential LNG sales, the total count of LNG trailers that must be loaded could range between 3,000 8,800 annually, or trucks per day on average. The current trailer loading facility has two loading bays, although only one bay can be used at a time. The time for a trailer to enter the loading bay, load with LNG, and leave the premises takes a little more than an hour. The demand for LNG from customers increases during the winter and decreases during the summer seasons so the demand is non-linear. The existing trailer loading facilities must be modified to accommodate the simultaneous loading of two trailers. This work will coincide with the installation of the proposed LNG facility and is included in the capital cost estimate. There is also room for adding a third or fourth loading bay in the future. Although increased demand will ultimately lead to an increase in LNG transport trailers that will be entering and leaving Philadelphia County, strictly enforced federal safety regulations govern over the road LNG transport. It has an excellent safety record in the United States. PGW also works closely with the Philadelphia Fire Department. Cryogenic trailers in the United States are required to be double-walled, vacuum jacketed pressure vessels, making the entire tank

8 extremely robust to physical damage and any other outside hazards. Research has revealed no evidence of a single person outside the driver to be injured in any of the small number of LNG transport accidents over 40 years, and in only a couple of incidents did LNG spill or ignite. Table 1: Summary of Operating and Capital Costs for Three Scenarios Option A: One 21 MMSCFD Plant (x$1,000) Options B1/B2: One 12 MMSCFD Plant (x$1,000) Option C: Two 12 MMSCFD Plants (x$1,000) Estimated Annual Operating and Maintenance Costs Liquefaction Fuel Costs $2,500-$3,000 $1,600-$1,650 $3,350-$3,375 Liquefaction Support Electricity $120-$130 $65-$75 $140-$150 Molecular Sieve $55-$60 $30-$40 $65-$75 Nitrogen Makeup $300-$315 $175-$180 $350-$360 Incremental Seasonal Maintenance $550-$600 $450-$500 $925-$975 Total Incremental Annual O&M $3,525-$4,105 $2,320-$2,445 $$4,830-$4,935 Estimated Capital Costs B1: Without Inlet Feed Compressor Phase 1: With Inlet Feed Compressor New Liquefaction Plant $4,300- $5,200/mcf With Inlet Feed Compressor $5,400-$6,500/mcf B2: With Inlet Feed Compressor $7,000- $7,900/mcf Phase 2: With Inlet Feed Compressor $6,200-$7,200/mcf $$4,000- $4,600/mcf Disclaimer: PGW does not guarantee the accuracy, adequacy, completeness, legality, or reliability of the estimates above presented, as all figures are merely indicative. Respondents should use their own best judgment in evaluating the information provided and responding to this RFI.

9 Table 2 LNG Production versus LNG Use Proposed Plant Size Option A 21 MMSCFD Annual Estimates, MMCSFD (except where noted otherwise) Options B1/B2 12 MMSCFD Option C Two 12 MMSCFD Existing Expander Plant 1,800 1,800 1,800 New Plant 5,700 3,300 6,600 Total LNG Made 7,500 5,100 8,400 Total LNG Utilized for Vaporization Design Winter Requirement Vaporization Normal Winter Requirement Vaporization Richmond Plant Boil-Off 12 Months 1, , , Potential LNG Utilized for Sales Minimum LNG Available with Design Winter for Firm Sales Potential LNG Available with Normal Winter for Interruptible Sales 5,300 1,000 2,900 1,000 6,200 1,000 Annual Trailers Loaded (@ 830 Mcf/trailer) Minimum Number of Trailers 5,932 3,027 7,022 Maximum Number of Trailers 7,748 4,843 8,838 Disclaimer: PGW does not guarantee the accuracy, adequacy, completeness, legality, or reliability of the estimates above presented, as all figures are merely indicative. Respondents should use their own best judgment in evaluating the information provided and responding to this RFI.

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12 Partnering/Development Issues PGW is a collection of assets owned by the City of Philadelphia. Respondents should be aware of the following when formulating potential public-private partnership options: PGW is unable to form a traditional joint venture with a third party because it cannot own stock nor can it guarantee the debts of third parties. For any agreement greater than 4 years, PGW contracts are usually done via an authority as conduit, through back to back agreements. Typically, PGW s participation in development arrangements employ lease, leaseback and rental payment mechanisms. PGW employees may not be permitted to work for a third party or on facilities controlled by a third party. Development at the Richmond Plant may involve environmentally active sites. PGW is not currently subject to FERC jurisdiction. Information Requested PGW is looking for creative responses suggesting how PGW can best meet the objectives outlined within this RFI. PGW will review all ideas relating to LNG expansion and sales growth opportunities. PGW is interested in considering the best LNG opportunities for PGW, balancing project objectives with other project factors such as feasibility, cost, system reliability, and long term planning goals. Responses to this RFI should include, at a minimum, the following information: Business name and address of the Respondent, and name and telephone number of the primary contact person. Qualifications of the Respondent, describing the company, the business and corporate philosophy, any professional affiliations, and experience in developing and delivering energy infrastructure and/or supply projects General description of the proposed solution(s) Proposed transactional structure of solution(s). Proposed timeline for solution(s). Technical description for the solution(s), include description of new facilities needed for the solution(s). Description of how the solution(s) would handle existing PGW needs and maximize PGW s asset capacity. Description of how the solution(s) could reduce PGW s financial and development risk compared to a PGW solo effort.

13 Description of anticipated regulatory approvals with estimated timelines. Enough detail for PGW to financially evaluate the proposed solution against other proposed solutions, including market summary, compensation to PGW, etc. Ideally, in presenting the information requested above, responses should also answer the following questions: General Questions 1. What specific experience does the Respondent have with projects completed or underway with public agencies? Please provide contact information for the public agencies for which these projects were developed. 2. Are there any particular concerns with any of the information that has been provided in this RFI? Please explain those concerns and provide proposed solutions or mitigations to address those concerns. 3. What local, state or federal regulatory or other issues that would hinder the feasibility of the Project? If so, what are they and how could they be resolved or mitigated? Project Structure and Development Questions 4. Who would own the assets, equipment and capital plant? 5. What financing structure is the most feasible and would provide the best value for PGW? 6. What degree of financial risk is acceptable to the Respondent? 7. Do you anticipate public or utility funding or incentives being available for the Project? If so, then what would be the anticipated source of these funds or incentives and how do they add value to the Project? 8. What threshold financial arrangements would be necessary or other critical factors resolved to successfully complete the Project? Please outline in order of relative importance. Project Solicitation Question Solicitation 9. What is the minimum amount of time required by the Respondent for developing and submitting a committed detailed proposal for the Project after issuance of a potential RFP/RFQ? Additional Considerations

14 10. Please provide any comments on other creative project scope ideas, procurement options, technical considerations, etc. that PGW should take into account in selecting and developing the Project. 11. What are the top risks for successful delivery of this Project and why? What potential impact could the identified risks have? What potential mitigation strategies could be employed to decrease the identified risks? 12. In the Respondent s experience, what type of public benefit and economic development could the Project foster in terms of new businesses and job creation? 13. What challenges related to communication with local officials, communities and business does the Respondent foresee and what strategies are suggested to be employed to maintain open and transparent relationships? 14. Other than the answers already provided, what information would help the Respondent make the business decision to engage in the development of the Project? Reservation of Rights This RFI and the process it describes are for the sole and exclusive benefit of PGW. No other party, including any Respondent to this RFI or future proposer to any competitive solicitation which may be issued by PGW, is intended to be granted any rights hereunder. Responses to this RFI should be submitted on or before July 30, 2015.