The project involved a proposed unconventional gas development asset located in northeastern British Columbia, Canada. Advisian was engaged along with a joint venture partner for engineering services on the project. The planned development included well pads across the two fields, a gas plant, and associated infrastructure including pipelines, compressor stations, and water sourcing and treatment.
Advisian was asked to assist in a key decision on the selection of an optimum power generation option for an upstream asset. Power was required for full field operations, including at well pads, compressor stations, and the gas plant. The location of the project was remote and thus isolated from existing grid power facilities, leading to the need for either self-generation or the existence of a new Independent Power Producer (IPP). Within this study, two technical options for in-field generation were considered, as well as an external generation comparison case. The options analysis investigated whether centralizing power generation and transmitting power to the various field locations would be more economic than having distributed generation with gas driven turbines at each location.
Advisian applied a standardized decision analysis process, including the DELTΔ™ cost benefit analysis software as a means of comparing the options. The process evaluated the financial aspects of the decision along with the associated risks.
Advisian conducted the following steps during the process:
- A framing workshop which identified the study objectives, the options to be analyzed, and the financial and nontechnical risks to be assessed
- Options development, including data collection, engineering cost estimates, cost analysis, and benefits evaluation for the three proposed options
- Cost benefit analysis using DELTΔ™ software, including capital and operating costs, potential power sales revenue, greenhouse gas emissions costs, and costs of power purchase from an IPP
Additional analysis was conducted in DELTΔ™ to find electricity price break points which would result in the IPP option becoming superior over the project life to onsite generation under different CAPEX and OPEX conditions.
The study successfully provided recommendations on the preferred power generation option. Some of the high level findings included:
- The capital expenditure difference between the two self-generation options was found to be negligible, and the centralized generation drive option had superior cash flow from the first year of operations onwards at base case conditions.
- Under specific, lower electricity price scenarios, purchasing power from an IPP was economically superior; however, this was in less than 20% of modeled scenarios under a Monte Carlo analysis.
- All options had significant exposure to fluctuating energy and greenhouse gas costs; these were identified as focus areas for risk mitigation going forward.
- Continuing change in regulatory attitudes toward carbon emissions formed an important risk factor to power generation on the project. Even at base value assumptions, the self-generation options each had over $200 million in PV carbon tax costs at the base price of CAD$1.49/GJ.