Orimulsion: Will it Emerge as a Strong Player in the Global Fossil Fuel Arena?

By K. Ravi

May 13, 2002 — Orimulsion is a fuel that appears to satisfy most of the basic criteria for competitive power generation: it is cheap, it can be burned as easily as any other fossil fuel such as coal or oil, it can be transported and stored at ambient temperatures and there are huge reserves of this fuel to secure long-term supplies.

Nevertheless, orimulsion has not been able to make a huge impact on the world power generation market. What are the reasons for this lack of interest and what does the future hold for orimulsion?

Venezuela’s Black Gold
Orimulsion is a naturally occurring bitumen (70 percent) mixed with water (30 percent) using a surfactant that stabilizes the emulsion. It has been developed and patented by Petroleos de Venezuela, S.A. (PDVSA), the national oil company of Venezuela and marketed globally through its subsidiary Bitumenes Orinoco, SA (Bitor). With 1.2 trillion barrels of potential bitumen reserves in the Orinoco belt of Eastern Venezuela, which is 1.5 times the world’s estimated oil reserves, Venezuela is undoubtedly sitting on a gold mine. However, the market development challenges are formidable and even after nearly a decade of marketing orimulsion, the country has not been able to make a dent in the international fossil fuel market.

The Case Against Orimulsion
When burned in power station boilers, orimulsion emits large amounts of sulphur dioxide (SO2), sulphur trioxide (SO3) and heavy metals such as nickel and vanadium. Also, the heavy fuel could severely pollute neighboring water streams in case of a spill. It would be difficult to clean up since the fuel mixes with water, unlike oil. Hence, it has been an object of derision among environmentalists worldwide. Such opposition had hindered the plans of Florida Power Limited to convert its Manatee County plant from oil to orimulsion. Even though the regulatory authorities initially approved the plan, the Governor’s office vetoed it, thus bringing to the forefront the permit constraints in the use of orimulsion as an alternative to coal or oil, in developed countries.

Moreover, despite the abundant supplies and relatively stable price of the product, the very fact that the power plants need to depend on a single source for their fuel supplies would work against the ethos of a deregulated environment. The recent coup against President Chavez and his subsequent reinstatement highlight the volatile political situation in Venezuela, brought out mainly by the currency crisis and mismanagement of the country’s highly oil-dependent economy. Thus economic or political instability in Venezuela could potentially jeopardize the fuel security of power plants depending on orimulsion.

Market Developments
Despite being billed as one of the dirtiest fuels by environmentalists, orimulsion has found favor with ecologically-conscious countries such as Canada, Denmark, Italy and Japan (see table below for plants under commercial operation). In fact, Italy is the largest orimulsion market for Venezuela, with ENEL consuming about three million tonnes per annum (MTPA) of this boiler fuel. The main attraction of orimulsion as a fuel in these markets is the possibility of using it in existing oil- or coal-fired units with minimum modifications. Also, the fuel is so cheap that, even after adopting suitable back-end pollution abatement technologies, it would be possible to generate power at competitive prices.

Japan is one of the main protagonists of orimulsion. Hokkaido Electric Power has been operating a 350-MW plant using orimulsion since 1997. Moreover, Japan is developing the 4,400-MW Gobo Greenfield Project based entirely on orimulsion, which is expected to start operation in 2007.

China is setting its sights on orimulsion as a fuel, with Venezuela as its partner in Latin America. In December 2001, China National Petroleum Corporation (CNPC) signed a long-awaited agreement with PDVSA for building a 6.5-MTPA orimulsion plant in Eastern Venezuela and also for importing the entire quantity for 30 years from 2004. It is the political equation and the attraction of long-term cheap fuel supply that is driving China towards orimulsion.

Other Asian countries such as India, Taiwan and Singapore are also contemplating the inclusion of orimulsion as part of their fuel mix. India has already approved the use of orimulsion for power generation and the petroleum major, Reliance Industries, is planning to invest $200 million in a 6-MTPA plant in Venezuela.

However, further expansion of orimulsion has faced rough weather in Canada, with public sentiment strongly against the use of this fuel to rebuild the 1000-MW Colson Cove Station by New Brunswick Power. Elsewhere in Europe, it has been alleged that the powerful British coal lobby has advocated a European oil levy on orimulsion to hinder its market development.

Coal will continue to be the major competitor for orimulsion and it would be very difficult, if not impossible, for orimulsion to dislodge coal from its number one position or even supplement it. The factors that go in favor of coal are its widespread availability and mature mining and combustion technologies. The transportation of coal is more cumbersome, however, and this might work in favor of orimulsion in the longer run, especially on a case by case basis.

Perhaps a shot in the arm for orimulsion is the recent U.S Environment Protection Agency (EPA) study which concludes that with the installation of modern gas-cleaning equipment, the emissions performance of orimulsion use is better than that of the other black fossil fuels. Does this mean that orimulsion could be the fuel of choice in the huge US and North American markets? Maybe not.

North America and most of Europe would continue to shy away from orimulsion for some time for various political, economic and ecological reasons. Energy-starved Asia followed by Africa is likely to expand the use of orimulsion, while Latin America itself will probably wait for the US to take a lead. With an unfriendly regime in Venezuela and with huge stakes in the oil-rich Middle-East, it is highly unlikely that the US Government in general and the energy industry in particular will show any keenness to develop orimulsion.

The fact is that unless the US takes the initiative, it is highly improbable that orimulsion extraction and pollution control technologies will mature to the level of coal or oil. Hence, orimulsion is likely to have pockets of strong markets in China, followed by Japan, Denmark and India. However, it is highly unlikely that it will be able to emerge as a strong player in the international fossil fuel arena.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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