Dear Energy Professional, Dear Colleagues,
In May 1996, a leading US boiler manufacturing company decided to send a marketing team to Dhahran Saudi Aramco facilities to make presentations of their new product “heat recovery steam generators” to upgrade the existing simple cycle gas turbine based power stations in Saudi Arabia.
Mr. Prahlad Kaushik was responsible to make the presentations in Saudi Aramco Dhahran premises, Sales Manager from Babcock & Wilcox International Inc of Barberton, Ohio USA. Since we were the B&W’s closest JV Company to the Saudi Aramco site, I was also asked to join the mission to support at site and get ready for necessary proposal preparation if/when needed in future.
Saudi Aramco, the state-owned national oil company of Saudi Arabia, was/still is the largest oil corporation in the world and the world's largest in terms of proven crude oil reserves and production. Headquartered in Dhahran, Saudi Arabia, Saudi Aramco also operates the world's largest single hydrocarbon network, the Master Gas System. It was formerly known as just Aramco, an acronym for Arabian American Oil Company.
In 1973 the Saudi Arabian government acquired a 25% share of Aramco, increased this to 60% by 1974 and finally acquired full control of Aramco by 1980. In November 1988 the company changed its name from Arabian American Oil Company to Saudi Arabian Oil Company (or Saudi Aramco).
Saudi Aramco produces and exports more crude oil than any other company. Recent production has averaged some 8 million barrels (1,300,000 m³) per day.
I took the non-stop overnight flight by Singapore Airlines from Istanbul to Dhahran. Flight was very comfortable. I recall zero-size beautiful Singaporean hostesses serving the meal.
We landed to Dhahran International airport after 4 hours of flight in their morning time. At the Dhahran customs clearance, the customs officer asked me to open my luggage and he inspected every written item, especially the written documents/ books/ magazines. Since I brought only company documentations, all business, harmless, it was relatively easy for me to pass the inspections. I remember the other passengers to leave all their magazines, books and newspapers at the gate to pass the customs.
At the arrival gate, our local rep was waiting for me. He took me to the special compound where we would be staying that week. The compound was operated by a Muslim Indian family. It was a family run enterprise. We had delicious Indian food open buffet service. It was a popular lodge for expatriates staying in Dhahran for short term.
Each one of us had a big private house with full accessories, air-conditioned, refrigerator, satellite TV etc. We had an open-air swimming pool nearby but we had no appetite to swim due to high heat during day time.
My business associate arrived on the same day from USA. We took a taxi that evening and went to a nearby rent-a-car company. It was also operated by another Muslim Indian brothers. We had a brand new car with air condition. Since my business associate had broad business experience in this environment, he immediately drove the car to a service station, and asked them to check the car/its engine/ tires etc. Although car was clean, it had low oil in engine and brakes, and tires were seriously worn-out. So the Indian mechanic completed the oil and advised us to be careful in driving especially in braking.
The next day we arrived to the head quarters of Saudi Aramco on outskirts of Dhahran. It was a huge establishment.
I recall a digital sign “110” at the main gate. In our air-conditioned car interior, it was quite hot inside. But when I realized that “110” number means Fahrenheit, that was an incredible heat outside (43 degrees Celsius). It was even unbearable to walk from car parking lot to the head office interior, almost 100 meters walk.
To my surprise, it was similar to a small Texas City, expatriate office ladies were in light summer dresses, managers were with business suits. Indoors were all air-conditioned.
From its headquarters in Dhahran on the eastern shores of the Arabian Peninsula, Saudi Aramco manages virtually all of Saudi Arabia's enormous hydrocarbon enterprise.
We were invited into a large conference room. Almost 30 or more all male Aramco engineers were invited to join our presentation. They were all fluent in English; most of them were graduates of leading US universities, very competent in their professions.
We were also very experienced in our supply, steam generators world wide applications.
In our presentation my colleague explained the virtues of combined cycle power plants. The power house in Dhahran was equipped with undisclosed number of GE frame gas turbines all operated in simple cycle mode.
We were explaining them that if they would put heat recovery steam generators at gas turbine exit, generate steam and steam turbines to couple with the existing gas turbines, they would be generating almost 50% more of existing power generation free of charge.
All they should be doing was to invest some more money to buy and install the new heat recovery steam generators and steam turbines. We call that system “combined cycle power plant.”
We were selling heat recovery steam generators. That was a new concept at that time, and a few special companies were manufacturing. We were expecting to receive a big order from our hosts.
In order to prove our marketing product we explained every detail of our equipment, showed our references. Our audience listened to our presentation and they asked many intelligent questions. In order to prove our point, we also prepared a feasibility study earlier. On the projector we showed them a Lotus 1-2-3 spreadsheet and asked our audience to give us their natural gas price in consumption.
In our market gas price is specified as USD per 1000 Nm3 or 1000 Normal ft3. That is also given as maybe 4-6 US Dollar per 1 million BTU. Due to ever increasing oil prices in the world, these prices are now almost tripled or more now.
Anyhow we were expecting that we could show them a payback period less than 3 years. In our own environment, conversion from simple cycle to combined cycle pays back within 6 months. That was so feasible.
Our audience had an internal conversation for declaring their natural gas price. Their response was very surprising for us at that time. They had no price for their gas, maybe a number but so negligible in their accounting books. Gas was almost free of charge. They were paying almost nothing, or a negligible figure for their gas production/ and its consumption. Their gas production facilities were next to giant oil fields and natural gas was a byproduct of their major oil production.
So there was no need for a combined cycle power plant. All they need to do was to run the existing gas turbines in simple cycle mode.
Later in the day, we had lunch together in their company restaurant and evaluated the current world business affairs. So in the end, our marketing was a failure.
The next day we returned to our countries with no market expectation of our heat recovery steam generation products in near future from gas producer countries. You have no chance to sell a design where you do not create a demand. Gas was free of charge and there was neither gain in money invested nor any payback in Dhahran.
Today we have more reasoning for introducing combined cycle power plants. We now know that simple cycle gas firing power plants add more heat into global warming compared to combined cycle systems since their exit gas temperature is between 400-500 Celsius or more, whereby the exist gas temperature is expected to be less than 150 degrees Celsius in combined cycle power plants. The annual CO2 emission is quite high in the oil producing countries, compared to world average.
Measures to lower global warming and more ratifications of Kyoto protocol may create new opportunities to introduce new technology products into new markets.
However HRSGs alone are not a solution to CO2 emission. It generates more power free-of-charge, with some initial cost. It is only feasible if you pay a high cost for your gas, as in the case of our local market, and if you pay a high penalty for each ton of your CO2 emissions.
Your comments are always welcome.