Sinohydro to tap Venezuela coal, build power plant

OREANDA-NEWS. Venezuela's government is preparing to award Chinese state-owned Sinohydro a \$2bn engineering, procurement and construction contract for a 1,000MW coal power plant near low-ash coal deposits in the western state of Zulia.

Sinohydro would also secure a 30-year coal mining license to produce and export up to 36mn metric tonnes per year of coal, energy and mines ministry officials with knowledge of the project say. Negotiations with Sinohydro are taking place through the ministry and state-owned oil firm PdV, which was assigned sole responsibility to oversee the development of Venezuela's coal and gold reserves in 2011 by late President Hugo Chavez. The energy and mines ministries were grouped into a single entity in 2012 by presidential decree.

Venezuela has around 10bn t of proven coal reserves, and more than 90pc of these are in Zulia, according to the US Geological Survey.

PdV will oversee the power plant's construction while Corpoelec will operate the plant with Chinese technical support after it is commissioned in 2018-19.

Last month President Nicolas Maduro issued a decree granting the ministry "direct authority" to award coal exploration and production concessions for five areas in Zulia's Mara and Guajira municipalities covering more than 250km? (155mi2). The decree designates PdV subsidiary Carbozulia "to exercise whatever activities are required to carry out exploration and production."

Zulia has about 2,200MW of installed generating capacity, but consumption has averaged more than 2,600MW since 2009. This has meant Zulia is dependent on state-owned Corpoelec's deteriorated national transmission grid for electricity generated by the 10,000MW Guri (Simon Bolivar) hydroelectric plant on the lower Caroni River, which is over 780mi from the state capital Maracaibo.

Corpoelec rations electricity in Zulia for several hours a day. The proposed coal-fired plant would more than cover Zulia's electricity supply deficit of around 400MW, leaving a surplus that could either be held in reserve or exported to neighboring Colombia's Guajira region, according to state governor Francisco Arias Cardenas.

Sinohydro has been building thermal power plants on behalf of PdV since 2010, financed by almost \$50bn of oil-backed loans that China has provided to Venezuela and PdV since 2007. The company built the 382MW La Cabrera (Jose Felix Ribas) gas-fired plant that was commissioned in April 2014. The \$604mn facility lies on the northern shore of Lake Valencia in central Venezuela.

The Chinese company has a \$1.5bn contract with PdV to build a 772MW combined-cycle plant near its 140,000 b/d El Palito oil refinery and Corpoelec's 2,000MW Planta Centro thermal complex. PdV expects the gas and diesel plant to be commissioned next year. Sinohydro has another \$300mn contract to build a 100MW oil-fired plant at the future site of PdV's planned 100,000 b/d Battle of Santa Ines refinery in Barinas state.

Environmentalists say that the proposed open-pit coal mines in Zulia will destroy the Guasare and Socuy river basins, pollute the water supply and provoke clashes with indigenous groups.