After opening the first pre-salt gas-fired plant, Arke Energia looks to expand

Formed by the Pátria Investimentos fund, Shell and Mitsubishi Power, the Arke Energia joint venture opened the Marlim Azul thermoelectric plant in Macaé, in Rio de Janeiro state, on Wednesday. 

With capacity of 565MW and requiring initial investment of US$500mn, the plant is the first to generate electricity from Brazil’s pre-salt natural gas. 

Winner of an auction (A-6) held by electric power watchdog Aneel in 2017, the plant will sell energy to 25 distributors in 22 states and, through a PPA, to Shell Energy Brasil. 

In this interview, the CEO of Arke/Marlim Azul, Bruno Chevalier, says the group is already thinking about expanding the plant and taking part in new auctions.

BNamericas: Is Marlim Azul 100% operational? Is the contract already in force?

Chevalier: The 2017 contract provides for the start of operations in January 2023. We submitted a request to Aneel stating that we’d been affected by the Covid pandemic for six months. But this request was made in 2021, and we needed to supplement it, because the effects [of the pandemic] had not passed. In other words, the first half of the year was forgiven, but we asked Aneel for more time, and this is being analyzed. 

In the meantime, we’re buying energy and delivering it. We’re fulfilling our contractual obligation, while we’re asking for an exclusion of liability, due to a force majeure event.

BNamericas: Are you asking for compensation for the energy you’re buying?

Chevalier: The PLD [the main reference price on the free market] is at the floor, so this hasn't affected us. The point is that we're paying a monthly rate for the use of the transmission system [TUST], but we're not using it. Therefore, a favorable decision [by Aneel] would give us credit on the transmission rate.

As far as construction is concerned, 99.9% of the work has been completed. The plant is operating at full load. But commercial operations should begin in the coming week.

BNamericas: How will energy be sold on the free market? Has the plant signed PPAs?

Chevalier: We sold 440MW in the 2017 A-6 auction and we sold Shell a 50MW PPA. So I have to serve these two customers [in the regulated and free markets]: the 25 distributors with whom we have signed contracts in 22 Brazilian states and Shell. 

The plant's total capacity is 565MW, but there is internal consumption, transmission losses, among other factors. Even so, there’s still a delta [the difference between the plant's total capacity and the energy sold] in our favor which, for the time being, will be settled by the [electricity trading chamber] CCEE. We're going to let the plant perform steadily in order to better understand this delta and then, eventually, we can be more commercially aggressive and look for other clients. 

EDF will operate the plant for us. It operates the Norte Fluminense [thermoelectric plant], also in Macaé. We want them to repeat the good work they do there.

The Marlim Azul thermoelectric plant in Rio de Janeiro state

BNamericas: Does all the gas consumed by Marlim Azul come from the pre-salt? How does it get to the thermoelectric plant?

Chevalier: It's gas from Shell, which is Petrobras' partner [in the pre-salt layer]. This gas is transported to Tecab [Cabiúnas terminal, in Macaé], where it’s treated. 

Shell decided to take part of the gas, up to 2.5Mm3/d, and send it to Marlim Azul. So we built a 20km pipeline from Tecab to the plant.  

Now, with the geopolitical issues, LNG has risen in price a lot, and gas is expensive. So selling to industry is good business. The flow from the pre-salt is constant, and a large plant like Marlim Azul, with constant consumption, provides an outlet for the gas.

Our concept is to have a lot of dispatch and an affordable energy price. 

The inflexibility [uninterrupted operation] established [in the Aneel auction] was 50%, the maximum allowed. That's between November and April [the wet season]. In the dry season, we’ll certainly be called upon to operate. So, in practice, I'll be generating all year round.

BNamericas: Could the plant be expanded? Is the group considering building other plants in the country?

Chevalier: When we conceived the project, we thought that since Shell has the supply capacity for another plant, we could build two plants side by side, on the same plot of land. That's why we built a transmission line with the second plant in mind, a gas pipeline with double the capacity and an expanded water pipeline. 

Our land has already been leveled. All we have to do is lay the power line and connect everything. The question is the availability of gas. I'd like to secure the gas and go to auction. But this is still being worked on. 

Speaking as Pátria Investimentos, we like to invest in infrastructure, power generation plants, not only in Brazil but also abroad. We’re interested in gas-fired plants, which is the transition fuel.

[Editor’s note: Chevalier is a partner of Pátria Investimentos.] 

BNamericas: This year's capacity auctions have been postponed. Do you believe it's possible that they will take place in 2024?

Chevalier: I believe that this postponement is aimed at improving the coordination of planning in the sector, which is positive. I don't see any harm being done. I believe they will take place next year.