Cutuco Energy's dream of bringing natural gas to Central America by building an LNG regasification facility and combined-cycle power plant could begin to become reality later in March, according to a company executive.
Cutuco -- based in La Union, El Salvador, and with offices in Houston -- is bidding for two electricity-generation tenders, one in Guatemala, the other El Salvador.
If at least the El Salvador result favors Cutuco, a green light will be instantly switched on for construction of the two projects. Delivery of the power will be required within four years.
"That will be a comfortable time scale," Vahid Sadeghpour, Cutuco's commercial vice-president, said. "We reckon everything will be ready in 42 months."
In the Guatemala tender, Cutuco is offering 55 MW, with a decision expected on March 15.
In El Salvador, where the offer is 350 MW, the result of the tender is due March 19. The tender is being organized by the two distribution companies in El Salvador, one a subsidiary of Arlington, Virginia-based AES, the other EPM, the municipal utility of the Colombian city of Medellin.
"There are definitely some challenges with the El Salvador tender," says Sadeghpour. The capacity is fixed and the regulator is going to establish a ceiling price, or cap, and the cap will not be revealed until bids are opened.
If Cutuco wins both tenders, the demand total of 405 MW will fit comfortably within the projected 535 MW of its combined-cycle plant. "In the months and years to come, we will also be looking to sell to large industrial users in El Salvador and in the region," said Sadeghpour.
"But whether we get 350 MW or 405 MW from the tenders, we believe that will make this project financially viable," he added.
Both the El Salvador and Guatemalan tenders give the winners four years in which to bring the capacity online. And that should provide enough time for construction of both the power plant and regasification facility, Sadeghpour said. "We think it would take a maximum of 42 months," he added.
Sadeghpour said Cutuco has been in talks with almost all potential suppliers of LNG that would be a good fit for the project, though he was unable to elaborate for commercial reasons.
"We'll be needing about nine to 10 average-sized cargoes a year, and that should be easily handled by most companies," he said.
Cutuco is in many ways a very isolated project. Central America has no production of natural gas, nor does it have oil, except for a very small amount in Guatemala. Faced with oil import bills that weigh heavily on their relatively weak economies, Central American countries have been investing heavily in renewables.
But with electricity demand growing at about 5% a year, it is not realistic to depend entirely on renewables in the short to medium term of some 10-15 years, argued Sadeghpour.
Construction of hydroelectric plants in Central America is particularly challenging because of the social and environmental impact, he added. The El Chaparral 150-MW hydro plant in El Salvador for example remains unfinished after years of delays and budget overruns.
Natural gas is a clean and relatively economic solution that will bridge Central America's transition toward full use of renewables, Sadeghpour said.
"Once the Cutuco complex is completed it can form an anchor for a later growth of the sale of natural gas and the necessary infrastructure throughout the region," he said.
El Salvador is the key because it is the only country in Central America to have enacted, in 2008, a law to regulate natural gas. But if infrastructure and supplies can be developed from that base, there is major potential for natural gas in the region, added Sadeghpour.
"There are at least 4,000 MW of ... highly polluting bunker-fuel and diesel plants in Central America that could all be converted to natural gas," he said.
