How does a public tender work?
A public buyer publishes what it needs, companies submit sealed offers before a deadline, and the contract goes to the offer that best meets published criteria.
Did you know?
Short answers to the questions people are embarrassed to ask in a meeting. Written for readers who are new to these industries, with sources for every figure.
Tenders and contracts
What do EOI, RFQ, RFP and RFB mean in a tender notice?
They are four ways of asking the market for something. The label tells you how much work the offer will take and how the winner is chosen.
What is a bid security?
A bank guarantee that a bidder hands in with its offer. If the bidder wins and then walks away, the buyer keeps the money.
Energy
What is associated gas?
It is the natural gas that comes out of an oil well together with the crude. What the operator does with it decides whether it becomes revenue or smoke.
Why do oil fields burn gas they could sell?
Because moving gas needs pipelines or liquefaction plants, and many fields are too small or too remote to justify them.
What is a power purchase agreement?
A PPA is a long contract in which a buyer agrees to take electricity from a specific plant at an agreed price. Banks lend against it.
Why are there two oil prices, Brent and WTI?
They are two benchmark crudes. Brent comes from the North Sea and prices most seaborne oil. WTI is American and is delivered inland at Cushing, Oklahoma.
What is LNG and why does it need such expensive plants?
Liquefied natural gas is gas cooled to about minus 162 °C so it shrinks roughly 600 times and fits on a ship.
What is the difference between a megawatt and a megawatt-hour?
A megawatt measures how fast electricity flows at one moment. A megawatt-hour measures how much was delivered over time.
What is a BESS and why are grid operators buying so many?
A battery energy storage system is a field of shipping-container batteries wired to the grid. It absorbs power when there is too much and returns it when there is too little.
What is a take-or-pay contract?
A deal in which the buyer pays for a minimum volume every year, whether it collects the product or not.
Why do factories build their own power plants?
Because an hour without electricity can cost more than a year of fuel. When the grid is unreliable or expensive, industry generates on site.
Mining
Why does every energy forecast end up talking about copper?
Copper carries electricity better than any metal except silver, so electric cars, grids and wind farms all need more of it. New mines take well over a decade to open.
Where does lithium come from?
From two very different sources: salty water under South American salt flats, and a hard mineral called spodumene mined mostly in Australia.
What is a royalty in mining and oil?
A payment to the owner of the resource, usually the state, for every tonne or barrel taken out of the ground. It is owed even when the project makes no profit.
Infrastructure
What is the difference between a concession and a PPP?
A public-private partnership is any long contract in which a private company delivers public infrastructure. A concession is the kind where the company is paid by users and carries the risk that too few of them show up.
What is an EPC contract?
Engineering, procurement and construction under one contractor and one price. The owner receives a finished plant and one party to hold responsible.
Technology
What is SCADA and why is it a security problem?
SCADA is the software that lets operators watch and control pipelines, power grids and water plants from a control room. Much of it was designed before anyone expected it to touch the internet.
What is PUE and why do data centre operators quote it?
Power usage effectiveness is total electricity used by a data centre divided by the electricity that reaches the computers. The closer to 1.0, the less is spent on cooling and losses.
Money and risk
What is the difference between CAPEX and OPEX?
CAPEX is what you spend to build or buy an asset. OPEX is what you spend to keep it running. The split shapes how a project gets financed.
What does a country's risk number mean?
It is the extra interest investors demand to hold that country's dollar bonds instead of US Treasuries. The usual gauge is J.P. Morgan's EMBI spread.
What is a basis point?
One hundredth of one percent. Finance uses it so that nobody has to ask whether a 1% rise means from 5% to 6% or from 5% to 5.05%.
What does it mean when a project reaches FID?
FID, final investment decision, is the moment a company's board commits the money to build. Before it, a project is a plan. After it, contracts get signed.