Hill Publishing Group | contact@hillpublisher.com

Hill Publishing Group

Location:Home / Journals / Journal of Electrical Power & Energy Systems /


Combined Heat and Power Plant Installation at Oil and Gas Fields: Is It Cost-Effective?

Date: May 11,2021 |Hits: 1065 Download PDF How to cite this paper

Zorana Božić1,*, Veselin Perović1, Branislav Nerandžić1, Slavka Nikolić1, Nikolaos Koltsaklis2, Nebojša Vojvodić3

1Department of Industrial Engineering and Management, University of Novi Sad, Faculty of Technical Sciences, Novi Sad, Serbia. 

2Department of Electrical and Computer Engineering, University of Western Macedonia, 50100 Kozani, Greece. 

3NIS j.s.c Novi Sad, Novi Sad, Serbia.

*Corresponding author: Zorana Božić


The paper presents an economic feasibility analysis applied to assess the cost effectiveness of implementing a combined heat and power system at oil and gas fields. The purpose of this paper is to present a generic methodological framework by calculating return on investments in order to investigate the economic benefit and a payback period at the plants installed capacity. The findings of this analysis demonstrate that the mode of operation with sale of electricity at feed-in tariff and supply of excess heat to third parties is the most cost-effective because of its shortest payback period of 2.80 years. However, mode of operation with sale of electricity at free market and using heat for own consumption is the least economical, with payback period of 20.84 years. The paper provides important insights into strategic long-term and challenging decisions made by investors highlighting potential risks and providing the roadmap and appropriate price signals on critical energy projects under market conditions.


[1] T. Lieuwen, V. Yang, and R. Yetter. (2010). Synthesis gas combustion: Fundamentals and Applications, United States, Taylor & Francis Group, CRC Press, 2010.

[2] CHP unit installation project, equipment specification,—technical documentation. Internal company report, pp. 1-23, 2015.

[3] Serbian Ministry of Energy, Development and Environmental Protection. Republic of Serbia: Decree on Incentives for Privileged Power Producers, Official gazette RS, No 8. Belgrade, 2013.

[4] D. D. Gvozdenacand T. S. Simić. (2012). “About the Serbian energy efficiency problems”, Thermal Science, vol. 9 (suppl. 1), pp. 1-5, 2012, doi: http://dx.doi.org/10.2298/TSCI120205056G.

[5] B. Stojčetović, Dj. Nikolić, V. Velinov, and D. Bogdanović. (2016). “Application of integrated strengths, weaknesses, opportu-nities, and threats and analytic hierarchy process methodology to renewable energy project selection in Serbia”, Journal of Re-newable and Sustainable Energy, vol. 8, no. 035906, 2016, doi: http://dx.doi.org/10.1063/1.4950950.

[6] V. Rajović, F. Kiss, N. Maravić, and O. Bera. (2016). “Environmental flows and life cycle assessment of associated petroleum gas utilization via combined heat and power plants and heat boilers at oil fields”, Energy Conversion and Management, vol. 118, pp. 96-104, 2016, doi: http://dx.doi.org/10.1016/j.enconman.2016.03.084.

[7] A. Colmenar-Santos, E. Rosales-Asensio, D. Borge-Diez, and J. J. Blanes-Peiro. (2016). “District heating and cogeneration in the EU-28: Current situation, potential and proposed energy strategy for its generalisation”, Renewable and Sustainable Energy Reviews, vol. 62, pp. 621-639, 2016, doi: http://dx.doi.org/10.1016/j.rser.2016.05.004.

[8] J. Y. Kang, D. W. Kang, T. S. Kim, and K. B. Hur. (2014). “Economic evaluation of biogas and natural gas co-firing in gas turbine combined heat and power systems”, Applied Thermal Engineering, vol. 70, no. 1, pp. 723-731, 2014, doi: 10.1016/j.applthermaleng.2014.05.085.

[9] H. R. Sadeghian and M. M. Ardehali. (2016). “A novel approach for optimal economic dispatch scheduling of integrated com-bined heat and power systems for maximum economic profit and minimum environmental emissions based on Benders de-composition”, Energy, vol. 102, pp. 10-23, 2016, doi: http://dx.doi.org/10.1016/j.energy.2016.02.044.

[10] R. E. Klaassen and M. K. Patel. (2013). “District heating in the Netherlands today: A techno-economic assessment for NGCC-CHP (Natural Gas Combined Cycle combined heat and power)”, Energy, vol. 54, pp. 63-73, 2013, doi: http://dx.doi.org/10.1016/j.energy.2013.02.034.

[11] J. L. Mojica, D. Patersen, B. Hansen, K. M. Powell, and J. D. Hedengren. (2017). “Optimal combined long-term facility design and short-term operational strategy for CHP capacity investments”, Energy, vol. 118, pp. 97-115, 2017, doi: http://dx.doi.org/10.1016/j.energy.2016.12.009.

[12] K. Amirnekooei, M. M. Ardehali, and A. Sadri. (2017). “Optimal energy pricing for integrated natural gas and electric power network with considerations for techno-economic constraints”, Energy, vol. 123, pp. 693-709, 2017, doi: 10.1016/j.energy.2017.01.145.

[13] N. E. Koltsaklis, G. M. Kopanos, and M. C. Georgiadis. (2014). “Design and Operational Planning of Energy Networks Based on Combined Heat and Power Units”, Industrial & Engineering Chemistry Research, vol. 53, no. 44, pp. 16905-16923, 2014, doi: http://dx.doi.org/10.1021/ie404165c.

[14] Serbian Ministry of Energy, Development and Environmental Protection, Republic of Serbia: Decree on Incentives for Production of Electricity from Renewable Energy Sources and High-efficiency Combined Production of Electricity and Thermal Energy. Official gazette RS 56, 2016, Belgrade.

[15] M. Jansen. (1986). “Agency costs of free cash flow, corporate finance, and takeovers”, The American Economic Review, Vol. 76, No. 2, pp. 323-329, 1986.

[16] R. E. Shrieves and J. M. Wachowicz. (2001). “Free cash flow (FCF), economic value added (EVA™), and net present value (NPV): A reconciliation of variations of discounted-cash-flow (DCF) valuation”, The Engineering Economist, vol. 46, no. 1, pp. 33-52, 2001, doi: http://dx.doi.org/10.1080/00137910108967561.

[17] S. G. Bennet. (1991). The quest for value: The EVA management guide, New York, Harper Business, 1991.

[18] C. T. Tsao. (2012). “Fuzzy net present values for capital investments in an uncertain environment”, Computers & Operations Research, vol. 39, no. 8, pp. 1885-1892, 2012, doi: https://doi.org/10.1016/j.cor.2011.07.015.

[19] M. Ehrhardt and E. Brigham. (2011). Financial Management: Theory and Practice, United States of America: South-Western Cengage Learning, 2011.

[20] S. D. Promislow and D. Spring. (1996). “Postulates for the internal rate of return of an investment project”, Journal of Mathe-matical Economics, vol. 26, no. 3, pp. 325-361, 1996, doi: http://dx.doi.org/10.1016/0304-4068(95)00747-4.

[21] R. I. Reul. (1957). “Profitability index for investments”, Harvard Business Review, vol. 35, no. 4, pp. 116-132, 1957.

[22] SEEPEX—Serbian power exchange, Day-ahead electricity price, [Online]. Available: http://seepex-spot.rs/sr/download/Activity%20Reports. [Accessed: 04-February-2020].

[23] Srbijagas. Price of the gas, Available: http://www.srbijagas.co.rs/naslovna.1.html. [Accessed 10.03.17].

How to cite this paper

Combined Heat and Power Plant Installation at Oil and Gas Fields: Is It Cost-Effective?

How to cite this paper: Zorana Božić, Veselin Perović, Branislav Nerandžić, Slavka Nikolić, Nikolaos Koltsaklis, Nebojša Vojvodić. (2021) Combined Heat and Power Plant Installation at Oil and Gas Fields: Is It Cost-Effective? Journal of Electrical Power & Energy Systems5(1), 33-45.

DOI: http://dx.doi.org/10.26855/jepes.2021.05.001

Volumes & Issues

Free HPG Newsletters

Add your e-mail address to receive free newsletters from Hill Publishing Group.

Contact us

Hill Publishing Group

8825 53rd Ave

Elmhurst, NY 11373, USA

E-mail: contact@hillpublisher.com

Copyright © 2019 Hill Publishing Group Inc. All Rights Reserved.