GCC’s power plans steps up a gear

Unprecedented economic and population growth in the GCC is putting a massive strain on the power infrastructure necessitating every government to take rapid action. MEE looks at the ambitious plans that are underway.

Unprecedented economic and population growth in the Gulf Cooperation Council (GCC), which comprises Bahrain, Kuwait, Qatar, Oman, Saudi Arabia, and the United Arab Emirates (UAE), is creating a massive strain on the power infrastructure necessitating every government to take rapid action. The GCC has an installed power capacity of 75 000 MW, but with demand growing annually at a rate of 9.5 per cent, more than 55 000 MW of additional power will be required by 2015 requiring an outlay of close to $80 billion.

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With the pace of investment not having fully kept up with demand in the first half of this decade, the reserve capacity has fallen significantly across the GCC. Aggressive plans are now underway, but they have not been without problems ” hampered by the shortage of contracting resources, increased commodity prices and, more importantly, allocation of fuel gas. The global financial meltdown is also expected to put a severe strain on some of the ambitious plans in the planning and design stage, and more so in the private power space.

Adding generation capacity

With almost 17 000 MW of projects to come online by 2011, Saudi Arabia, by far the largest GCC member, is projected to spend around $30 billion in the financing of projects to increase the productive capacity of existing power plants and the setting up of new power projects, thus boosting the total energy output. With a population close to 25 million, Saudi Arabia has the highest per capita consumption of power in the GCC and hence development of its power sector is pivotal to the Kingdom’s continued economic growth. The plan to overhaul and privatize Saudi Arabia’s power sector could be approved by the Supreme Economic Council either by the end of this year or in early 2009. Approval would mean splitting the power generation assets of Saudi Electricity Company (SEC) into four separate units before eventual privatization.

The SEC, which is government owned, would be transformed into a holding company for the four units and most likely retain ownership of at least one of the companies and the transmission assets after privatization. The restructuring would unbundle generation and transmission assets, and a new company would be formed to run Saudi Arabia’s power transmission grid. Unbundling would be followed by the introduction of competition in the wholesale sector, and later in the retail sector.

The unprecedented rate of growth of the UAE’s economy, supported by population growth, new residential and commercial buildings, and the new businesses, has meant the support infrastructure for power has had to grow in tandem with the rest of the economy. In the UAE, almost 15 000 MW of power will be commissioned by 2013, with another 16 000 MW in various stages of planning and bidding.

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Dubai alone will account for more than 50 per cent of new capacity and will have to boost its power generating capacity to 9500 MW by 2010. It continues to invest heavily to generate additional power to match demand.

Under the agreement signed between Abu Dhabi and the northern emirates, Abu Dhabi will supply the five northern emirates with up to 2500 MW of power for the next seven years. The northern emirates, comprising Ajman, Fujairah, Ras al-Khaimah, Sharjah and Umm al-Quwain, generate around 1300 MW of power currently, but demand is growing at almost 20 per cent.

Kuwait’s power problems are exacerbated during the peak summer months when consumption is at its peak. New housing plans are also putting pressure on the power grid. Kuwait will pump around $4.6 billion into building 5000 MW of additional electricity production.

To support the new power generation, Kuwait is in need of gas. Talks are currently underway with Qatar and a liquefied natural gas import facility will be commissioned by mid 2009 to facilitate receipt of this gas.

Though privatization plans are yet to make much headway, the government has introduced major changes by relaxing its rigid tender rules, which has encouraged increased participation. Qatar will spend around $3 billion on raising power production by over 3000 MW.

To support the strong economic development, Oman will require up to 3000 MWof new power generation capacity by 2014. Peak demand in its main interconnected system ” governorates of Muscat and Buraimi and most of the South Batinah, Sharqiya, North Batinah and Dhariha regions ” is expected to double to over 5000 MW in 2014, an increase of ten per cent a year. In Salalah and Dhofar, peak demand is forecast to grow to 600 MW for the same period.

In 2007 Bahrain achieved the commissioning of its first private power project, Al Ezzel. The project, which was constructed in two phases, kept to schedule and looks set to encourage the country to open its power sector to further private investment. This will add 4000 MW to the grid by 2013.

The demand for power is expected to grow at an annual rate of 6.5 per cent, with total demand anticipated to reach over 2600 MW in 2012.

Alternative energy sources to gas

Current gas feedstock arrangements are unlikely to keep pace with the power demand growth, posing a significant challenge for regional utilities. Fuel supply and resulting power shortages are the single largest risk to the economic growth of the region. To combat the issue facing the power market of viable gas allocations, the utility companies are looking at alternative energy production, such as coal, nuclear and solar-based energy.

In July this year, Mining Corporation Berhad (MMC) of Malaysia signed a $2 billion contract to build the region’s first coal fired power station in northern emirate of Ajman. Dubai is progressing with its plan for a 2500 MW coal plant, while Abu Dhabi also contemplating establishing a coal fired plant. The Oman Power & Water Procurement Company initiated a feasibility study for a coal fired power and desalination plant to be located at either Barka or Sohar and operational by 2011.

It will have capacity of 700 MW of power and 26 millions of imperial gallons per day of potable water.

The move is driven by fears over gas shortages. If all of its power were to be fuelled by gas, Oman would need more than 7000 million m3 of gas annually by 2013. However given the delays associated with coal, it is learnt that the fuel will be gas to meet the schedule.

The UAE’s Emirates Nuclear Energy Corporation (Enec), which was set up earlier this year to oversee the country’s nuclear programme, has made progress by appointing a consultant for the programme management services. The plant location, number and size of the plants are still under study and will most probably be located in Fujairah.

Under the solar power initiative, progress is being made on the 100 MW Shams 1 plant in Abu Dhabi under the initiative of Masdar. This will be the largest solar plant in the world.

Qatar is also considering building a 3500 MW solar power complex. Studies are expected to be underway in 2009 both in Dubai and Kuwait for a solar plant. Dubai is also studying the feasibility of generating power from wind energy.

T&D expansion

Saudi Arabia has a massive $20 billion worth of projects that represents almost 50 per cent of the total investment planned in the GCC, for improving and expanding its transmission network by the end of 2014.These projects are currently at various stages ” execution, design and planning. Next on the list is Qatar with close to $9 billion to be spent under the phase VII, VIII and IX power transmission programme followed by UAE at $5 billion with Kuwait, Oman and Bahrain collectively likely to invest close to $2.5 billion.

The $1.2 billion GCC Power Grid linking the six GCC countries with an integrated electricity grid by 2010 is expected to give a fillip to the power scenario, even as the six nations pump in major investments into the expansion of the national and regional power grids.

The UAE and Oman have completed the integration of their own networks and the remaining two phases are due to be completed by 2010.

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By 2028 it is expected that the GCC Power Grid will save billions by sharing generation reserves between the linked GCC countries thus allowing the reduction of the reserves by 50 per cent of an isolated system, and thus avoiding the cost of constructing new generation plants to meet growing population demands.

The first phase is on schedule to be completed by first quarter of 2009. The second phase, which consists of integrating the independent power systems in UAE and Oman and connecting the two countries, is already complete. The third phase, which will connect Phase 1 with Phase 2 is expected to be completed in 2010.

The project will pave the way for bigger projects such as the $8 billion Saudi Egypt (Red Sea) Power Interconnection linking the GCC and other Arab nations. MEE

Emil Rademeyer, Proleads, Dubai, UAE

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