How do you solve a problem like M?

This summer, the Saturday night UK television ratings war turned out to be a tussle between two talent shows – X Factor and How Do You Solve a Problem Like Maria? The latter involved the search for a performer to take on the starring role in the forthcoming West End production of The Sound of Music being produced by Lord Andrew Lloyd Webber.

Such was the enthusiasm for the show that on the final Saturday some two million telephone votes were cast – approximately 1 in 30 of the entire UK population. The winner beat off competition from around 6000 other hopefuls and, in doing so, solved his Lordship’s problem.

To have such a choice is indeed a luxury, as the Dubai Electricity & Water Authority (DEWA) has discovered. Not that DEWA would have expected quite such a wealth of alternatives following the tender process for EPC contractors to build its latest power and water plant – the Jebel Ali M Station. But it might have expected more offers than it got. In the event, only Doosan bid for both the 2000 MW power and 397.5 million litres a day desalination elements, with Italy’s Fisia Italimpianti being the sole candidate for the desalination package alone.

Dubai’s tendering rules stipulate a minimum number of bidders for each project. Since this was not met, the project has had to be re-bid with contractors invited to submit proposals by 5 December.

The delay is a potential setback for DEWA, which was looking to proceed quickly with its biggest power and water project to date, so as to meet the demand emanating from Dubai’s staggering construction boom. Demand for electricity in the Emirate is growing at 15 per cent a year. By 2010, demand will have risen by 60 per cent, according to a recent forecast by Emirates Industrial Bank, with over 8000 MW of installed capacity likely to be needed. Local reports have quoted a top official saying that DEWA expects daily water demand to reach 1550 million litres per day by 2011.

At this stage there is no plan to alter the project schedule, under which the M Station will be commissioned in phases starting in May 2009. However, this timetable could be in jeopardy if the second bidding process is not successful.

Given the number of new power and water projects being undertaken in the Middle East it is perhaps no wonder that DEWA has struggled to attract competition for this project. Industry insiders put the blame on a combination of the tough terms and conditions of the deal and the limited local resources to undertake such a huge project. Some other projects in the region have experienced similar problems. Kuwait’s 2500 MW Al-Zour North now looks unlikely to proceed after only one bid was received. While IWPP projects in the region seemed to have faired better than those on an EPC basis, there seems little doubt that the huge size of the project is a real issue. The size certainly rules out all of the smaller contractors and the larger ones have plenty of other options open to them at present. The market for suitable gas turbines is also concentrated with few manufacturers having proven experience in a comparable environment.

Jebel Ali M is being re-bid under the original terms and conditions, but following a meeting between DEWA senior management and prospective bidders, it is strongly rumoured that an addendum will be issued scaling back the project and/or implementing it in phases, in order to minimize the financial risk and increase competition. Even with these changes, a senior representative of one major EPC contractor has told me they will not be bidding and that DEWA should be content if it gets two or three tenders.

So, the best of luck to DEWA in getting this vital project off the ground and to Connie in her role as the new Maria von Trapp. Until the next edition of Middle East Energy, I’ll say “So Long, Farewell.”

Nigel Blackaby, Acting Editor

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