This year’s POWER-GEN Middle East in Abu Dhabi confirmed that the region is continuing to make great strides in the development of its power sector. As expected, the focus was on the region’s needs in terms of capacity, how development would be funded, and what form new capacity might take.
GCC countries will need to add 25 GW to the current 60 GW by 2010. Hajir Naghdy, managing director of the Abu Dhabi Commercial Bank (ADCB) in the UAE said: “$30-$35 billion will be needed to build new capacity in the GCC by 2010. This will result in private ownership increasing to 25 per cent from 11 per cent.”
There is already plenty of evidence of this taking place. On the sidelines of the conference, Adwea announced that within the next month it would sign the power and water purchase agreement with Singapore’s Sembcorp Utilities for the Fujairah IWPP project. Sembcorp’s bid of $1.343 billion beat three other international bidders for Fujairah, the sixth plant to be privatized by Adwea. Under the deal, Sembcorp will take over the existing plant and add 225 MW. The estimated cost of the takeover and the addition is put at around $1.9 billion.
Speaking on Saudi Arabia’s private power achievements, Omar Alghamdi, president, Water & Electricity LLC, Saudi Arabia, noted: “Shuaibah III is the largest oil fired IWPP plant in the world. It also sets a record for debt tenor in Saudi. Nobody questioned the evaluation process. This proved we met international standards. Other projects are coming. The request for proposal for the 850 MW/212 000 m3 water/day Suqaiq crude oil fired IWPP was issued at the end of December 2005. Raz Azzour will be a 2500 MW/800 000 m3/day gas fired project.”
Outside of the Gulf, Iran may have a difficult time ahead as negotiations continue over its nuclear programme. Nevertheless, the opportunities there are tremendous. Its power needs in the next five years are similar to the GCC countries combined. Official estimates for demand growth are around 7.5 per cent but the actual growth according to Mapna is nearer 10 per cent. Under the Fifth Five Year Development Plan (2006-2010) it is expected that 20 GW will be added. Khalil Behbahani, vice president IPP Projects, Mapna, commented: “The doors are open for the private sector since the public sector cannot cope. In Iran there is an ECA (Energy Conversion Agreement) as opposed to a PPA where fuel is supplied free of charge by the offtaker. There is also a good security package including a take or pay clause which represents about 90 per cent of the tariff. There is a payment guarantee from the Ministry of Finance, which will pay if the offtaker cannot. The Foreign Protection Promotion Act also provides protection against political risk.”
Further afield, Mena (Middle East and North Africa) countries are rethinking their fuel mix. Before the early 1990s, 60 per cent of power generation came from oil fired plant. Today, around 55 per cent comes from gas. In some countries like the UAE and Qatar, it is nearly 100 per cent. Leila Benali, Middle East Associate, Cambridge Energy Research Associates, noted: “This trend is expected to continue except in countries that lack a gas infrastructure. The decision on whether to use oil or gas depends on the country’s [fuel] export strategy. When oil prices are high, governments are subsidizing prices to generators. They are also losing the opportunity to export.”
Dependence on gas will depend on the country’s gas export strategy as well as how fast the country is seeking to industrialize. The UAE looks set to continue on its current course. Dolphin Energy recently announced that it planned to refinance $3.45 billion of bridging loans by October this year. In July last year, Dolphin closed a $3.45 billion, four-year bridge financing agreement to cover the construction costs of the project which is scheduled for completion this year. The project involves developing natural gas reserves in Qatar, processing it onshore and transporting it by pipeline to the UAE.
While Middle East countries are not yet signatories to the Kyoto Protocol, environmental considerations may further increase the use of gas and even lead to the adoption of low to zero carbon emitting technologies. In her analysis of fuel trends Benali added: “In future, there will be environmental controls which will add to the capital cost of oil fired plant. This will also impact fuel choice.”
Some Mena countries are already looking at ways to reduce carbon dioxide emissions and both wind and Clean Development Mechanism projects will both play significant roles. There seems to be no stopping the rapid pace of development. The region is truly a land of plenty.
Publisher & Editorial Director