So often we hear the phrase “it’s a global economy”. Yet every day the statement becomes truer. The power business is no exception to the trend. The boundaries that once existed between power markets are fast disappearing, especially in Europe, and it may not be long before we see a similar scenario in the Middle East.

In June it was announced that the final batch of contracts being tendered as part of the GCC grid interconnection project had attracted 14 bidders. As we went to print, the opening of the bids was imminent. In this first phase of the project, four lots for overhead line work were being tendered in the last of five packages to be tendered by the GCC Interconnection Authority (GCIA).

The GCC interconnection project will connect the six Gulf States – Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. Phase One of the project involves the AC interconnection of Kuwait, Bahrain and Qatar and a back-to-back HVDC interconnection with Saudi Arabia. Phase Two will involve the integration of the independent power systems of the UAE and Oman. The implementation of Phase Three is conditional on the internal integration of the networks in the UAE and would complete the interconnection of the GCC North and South grids.

The grid has been designed so that the capacity of every interconnection is based on the assumption that each system could import up to 50 per cent of the capacity of the largest plant in each country, but not more than 30 per cent of the peak demand in the year when the project is completed i.e. 2010.

The GCC countries, like Europe, can clearly see the benefits of an interconnected system i.e. improved system security and the elimination of building excessive generating capacity. The completion of this grid will be an important piece in what is becoming an ever-growing jigsaw puzzle of intercontinental energy systems.

There is continuing work to close what is called the Mediterranean Ring (see pages 9 and 11). This will allow power to move freely between Europe and the Maghreb countries. For electricity trading between Maghreb countries and Europe, reciprocity in market rules will be necessary. With this aim, a regional electricity market will be implemented in the Maghreb countries with the support of the EU.

Looking further into the future, it will only be a matter of time before this Euro-Mediterranean ring is extended far enough to synchronously interconnect with the rest of the Middle East and the GCC grid system to form a single ‘super ring’. Important connections in the coming years will be an extension south with a synchronous interconnection between Egypt and Sudan (220 kV line); and an extension into the Middle East with the interconnections between Syria and Iraq (400 kV line), Turkey and Iraq (400 kV line) and Jordan to the western part of Saudi Arabia.

A fully interconnected system like this is some way off but it offers the prospect of electricity trading and power exchange on a whole new scale. Europe already has a number of power exchanges that allow traders to buy and sell electricity in spot, forwards and futures markets. And with the importance of the Middle East in terms of its oil and gas reserves, the energy trading possibilities become more interesting as the European grid extends down into the Middle East.

In June Dubai Holding and the New York Mercantile Exchange (Nymex) announced the formation of the Dubai Mercantile Exchange (DME), a joint venture to develop the Middle East’s first energy futures exchange. DME is part of a larger government initiative to make Dubai a premier financial trading hub. It is Nymex’s first overseas joint venture and according to the partners, presents a unique opportunity for the global energy futures industry to fill a time zone gap in trading between Europe and Asia. The DME is expected to open for trading in early 2006.

Initially the exchange will trade in sour crude and fuel oil. How or if this could become an exchange for trading power and gas is a long way off but it could change the face of the power business as we know it if it does.

Junior Isles
Publisher & Editorial Director