Nigel Blackaby
Associate Editor

Surveying the news headlines is one quick way to get a snapshot of activity in a particular country. Not that this is a foolproof method as headlines can be misleading – “Quarter of a million Chinese live on water”, could well be misinterpreted, as can “Grandmother of eight makes hole in one.” Even so, my impression, arising from recent energy news headlines, was that Saudi Arabia among the GCC countries was especially active in developing its power and water infrastructure, despite the global downturn.

Among the GCC countries, Saudi Arabia stands apart, occupying four-fifths of the Arabian Peninsular and with a population of over 27 million, accounting for around 68 per cent of people in the GCC. Over the next five years the population is set to grow to between 28.5 and 31.7 million, putting further pressure on the country’s leaders to find enough housing and jobs for the mostly young population. This population will want more drinking water from energy-intensive desalination plants and more air-conditioning. What is more, the Kingdom has ambitious plans to develop its industrial base, all of which adds up to an urgent need for a great deal more electrical power.

Any concern that demand for its staple export, and source of its wealth might be faltering as a result of the global economic downturn has been allayed to an extent, as a recovery begins to take hold and as Saudi oil is needed on international markets to make up for the likely loss of production from offshore drilling around the USA

State-owned Saudi Electricity Company (SEC) says that the country’s current capacity of 42 GW will have to rise to 50 GW by 2012 and 75 GW by 2020. The demand for power has already doubled in the period 2000-2008 and so these projections amount to a virtual doubling of installed capacity every decade. Demand over the last ten years has been satisfied but at the expense of a sharp decline in the reserve margin, down to around 7 per cent of capacity – something which the authorities wish to re-build in the coming years. In terms of investment, MEED puts the amount needed to be spent to meet power and water demand to 2025 as $270 billion, of which $80 billion would go to electricity generation.

SEC plans 34 power projects over the next eight years with a total additional capacity of 21 GW, ranging from small extensions to existing facilities, to new projects with capacity in excess of 1000 MW. SEC already has a programme of five independent power projects underway, which would add 8800 MW by 2019. These include the 2000 MW P11 project close to Riyadh. The Saline Water Conversion Corporation (SWCC) is tendering the Ras al Zour
2400 MW and 1 025 000 m3 desalination project, which will supply SEC with 1000 MW. SEC is also planning power plants at Qurayyah, Dheba and Shuqaiq, which will come online in 2015, 2016 and 2017 respectively, and the 1200 MW Rabigh facility, due to begin operation in 2012 with a second phase following in 2013.

Most of the power projects in the pipeline in Saudi Arabia will be oil fired following a government decision to reserve gas stocks for other uses including export. This policy has been undermined with the decision to proceed with the Ras al-Zour power and water project as a gas fired facility. The shortage of natural gas remains a constraint with national oil and gas company Saudi Aramco being pulled in different directions to supply gas to industrial plants and its own operations, according to a recent report by investment bank JP Morgan.

“With gas growth uncertain over the next few years and a stated policy that petrochemicals get first priority for gas supplies, it appears that the Kingdom’s power generation will require an increasing amount of oil,” says Lawrence Eagles, the author of the report. The burning of oil to generate electricity however emits more pollution, requires additional capital investment in power plant technology and reduces the country’s exports.

The need to develop significant amounts of new generation capacity over the nxext few years is no doubt one of the main drivers in the moves to reform the power sector in Saudi Arabia and to encourage more private participation and investment. A radical reform has been under consideration for a number of years that would see the break-up of SEC into four competing units, with SEC becoming a holding company for these, as well as a transmission and distribution accompany. The idea would be for the four companies to have the ability to both divest generation assets in order to finance other projects, or to build strategic alliances. SEC is currently partly privatized, with 20 per cent of the company’s shares floated on the Saudi stock market, somewhat complicating any forced break-up of the company. However, the country’s power regulator ECRA has said that the unbundling of the sector during 2010 is its aim, “to encourage competition and privatization.”


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