Qatar’s triple whammy

Ambitious infrastructure programmes are commonplace in a Gulf region awash with oil money, but Qatar’s plan to triple its power capacity by 2015 is among the most challenging

The Gulf State of Qatar is emerging as an important force in the Middle East region both economically and politically. The once inward-looking state is now a major overseas investor and is speaking out on foreign affairs issues as never before. The 2006 Asian Games saw Qatar as the flag bearer for the entire region. This new found confidence is based on strong economic and political foundations, and is supported by rapid industrialization all of which, in turn, requires adequate infrastructure support and a significant expansion of power and water supplies.

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Qatar is a fast-growing nation with a population of just over 800 000, although only one in five of the population is native-born. Most have come from the Indian sub-continent, Iran and northern Africa to take advantages of employment opportunities in and around the capital Doha. The population is forecast to reach at least 1.33 million inside 15 years.

The country saw gross domestic product (GDP) growth of more than 33 per cent in 2005 and over 29 per cent in 2006. High oil prices have been the driving force behind the growth spurt and even with slightly lower crude prices, the expectation is that GDP will rise by an average of 15 per cent annually for the next few years. The country has become a regional hotspot for business activity and industrial development.

Despite some progress in diversification, energy still dominates the economy in Qatar, accounting for 90 per cent of all exports and 65 per cent of total government revenue. In addition to oil the energy sector now spans liquefied natural gas (LNG), gas-to liquids (GTL) and piped gas.

Qatar has been promoting private sector involvement in its industrial activities, including in power and water production. It has recognized that without private finance, infrastructure improvements would not be able to keep pace with overall growth in the country. The growth in demand for power and water in Qatar is unprecedented and is expected to continue in the next few years. Per capita electricity production in Qatar is already among the highest in the world and is projected to reach 22 500 GWh by 2030, more than double the Organization of Economic Co-operation and Development (OECD) average, according to the International Energy Agency (IEA).

Future growth predictions are backed up by recent trends. The demand for power has increased by an average of around 9 per cent from 2001 to 2005 while in 2006 it increased by more than 17 per cent. Water demand has been growing at an average of 5 per cent from 2001 to 2005, and jumped to more than 11 per cent in 2006.

Qatar’s booming economy has been the springboard for the implementation of many small and large-scale commercial and industrial projects. Qatar Electricity and Water Company (QEWC) predicts that demand from bulk electricity users will be 26 per cent by 2010 and domestic users will require an additional 7 per cent over the same period. The expected average annual demand increase for water from 2007 to 2010 is close to 16 per cent, with bulk users requiring 32 per cent more water and domestic consumers 5 per cent.

Qatar has responded by building new and power and water production facilities and has awarded contracts to build yet more still. An additional 4750 MW of power capacity and 590 million litres/day (MLD) of potable water production has been added in the past six years. This represents an increase of more than 270 per cent in power generation and a 130 per cent increase in water production from the year 2000. Installed capacity stood at 3419 MW in 2006 and planners are looking triple this to about 10 000 MW by 2015.

Private access

Qatar’s strategy to meet future demand has been the full privatization of the power and water sector. It is one of the leading Gulf Cooperation Council (GCC) countries in power and water privatization.

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In May 2000, the government transferred all production assets, as well as transmission and distribution infrastructure to the QEWC. The government retains 43 per cent of QEWC, with 57 per cent controlled by local investors. Responsibility for transmission and distribution rests with Qatar General Electricity and Water Corporation (re-branded Kahramaa). Kahramaa operates as an independent corporation and has transferred its power plants to QEWC.

QEWC currently has power production facilities of its own totalling 2700 MW and 591 MLD, out of which 600 MW and 136 MLD is under construction. QEWC is also a shareholder in independent water and power projects (IWPPs) in Qatar, totalling 3780 MW and 454 MLD. Of this, some 2400 MW and 205 MLD is under construction. Based on equity interest, QEWC’s share of these IWPPs is 1551 MW and 195 MLD.

Quantum leap

Another signal of Doha’s determination to meet growing customer demand came in January this year when Kahramaa announced its largest ever annual budget totalling QR12.6 billion ($3.46 billion). This compares to QR7.8 billion allocated for 2006. Possibly even more revealing is the fact that Kahramaa’s entire budget for the current fiscal year is nearly five times as much as was deemed sufficient in 2003. Kahramaa’s acting manager for Electricity Network Planning, Ali Al Jomali, described the step up as a “quantum jump”. The corporation plans to spend QR7.56 billion on electricity infrastructure and network development, and has allocated QR1.3 billion to water projects. The remainder of the budget will go on operational costs.

Kahramaa has planned as many as 31 major projects this year, including extending its electricity network 113 per cent. As part of this work Germany’s Siemens PTD was awarded its largest ever transmission and distribution contract by Kahramaa last November, valued at around $992 million. The project involves supplying 25 new substations and providing extensions or renovations to 24 existing ones.

ABB has also secured contracts from Kahramaa including a $450 million substation and telecommunications package for Qatar’s Phase VII grid expansion project. In November 2005, ABB won a $170 million contract from Kahramaa for 12 substations and power cables for Qatar’s Phase VI grid expansion project, and a $220 million contract for Phase I of the Gulf Grid project, linking the electrical grids of six Gulf States, including Qatar.

The next financial year will see a further increase of 169 per cent with the addition of 40 new substations. The rush to expand is due to the number of large energy projects that are due to come on stream in the next decade, but there is no doubt that the state’s burgeoning population has already impacted significantly on power demand.

Officials at Kahramaa emphasized that its strategic planning was aimed at not only improving its networks, but also maintaining the highest quality of service to customers. Kahramaa is also keenly aware of its social responsibility and regularly embarks on public awareness programmes to encourage water and energy conservation. It plans to develop models to predict and plan for future growth, and has advertised in local newspapers to elicit timely projections of future requirements from bulk consumers. Kahramaa plans to constantly update these studies to react to the dynamic market conditions.

Mega projects

The most significant infrastructure addition on the horizon is the construction of the Ras Laffan C IWPP – destined to be Qatar’s biggest and one of the largest such projects in the region. The Ras Laffan plant will have the capacity to produce as much as 2600 MW of power from 2010, and 250 MLD of desalinated water by 2011. Estimates of the cost of this project range from $2.5 billion to $3.5 billion. A request for proposals to developers was issued in March and those that pre-qualify will have until the end of this month to submit proposals. The successful bidder will hold a 40 per cent stake in the new project company with the remaining 60 per cent being held by local investors, widely expected to be QEWC and Qatar Petroleum.

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Only six moths ago Kahramaa was signing a deal with Marubeni Corporation for the development of the 2000 MW Mesaieed IPP in which the Japanese firm will have a 40 per cent stake. In March, the special purpose holding company, Mesaieed Power Company was established and a 25-year power purchase agreement signed, providing for the first 1000 MW to be delivered by mid-2008 and the remaining 1000 MW to be commissioned by 2010. Spanish EPC contractors Iberinco will build the plant, which had originally been planned with a desalination element although this was later dropped.

Meanwhile, Alstom, Siemens, GE Power and ABB are competing to secure the contract to build a captive 1350 MW gas fired power plant as part of the Qatalum smelter project. The EPC contract also includes the building of a 220 kV substation, a 400 kV grid connection, a water treatment plant and a district control system.

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