Restructuring, privatization and strong growth in electricity demand is heralding a new era for Oman’s power sector. It has also signalled the need for investment in the country’s transmission and distribution network.


The northern Oman electrical system
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In July 1999, the government of Oman awarded an international consortium a contract to advise on the restructuring and privatization of the country’s electricity sector and the associated system upgrades required. Six months later, the consortium had submitted its report and the restructuring programme was underway.

With a rising remand for electricity, the government of Oman wants to increase the efficiency of the power sector in order to attract investment in generation, transmission and distribution. It is therefore planning to restructure and privatize the sector through the unbundling of the national utility, MEW, which will be split up and corporatized before privatization. MEW is a government department.

With this programme in mind, the government appointed an international consortium in July 1999 to advise on and oversee the implementation of restructuring and privatization in the country. Led by Dutch bank ABN AMRO, the consortium began work immediately and within six months had submitted its report on the restructuring project to the Ministry of Economics.

ABN AMRO is acting as the financial advisor in the project and its partners are engineering consultants Mott MacDonald and international law firm Denton Wilde Sapte. The consortium’s role is threefold: to restructure the industry in preparation for privatization; determine the country’s capacity demand and implement necessary IPP projects and any associated infrastructure; and advise on privatization.

In spite of their differing areas of expertise, the partners have been working very closely on the project, according to Christopher McGee-Osborne, partner at Denton Wilde Sapte: “All three of the organizations are working on all aspects of the project. Pretty much every document that has gone to the [Oman] government has had input from each partner – there isn’t really that much of a boundary.” He added: “It’s a very close working relationship”.

A timely challenge

This working relationship between the partners is partly the result of a demanding timescale for the project. The increasing demand for electricity in the country means that Oman needs additional capacity fast, and therefore the restructuring programme must be implemented quickly. Having begun work in July last year, the consortium has already given its report to the government on restructuring, completed the demand assessment and has also begun the process of implementing two independent power projects (IPPs) and upgrades of the transmission and distribution system. “Undertaking a new privatization scheme in a country is always difficult,” said McGee-Osborne. “We have achieved an enormous amount – to do all that in twelve months is unheard of.”

Because of such a tight timescale, the Oman government has put stringent conditions on the selection of contractors for the implementation of the transmission and distribution and IPP projects. “The government needs the power very quickly and therefore it only wanted to appoint experienced contractors who can complete the projects on time,” said McGee Osborne. Bill Howieson, project manager with Mott MacDonald added: “The conditions of the qualifications for the EPC contractors and the developers are very stringent because of the tight timescales and urgent need for power.”

The restructuring of MEW will be completed in mid-2001. The government has already approved the structure proposed by the consortium in its report, and has appointed teams to start work on the unbundling of MEW. The consortium is now working on drafting an electricity law that will provide a regulatory framework for the restructured power sector.

In order to support the restructuring programme and the new regulatory framework, an upgraded technical framework is required, including a new load despatch centre, development of the transmission and distribution grid, and new power plants.

Taking shape

On the basis of its demand assessment, the consortium recommended to the government that two IPPs should be implemented. These projects are beginning to take shape, and will be the country’s second and third IPP plants.

The first project to be implemented will be Al Kamil, a 250 MW open cycle natural gas fired power plant. The tender document for this project was issued in April 2000 and bids were received on May 1, 2000. National Power has been appointed preferred bidder, and is expected to execute documents on 15 July. The project is, said McGee-Osborne, “going extremely well”.

The second plant will be Barka, and this project is currently under tender. This is likely to be a 400 MW power and desalination plant, reflecting an increased need for desalination as well as power in the country. Bids are due at the end of August.

The planned increase in generation capacity in Oman also demands that the country’s transmission grid and distribution network are upgraded. The system will also need to have more sophisticated functions than it currently has. “The existing control system needs to be significantly upgraded in order to control a further two [power] stations,” said Howieson. “Right now, it only controls three stations and it has no control over other main power stations in the northern part of Oman.

“There is a need to upgrade the load despatch function in Oman to take into account an expanding transmission system and a growing demand. To upgrade the existing facilities would be very difficult. Secondly, with privatization coming in, there will be a need for more precise monitoring and control of the stations.”

The consortium is overseeing the implementation of this upgrade project in Oman’s northern electrical system. The project has several elements: the installation of several new 132 kV substations and 220 kV substations, transmission lines, fibre optic communications lines, scada equipment and a new load despatch centre.

The Sharqiya region of Oman’s northern electrical grid currently consists of several localized low voltage distribution networks that supply power from diesel engine-based power plants to local towns. To increase efficiency in the system, the consortium has recommended that these localized networks are interconnected so that power from the new power plants can be utilized. “All of these towns have their own generation right now and the power is transmitted via a 33 kV network,” said Howieson. “The idea is to build the power station at Al Kamil and interconnect all of these existing systems with a new 132 kV line.”

A new 132 kV transmission line and five new 132 kV substations will therefore be built. The transmission line will run from Izki substation to Mudaibi and then to Mudairib substation. From Mudairib, the new line will continue to the new power station at Al Kamil, and from there it will split into two: one line running to Sur substation and another to BBB Ali substation. The government is on the verge of awarding the contract for his work, according to Howieson.

There is currently no 220 kV system in Oman, only 33 kV and 132 kV circuits. A new 220 kV substation will be built at Barka IPP plant and a new double circuit overhead 220 kV transmission line will run from here to another new substation at Filayj. The new line will continue to an existing 132 kV substation at Madinat Qaboos.

Advanced communications

The new substations will be equipped with scada equipment capable of monitoring the various aspects of substation activity, such as isolator and switch condition and position, and will also have metering and fault diagnostic functions. The consortium is still investigating this aspect of the project. “Mott MacDonald is currently undertaking a survey of all the substations to establish exactly what equipment is there and what equipment is required as part of the load despatch centre contract,” said Howieson. “General details will be provided as part of the EPC contract documentation, but the load despatch centre contractor will be required to do their own detailed survey.”

Another contract that is about to be released is for the retrofitting of a fibre optic cable running from the substation at Izki to an existing power plant at Rusail. This will aid communications between the area around Muscat, Oman’s capital, and the interior, which are separated by a line of hills. These hills are split in the middle by the Samail Gap, through which the 132 kV runs and on which the fibre will be installed.

The primary purpose of the fibre optic line is data transfer between the Muscat and interior sections of Oman’s northern electrical system. “There are a whole series of substations in that area that are not controlled or monitored by the existing load despatch centre, so we need some way of getting information back from all those substations [to the load despatch centre],” said Howieson.

The tender for the load despatch centre is to be floated imminently.

The centre will be completed by the end of 2002, in time for the start up of Barka power station. It will be located at a substation in the Muscat area, and its functions will include controlling power station despatch, monitoring plant output and system condition, and monitoring the status of the transmission system.

The design of the centre in terms of hardware and software architecture will be decided by the contractor for the project. When complete, the load despatch centre will be operated by the transmission company formed by the unbundling of MEW.