North African countries have signed agreements worth several billion dollars for the construction of independent power projects (IPPs) in the last year alone, to meet rapidly expanding demand. Economic and demographic growth, especially in Egypt, has underpinned the rise in electricity consumption. Libya is phasing out its oil-fired plants, while in Algeria, the construction of energy-intensive desalination plants is driving up its domestic power needs. All these countries have large gas reserves with which to supply new IPPs. But construction costs are soaring, in addition to which, other industrial projects are competing for gas supplies, raising nuclear energy’s profile as a future source of electricity in the region.

Energy demand in Egypt has surged over the last decade, at a rate of 7-8% annually, due to its rapid industrial and population growth, and the rise is set to continue. The petrochemical master plan, for example, is expected to create 20 greenfield projects by 2022, requiring huge volumes of gas feedstock. Egypt also made its debut as an LNG exporter in 2005, and will begin natural gas exports through the Arab Gas Pipeline in 2008. This leaves the most populous Arab country with limited quantities of gas for its own use, despite having reserves of 72.3 trillion cu ft at the end of the 2006-07 fiscal year and current production of around 6.4bn cfd. Egyptian officials have said, however, that domestic requirements are a priority and that only when these are satisfied will future export plans be considered.

Although hydropower from five dams on the Nile still contributes significantly to Egypt’s electricity generation mix, it has fallen from around 25% at its height to an average of just 11.8% in 2005-06. More than 80% of the rest comes from gas-fired power plants, consuming around 60% of the country’s total natural gas production. The IEA said in 2005 that Egypt would need to spend around $36bn in the power sector up to 2030, about the same as the anticipated investment in its gas sector over this period, to bring generation capacity additions of 19gw.

Egypt’s Ministry of Electricity and EnergyMinistry of Electricity and Energy hopes to add around 8,500mw of new capacity in 2007-12, and wholly owned subsidiaries of the state-owned Egyptian Electricity Holding Company (EEHC)Egyptian Electricity Holding Company (EEHC) have signed several agreements with independent contractors for new gas-fired plants to achieve this goal. Egypt’s Orascom Construction Industries (OCI)Orascom Construction Industries (OCI) in January ordered the civil works package on the 750mw combined cycle power station at Sidi Kerir, due to be completed in 2010. OCI also won a contract in April 2007 to carry out the civil works package on the $595mn/700mw el-Tebbin power plant outside Cairo which will take four years to build. General Electric (GE)General Electric (GE) was selected in July 2007, with its Italian partner Techint Cimi Montubi (TCM), to build two gas turbine generators at the new al-Kureimat III combined cycle power plant south of Cairo which will have a generation capacity of 750mw. Other important Egyptian power projects include the new 1,300mw combined cycle Abu Qir plant near Alexandria, expected to be ready in November 2011 and to cost around $1.6bn (MEES , 21 January), and phase two of the North Cairo power station, which was completed in October 2007 and doubled the plant’s capacity to 1,500mw.

High Hopes For Renewables

At the inauguration of the North Cairo plant’s expansion last year, President Husni Mubarak underlined the government’s efforts to increase investment in renewable energy, to bring its contributions to 20% of Egypt’s aggregate energy use by 2020. Certainly there are projects under way that will raise renewables, especially solar power, in the overall electricity generation mix. A 150mw hybrid power plant is being constructed at Kureimat that will rely on natural gas and solar power. The $328mn project is being jointly constructed by Spain’s Iberdrola and Orascom, and should be in operation by 2010, according to Electricity Minister Hasan Yunis. And in November 2007, a subsidiary of the Italian cement firm Italcementi signed a memorandum of understanding with the ministry to examine the viability of a 400mw wind farm in the Gabal el-Zeit district on the Red Sea coast. But within the overall picture, these additions from renewable energy sources represent only negligible quantities for the foreseeable future.

Given the windfall revenues that the Egyptian government earns from gas exports, and the small share of electricity that renewable energy provides, it is hardly surprising that the country has simultaneously decided to reactivate its civilian nuclear energy program, as announced by President Mubarak in October 2007.

Libya: Underdeveloped Power Sector

Years of economic sanctions in neighboring Libya, lifted only in 2004, along with its much smaller population and industrial requirements, have left its power sector seriously under-developed. As recently as 2003, oil accounted for 80% of Libya’s power generation, costing the country dearly in terms of lost revenue. But Tripoli is now focused on switching to gas as the primary source of electricity. The state-owned General Electricity Company of Libya (GECOL)General Electricity Company of Libya (GECOL) is doubling its installed generation capacity by 2010, from around 5,000mw now, and converting every power and desalination plant to gas. The General People’s Committee for Energy, Water and Gas has also commissioned Belgium’s Tractebel to draw up a 25-year gas master plan to improve the gas transmission network, and provide the design and engineering work for the supply of gas to 500,000 end-users in Libyan cities. “One of the goals is to accommodate the future needs of the industry and power sector,” says a source at Tractebel. The plan will take 10 months to complete, starting this month.

As witnessed in the country’s oil and gas sector over the past four years, Libya has been energetically encouraging foreign companies to modernize the country after 20-odd years of international isolation, and GECOLGECOL has recruited a number of Asian companies to renovate the power sector. India’s Bharat Heavy Electricals Limited (BHEL) was the latest to sign an engineering, procurement and construction (EPC) contract – to expand generation capacity at the West Mountain power station, which it completed in 2006, from 600mw to 900mw. South Korea’s Hyundai Engineering and Doosan Heavy Industries have signed contracts worth almost $2bn for the construction of two power plants with a combined generation capacity of 2,800mw, west of Tripoli and in al-Khalij, 20km west of Sirte, due for completion in December 2011. Contracts for the construction of two 750mw combined cycle power plants in Misurata and Benghazi regions, also due for 2011 completion, were awarded to South Korea’s Daewoo in May last year at an expected cost of $845mn. According to GECOLGECOL, the conversion of the diesel-fired power stations at al-Zawiya and North Benghazi, with a total generation capacity of 750mw, to combined cycle gas turbine systems, was due to be completed last year.

Although Libya’s gas needs are relatively small, so are its production levels, at around 2.7bn cfd, and local demand will jump with the completion of these power projects. GECOLGECOL estimates that Libya’s total gas requirements, for power generation, water desalination, and other industrial and civilian uses, will rise from around 1bn cfd this year, to around 3bn cfd in 2012, and 3.8bn cfd in 2020. Partly to help meet this demand, but primarily to boost Libya’s export capacity, the state-run National Oil Corporation (NOC)National Oil Corporation (NOC) has increased efforts in the last year to develop the fledgling gas industry, signing contracts with some of the leading producers to develop gas-prone exploration blocks. But the lead time for developing future gas discoveries is long. One of the biggest of these gas exploration contracts, signed with BP in May last, is expected to see initial production in 2018 at the earliest (MEES , 25 February).

Slaking The Region’s Thirst

Libya and Algeria suffer from shortages of fresh water, and have ambitious plans to boost their seawater desalination capacity. But the new plants will require significant power supplies to operate. Algeria is planning 12 desalination plants by 2010 with a total capacity of 2.2mn cu ms/day, and President Abdelaziz Bouteflika inaugurated the new $250mn El-HammaEl-Hamma complex, west of Algiers, on 23 February. Built by General Electric with production capacity of 200,000 cu ms/d, El-HammaEl-Hamma is the largest desalination plant in Africa and will provide a quarter of Algiers’ population with water. But the reverse osmosis plant will require 3.23kw of power per cubic meter of water, or 645mw, to be sourced from the local grid, MEES understands.

Like EEHC and GECOLGECOL, Algeria’s SonelgazSonelgaz has awarded numerous EPC contracts lately for the construction of combined cycle power plants. In November, Spain’s Iberdrola, in a consortium with General Electric, won the €1.47bn turnkey contract to build the 1,200mw plant at Koudiet Edraouch in the El-Taraf province, 700km east of Algiers, while Egypt’s OCI and French engineering group Alstom secured the $1.98bn contract for a 1,200mw plant at Terga, in the Ain Temouchent province, 400km west of Algiers. These were the last two of eight new power stations that SonelgazSonelgaz wants to build in its attempt to renovate and expand Algeria’s ageing power sector to meet local demand, growing by 5% annually (MEES , 25 November 2007). Altogether they should add 3,940mw to the north African country’s existing generation capacity of around 7,000mw.

Algeria, too, has ambitions to diversify its energy consumption. “We welcome alternative energies because that will help stretch the resources we have,” Minister for Energy and Mines Chakib Khelil said in November 2007. Spain’s Abener Energ?a won the contract to build Algeria’s first solar gas hybrid plant at Hassi R’Mel in May 2006. The 150mw plant, 34% of which is being financed by Algeria’s renewable energy agency New Energy Algeria (NEAL), is due for completion in 2009. Two other similar projects with a total capacity of 400mw were planned for 2015.

Linking Up With Europe

But all the countries in north Africa, except Tunisia, are now seriously considering pursuing the nuclear option, in order to “face the great challenge of meeting increasing [energy] consumption,” as Egypt’s president put it, and especially in the case of Libya and Algeria, as a way of powering energy intensive water desalination projects. France has played a key role in this regard, signing a nuclear cooperation deal with Libya and Algeria in December, firstly during President Sarkozy’s state visit to Algiers, and shortly afterwards when Libyan leader Mu?ammar al-Qadhafi visited Paris (MEES , 24 December 2007). Dr Khelil said shortly before Mr Sarkozy’s visit that Algeria could have a nuclear power station within 10 years, adding that the government would issue a nuclear law in 2008 to regulate the sector and would set up an independent agency to deal with safety and security matters. Algeria has enough uranium to supply two 1,000mw power plants for 60 years which, if utilized, could free up significant quantities of gas for export.

Finally, the North African countries want to build power interconnections across the region and with Europe to enhance security of electricity supply. A study on reinforcing the interconnections linking Egypt to Morocco was completed in 2004 by Tractebel, and the ELTAM group was established to replace the existing 220kv networks with the 400-500kv extra-high-voltage cable system. The Arab Fund for Social and Economic Development (AFSED) has helped to finance the project. High-tension transmission lines are gradually being introduced, and the 400kv interconnections are due to be completed by 2015. Tunisia, Algeria and Morocco are already connected to the European system via a 400kv sub-sea cable to Spain. And there are plans for other high-voltage direct current (HVDC) links to run alongside the gas pipelines being built or expanded between North Africa and southern Europe.

North Africa Generation Capacity And Investment, 2004-30

Source : IEA and EIA.

© Copyright MEES 2008.

 

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