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Power sector to grow at fast pace in GCC

MUSCAT -- The GCC countries are witnessing burgeoning power demand and the sector is growing at the rate of 8 per cent to 10 per cent annually.

Industry experts are of the opinion that the power sector in the GCC region has seen exponential growth, with demand for electrical power to triple over the next 25 years. Leaving aside the global recession, massive investments are being planned in the GCC especially in mega energy and industrial sectors. Expanding population and social developments are other major drivers for utilities demand to grow at such high rates.

"Leaving aside the global recession, massive investments are being planned in the GCC especially in mega energy and industrial sectors. Expanding population and social developments are other major drivers for utilities demand to grow at such high rates", Global Investments House says in its report -- GCC Investment Strategy-2012.

According to the World Energy Council, the GCC will require 100 GW of additional power over the next 10 years to meet demand. The power sector will require $50 billion worth of investments in new power generating capacity and $20 billion in desalination.

The Global Investments House in its forecast for 2030 sees a compound annual growth rate of 7 per cent per annum. This forecast compares to a global rate of 1.8 per cent per annum, placing the GCC countries with one of the highest power demand growth rates in the world.

As per the latest industry data there are 44 power and water projects in the GCC valued at $31.9 billion already under way or due to begin in 2012.

The UAE leads the way with 11 projects valued at $10 billion, including the $800 million Hassyan 1 Independent Power Plant, on which construction is slated to begin in 2012.

Saudi Arabia also has 11 new projects under way or due to start in 2012, valued at $8.6 billion, including the $2 billion Al Qurrayah Independent Power Plant (IPP).

In Kuwait, ten projects are under way valued at $3.4 billion, seven of which will begin construction in 2012.

Bahrain has three projects valued at $4.1 billion, including the independent water and power plant in Al Dur, which has been ongoing since 2008.

Qatar has three projects valued at $3.3 billion, while Oman has six projects valued at $2.5 billion, all of which will begin construction in 2012.

This investment in power generation is essential to meet the demand emanating from the aggressive diversification attempts and infrastructure- led developments in the GCC countries.

Thrust on IWPPs

The IWPP model has helped GCC countries meet demand for electricity and water, which is rising rapidly on the back of growing populations and energy-intensive infrastructure and industrial projects. Private projects account for around 40,000MW of power capacity in the region. The year 2011 witnessed 3 IPPs being awarded in the GCC with 7,500MW of new capacity contracted. It is likely that 2012 will also follow the suit with almost same volume. Saudi Arabia, Oman and possibly Abu Dhabi are all planning to award more private capacity and are due to be joined by Kuwait and Dubai, the GCC's last bastions of state generation.

In GCC as such there is no shortage of power on an aggregate level in the region, at a granular level pockets of over-capacity currently exist. This is the case in Saudi Arabia and within parts of the UAE, such as Abu Dhabi and Dubai, while Sharjah suffers from electricity shortages. Kuwait, Oman and Bahrain all experience power shortages at times of peak demand. Till now Kuwait was the only GCC country not to embrace private developers, however, it is planning to beef up its capacity and is set to award its first privately developed power and water projects. In a short span of time Qatar has ramped up the capacity on a rapid pace. This made Qatar the surplus state and during the summer of 2011, it has exported 200MW of surplus electricity to the GCC electricity grid (GCCIA).

GCC grid

Saudi Arabia, along with its GCC neighbours, plan to export electricity. In 2009 the GCC Interconnection Grid was established, which has already linked the utility networks of five GCC states, with Oman set to join soon. The joint project between Saudi Arabia, Bahrain, Qatar, Oman, Kuwait and the UAE will allow the nations to reduce the frequency of power outages by exchanging generation capacities across seasons and time zones. It is hoped that this regional grid will one day be linked to the Egyptian network, thereby connecting a major part of the Arab world's electricity through one grid. The Interconnection Grid has provided huge benefits to those states connected. Longer term, the GCC harbours ambitions to export electricity further afield, including to Europe.

Nuclear energy

Perhaps the biggest challenge facing utilities in the coming years will be how to secure the necessary feedstock to power the new capacity. With the exception of Qatar, all GCC states are facing increasingly tight gas markets leaving governments with little option but to pursue alternative energy production. In Saudi Arabia and Kuwait, liquid fuels, in the form of crude oil and diesel, have overtaken gas as the largest source of feedstock. However, this has come at a high price with Riyadh alone burning an estimated 800,000 b/d in its power plants.

The increasingly high cost of burning liquid fuels and the environmental concerns over coal have left nuclear power as the favoured option in much of the GCC.

There is a growing acknowledgement in the GCC that nuclear power will have to play a significant role in future if the high power demand growth is to be met and electricity shortages are to be averted.
Towards this end, Saudi Arabia has plans to spend more than $100 billion to build 16 nuclear energy plants over the next few years. The report has an optimistic stance for the sector as a whole.

© Oman Daily Observer 2012