Wednesday, Apr 01, 2009
(This item was originally published Tuesday.)
By Nour Malas
Of ZAWYA DOW JONES
ABU DHABI (Zawya Dow Jones)--The Gulf Cooperation Council Interconnection Authority, or GCCIA, will launch in May commercial operations of phase one of its $1.4 billion electricity grid that will eventually connect six Arab Gulf states for the first time and increase efficiency in the region's electricity sector, a senior official said.
Phase one of the GCC interconnection grid -- which links Kuwait, Bahrain, Qatar and Saudi Arabia and cost $1.2 billion to build -- is complete and in the testing phase for full operations by the end of May, Ahmed Ali Ebrahim, GCCIA director for system operation and maintenance, said Monday.
"By the end of May, we will be in a position, technically and legally, to support trade transactions," Ebrahim said on the sidelines of an Abu Dhabi power and water conference organized by London-based MEED.
The GCCIA, headquartered in Al Khobar in Saudi Arabia's Eastern Province, is jointly owned by the six GCC member states.
The grid, which was first conceived in the 1980s, will allow the transfer of electricity between the six countries to utilize excess capacity and limit the need for new investments in additional power generation capacity.
The network will boost efficiency and reliability by ensuring uninterrupted electricity supplies. In the longer term, it may interconnect with other regional grids in North Africa and as far away as Europe, Ebrahim said.
The remaining two phases of the GCC grid will connect the United Arab Emirates and Oman, linking all six GCC countries by the end of 2010, he added. Phase two, covering the Oman-U.A.E. link, a 52 kilometer sector built bilaterally by the two countries, is already complete.
The third phase will see the construction of an electrical substation and an overhead line in Abu Dhabi emirate. Bids for the substation are under review and include "all the big international names" including ABB Ltd. (ABB) and Siemens AG (SIE.XE), Ebrahim said, adding that a contract award was imminent.
Last year, Saudi Arabia's National Contracting Co., or NCC, won an estimated $70 million contract to build the overhead line from Sila in western Abu Dhabi to the capital.
TRADE AGREEMENT
A power exchange trade agreement, or PETA, which sets out the trading terms by which the countries will exchange and trade energy between their national electrical transmission systems through the GCC grid, will be signed in two months, he added.
"This is just the starting point. Over time, this can evolve into a regional market," Ebrahim said.
Prices for power trades will be fixed bilaterally between member states, with PETA regulating and charging an as of yet undetermined fee for each electricity transfer. Trading in emergency situations won't be charged, Ebrahim said.
Electricity demand in Arab Gulf states has soared in recent years on the back of an economic boom that has seen billions of petrodollars flow into infrastructure, tourism and real-estate projects across the region.
Despite the global economic downturn, which is also affecting GCC states, power demand is expected to remain buoyant across the region, Ebrahim said.
"The economic slowdown, when it comes to electricity, doesn't have a very big effect. We have had tremendous growth percentages, with 4-5% annually. Now we are reaching above 10%, and this crisis will bring this down to a more reasonable rate. There is still demand on electricity, we can still optimize the resources we have," he said.
Industry officials say that despite an anticipated slowing of electricity demand in Arab Gulf states as a result of the economic slowdown, there was unlikely to be excess capacity.
"I don't think there's a chance there will be excess capacity but it may be a chance to catch our breath a bit," said Richard Tabors, vice president of CRA International.
The GCCIA also expects to sign soon an exclusive agreement with a telecoms firm for the utilization of the grid's fiber optic cables for telecommunications purposes, Ebrahim said.
The plan involves the authority leasing cable capacity to telco providers to generate additional revenues.
By Nour Malas, Dow Jones Newswires, +9714 364 4960; nour.malas@dowjones.com
Copyright (c) 2009 Dow Jones & Co.
(END) Dow Jones Newswires
01-04-09 0424GMT
