Tuesday, Jun 12, 2007
(Updates a story published GMT 0730 with IEA figures and Gas supply data.)
By Oliver Klaus
Of DOW JONES NEWSWIRES
DUBAI (Dow Jones)--Dubai may open its power generation industry to foreign investment for the first time and build nuclear electricity plants in an effort to meet demand that's surging by 20% annually, an official said Tuesday.
Companies like International Power PLC (IPR.LN), Suez (SZE) and AES Corp. (AES) may be allowed to invest in the emirate's power plants if they are "able to deliver at a cost effective price," Saeed Al Tayer, Chief Executive of Dubai Electricity & Water Authority, known as Dewa, told Dow Jones in an interview.
"In case their unit cost is more attractive it should be considered," he said at Dewa's headquarters. Government-controlled Dewa currently holds a monopoly for producing and selling electricity in the emirate.
The state utility may need foreign companies to help fund the $37 billion required to quadruple capacity to 25,000 megawatts, equal to half Florida's electricity capacity, by 2017, according to industry estimates.
Nuclear power is another option that could help meet Dubai's power and water demand, which is rising by an average rate of 20% and 15% respectively, Al Tayer said.
Shortages of power and desalinated water could pose a risk to Dubai's economic boom that saw its economy grow by over 12% last year amid a surge in real-estate construction and tourism investment.
"It really depends on the government's ability to forecast future demand and to put projects in place to meet that and where necessary to attract foreign expertise and money to support what is a massive build out," Philipp Lotter, Middle East vice president at Moody's Investors Service Inc., said.
Power Alternatives
Persian Gulf monarchies including Saudi Arabia, the U.A.E. and Qatar have already begun assessing bringing nuclear technology to Gulf Cooperation Council member states as an alternative to gas and liquid fuels to fire their power plants.
"We should explore alternative ways of producing power, like nuclear," Al Tayer said.
Alternatives such as atomic and renewable energies could help Dubai keep up with runaway demand that will require Dewa to double generating capacity to 11,100 MW by 2011 and spend $14 billion in the next five years alone, according to Al Tayer.
Dewa's expansion plans beyond that involve building a 9,000 MW power and desalination complex near the border with Abu Dhabi, known as P station, and adding 5,000 MW at new sites at Al Habab power facility, Al Tayer said.
The projects are targeted for completion by 2017, he added.
Another 400 MW will be added from upgrading existing power plants at Jebel Ali, a port and free zone adjacent to which most of the emirate's power generation capacity of about 5,000 MW is presently located.
Gas Shortage Looms
The need for more power generation and desalination capacity in the region has pushed natural gas demand in Dubai and elsewhere in the Persian Gulf, leaving the natural resource in scarce supply.
"Shortages of natural gas - hitherto the fuel of choice for electricity generation - have become a regular feature, forcing governments to consider alternatives such as coal, fuel oil, nuclear and even imported gas," the Paris-based International Energy Agency said today in its monthly oil market report on the Middle East power sector.
To meet soaring demand, the U.A.E. will this summer begin the commercial import of gas from Qatar through the Dolphin pipeline.
Dolphin Energy Ltd., which is 51%-owned by the emirate of Abu Dhabi and Total SA and Occidental Petroleum Corp., will pipe in 2 billion cubic feet a day of gas, of which nearly a third will be supplied to Dubai.
Negotiations to raise Dolphin throughput by an additional 60% are already under way although an agreement is still pending.
With gas supplies constrained, nuclear and coal power plants could indeed be viable alternatives to meet ever higher power needs, industry sources say.
"Nuclear is an option but in my experience it takes eight-10 years to build a plant. Coal power is an option but the problem is that the plants take up significantly more space," a U.A.E.-based industry source said.
Some help in the struggle for more electricity will come from the planned $1.5 billion interconnection of the G.C.C. member states' power grids, according to Al Tayer.
"The grid will improve efficiency and power reserves, and in the future help to reduce capacity expansion to some extent," he said.
-By Oliver Klaus, Dow Jones Newswires, +9714 364 4961 Oliver.Klaus@dowjones.com
Copyright (c) 2007 Dow Jones & Company, Inc.
(END) Dow Jones Newswires
June 12, 2007 06:05 ET (10:05 GMT)
