Soaring demand strains Middle East electricity output

The Middle East will need to invest up to $140bn in new power generation, distribution and transmission capabilities this decade to cope with soaring electricity demands.

Average peak demand in the Middle East is growing at a rate of 8 per cent annually, although in Abu Dhabi and Qatar, peak power demand is rising by 10-15 per cent a year. MEED Insight Research Editor Angus Hindley estimates that by 2019, capacity requirements in the GCC alone will be 170,000MW, requiring huge levels of investment.

Speaking at the MEED Middle East Projects Market Seminar 2011 in Dubai, Hindley told delegates: “On present trends and taking into account recent public spending announcements, the required total GCC power capacity will have to rise to more than 170,000MW by 2019, from about 95,000MW at the end of 2010.  

“Saudi Arabia will account for about 80,000MW of this. But there will have to be big increases in Kuwait, Abu Dhabi and Oman. This does not however take into account the need to decommission and replace existing capacity.”

Hindley estimated that the new capacity required in the GCC by 2020 will involve investment of $66bn to $70bn. “At least the same amount will be needed for investment in transmission and distribution.”

Saudi Arabia is the largest electricity generation market in the region, with 50,000MW of capacity, followed by Egypt, with about 25,000MW. In 2010, power demand grew by 10 per cent in Saudi Arabia, due to a combination of economic and population growth and the very hot summer. Current power reserve margins vary across the region, Hindley said, with Abu Dhabi, Dubai and Qatar having healthy reserve margins, while in Kuwait it is very low at 3 per cent.

Feedstock is probably the biggest issue facing the Middle East power sector, said Hindley. “Gas is the feedstock of choice if generators could get it. The overwhelming majority of Kuwait’s power feedstock is in the form of liquids. Almost 70 per cent of feedstock in Saudi Arabia is liquids. About 800,000 barrels a day of liquids are used in the kingdom’s power stations.”

For this reason, Saudi Arabia is considering the possibility of building up to 30,000MW of nuclear power capacity, allowing it to reduce the quantity of oil used each day to generate power.

“There are LNG terminals in Dubai and Kuwait and one is to be built in Bahrain,” said Hindley. “But so far, gas feedstock imports into the region have been modest. LNG is seen as a back-up for emergencies.”

The GCC has about 95,000MW of installed generation capacity, with some 11,000MW of new capacity being commissioned in 2010, Hindley said. “Qatar has sufficient capacity to make it possible to import electricity through the regional GCC grid,” he said.

“Saudi Arabia had an unprecedented amount of new awards in the power sector in 2010,” Hindley said. “Some 11,000 MW of generation capacity was awarded last year. This compares with contracts for about 3,400 MW of capacity in 2009.” He said awards in other parts of the region were comparatively modest.