Special Report: Power & Water - Gulf plants face fuel supply threat
Given the challenge that Gulf power plants face in securing a reliable and cheap supply of gas feedstock, it seems remarkable that it is still the first choice for the industry. Most of the region still relies on gas to fuel its electricity generation plants, even as competition for the finite amount of gas supplies intensifies.
Governments across the Gulf have been encouraging the development of new industries such as petrochemicals, which are now competing with power plants for gas supplies at home. At the same time, the raft of export agreements signed in the first half of this decade means more gas is being sold to overseas customers, particularly in Asia and the US.
With fresh exploration agreements being put on hold because of today’s low oil prices, associated gas that could have been tapped from new oil wells is unlikely to come on stream any time soon.
For the power sector, the immediate risk from this gas shortage is more power outages during the summer, when demand from air-conditioning units spikes. The main long-term consequence may be to raise the cost of power to the consumer.
If utility firms were able to sell power at commercial rates rather than the subsidised prices forced on them by governments, there would be a far greater incentive for energy companies to invest in new gas production.
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