With a 15 per cent reserve margin and the Addur independent power project set to bring a further 834MW into the market in 2011, Bahrain is sitting comfortably as supply keeps pace with demand
New capacity will be added in two years’ time, with the Addur 2 IPP expected to bring another 1,200MW into the market
IPP=Independent power project. Sources: Finance Ministry; MEED
By this summer, Bahrain’s third independent water and power project (IWPP) at Addur will be fully commissioned by developer GDF Suez and Kuwait’s Gulf Investment Corporation, adding another 834MW to the 400MW already being produced at the site. Its operation before the 2011 peak is good news for Bahrain, which in 2010 suffered blackouts that led to the emergency supply of 150MW from Qatar, using the new GCC interconnector. Today, installed capacity is 3,177MW, but before Addur’s 400MW entered the system, installed capacity was too close to the 2,708MW peak demand for comfort.
The country’s Electricity and Water Authority (EWA) is working on forecasts of 10 per cent growth in peak demand per annum. Many expected that the real-estate downturn would lead to these forecasts being revised down. Residential demand accounts for approximately 60 per cent of electricity requirements and, between 2008 and 2009, the peak demand rose by only 5 per cent. However, it seems that EWA had correctly predicted forecasts and, between 2009 and 2010, power demand was almost back to the record 12 per cent peak seen between 2006 and 2007. At this level of growth, it is likely that Bahrain will have to move forward with future power plants planned for the Addur site.
“Bahrain is quite comfortable with supply,” says Sheikh Khalid bin Mohamed al-Khalifa, chief of privatisation and outsourcing directorate at the Finance Ministry. “We are planning for peak demand for the next two years – so in two years time it will be necessary to develop Addur 2. It may be earlier if demand increases more than expected.”
The Addur 2 independent power project (IPP) is expected to bring another 1,200MW into the market, with Addur 3 and 4 contributing a similar amount. Of course, building new capacity is of little use if the transmission network is unable to cope with demand. This was understood to be one of the reasons behind the 2010 blackouts. To correct this, EWA has made investing in the network a priority. A $370m contract for 39 new electrical substations was awarded in mid-2009 and is now over 55 per cent complete.
Plans are also under way for a new 400kV power station and transmission network. “The entire network is now more robust,” says Al-Khalifa. “The GCC has a lot of options now, but we have the locations available [for Addur 3 and 4],” he says.
Addur 3 and 4 will require feedstock and securing gas remains a challenge. EWA says that no progress has been made on negotiations to secure further gas supplies via pipeline from Iran or Qatar. This means that liquefied natural gas imports and the drilling of eight new gas wells are likely to present the most obvious feedstock options. In late January, Bahrain’s oil and gas affairs minister Abdulhussain Mirza confirmed that it would drill new gas wells in a bid to double existing production from 250 million cubic feet a day (cf/d) to 500 million cf/d.
The forthcoming Addur 1 also brings with it a further 48 million gallons a day (g/d) of desalinated water supply, which is much needed as average demand growth between 2008 and 2009 hit a massive 20 per cent.
Most of the current desalinated water is produced at Hidd, which has a massive 90 million g/d of output. Average demand in 2010 was 139 million g/d and in February 2011 this was hovering at about 133 million g/d. Meanwhile, production of desalinated water was 120 million g/d with 13.6 million g/d of groundwater supply. Storage capacity is 218 million g/d, providing a buffer, but in the long-term, more capacity is required as the government seeks to reduce abstraction of groundwater. Addur 3 is set to have a further 48 million g/d desalination capacity and plans to replace the ageing Sitra plant with a new IWPP are under consideration by EWA.
Financing the expansion is another challenge for Manama. Addur took six months to reach financial close, following its launch in January 2009. However, this was a matter of timing more than anything else. When it finally closed in June, it raised $1.7bn from international banks, along with £400m in equity investment, and the deal was marked as the start of the recovery for project finance. Its successful completion involved higher margins and shorter tenors than had previously been features of regional power schemes.
Bahrain is sitting comfortably as new capacity comes online, and although it faces feedstock and financing issues in the future, the kingdom is prepared for the challenge.
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