Compromise is key to progress in Omani power sector

08 October 2009

To maximise competition, Oman not only extended the bid deadline for two new power plants, but also cut the developers’ work in half

Developers have been relieved to hear that Oman Power & Water Procurement Company (OPWP) has abandoned the more aggressive of two plans to begin power production at its Barka 3 and Sohar 2 independent power projects.

In a difficult market, developers had welcomed the two 650-750MW projects for their relatively manageable size. The fact that the schemes were for power only, rather than water as well, made them more straightforward to deliver. However, OPWP’s decision to request separate prices for two different scenarios for the delivery of the project significantly complicated matters.

The first scenario involved bringing full power capacity on line in May 2012. The second gave developers more time, allowing them to complete the schemes by April 2013. This set-up meant that developers would have had to prepare two separate bids for the projects, submitting two sets of tariffs, and arranging two sets of financing for the engineering, procurement and construction contracts.

Faced with a looming mid-October deadline, developers argued they could not prepare their bids in time, and warned that the client would risk receiving no bids if it insisted on the original schedule.

Wisely, OPWP conceded ground. To maximise competition and secure as many bids as possible, the utility not only extended the bid deadline to December, but also cut the developers’ work in half. It has now scrapped the 2012 delivery date and settled for 2013 instead.

In the context of the global economic slowdown, Oman can afford to delay some projects. OPWP acknowledges that it has revised its electricity demand projections downwards.

Both Oman and its power contractors stand to benefit if the utility continues to listen to reasonable criticisms of how it manages its projects.

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