Shortly after the turn of the century, Oman found itself in a compromising position. After enjoying its first flush of revenues from gas in the 1990s, the government had committed a sizeable proportion of its local resources to export as liquefied natural gas. Yet in the interim, population growth and the spread of heavy industry had put an unexpected strain on the country’s power infrastructure, and by extension its gas reserves. In 2008, Oman found itself in the unusual situation of having to import gas by pipeline from the UAE simply to honour its export commitments and meet domestic demand for electricity.

Projected power demand in Oman (MW)
  2009 2010 2011 2012 2013 2014 2015
Main interconnected system 3,371 3,739 4,220 4,507 4,742 4,984 5,348
Salalah system 305 349 427 458 492 523 552
Total demand 3676 4,008 4,647 4,965 5,234 5,507 5,900
Source: Oman Power & Water Procurement Company

Rising consumption

The country has also begun to explore different options for power generation that do not rely on local gas or its dwindling supplies of crude oil. The 1,000MW plant planned for Duqm could become the first coal-fired facility to be built in the Gulf, although that is now doubtful.

Letters of interest are currently being received for the independent water and power plant by the client, Oman Power & Water Procurement Company (OPWPC). It hopes to award the main contracts in August 2011, with a view to having the plant up and running by early 2016. If it decides to go with the coal option, the fuel would likely be imported from Indonesia and South Africa, although Oman does have modest coal deposits of its own.

The Duqm plant is one of several new power facilities being planned in Oman in order to meet rising electricity consumption.

Peak power demand is expected to reach 5,348MW by 2015 in the main interconnected system – the network which covers more than 90 per cent of the country, compared with about 3,000MW in 2008. Government forecasts have been modified slightly to account for the slowdown in the global economy, but OPWP still allows for a “high case” scenario, in which electricity demand reaches more than 6,000MW in the next five years – roughly double current levels.

Demand has been exacerbated by industrial development over the past decade, centred on cities such as Duqm, Sohar and remote Salalah, on Oman’s southern coast. Salalah, home to a fast growing international port and industrial zone, is covered by its own generation and distribution network. Demand there is expected to grow by more than 100 per cent to 552MW in the next five years, with a high case scenario of 710MW at peak demand in 2015.

Construction of a new independent power and water project at Salalah, also known as the Mirbat power plant, began in February. The capacity of the estimated $1bn gas-fired power plant will be between 400-430MW, with the facility expected to be operating at full capacity by 2013. A 15-year build-own-operate contract was awarded to a joint venture of Singapore’s Sembcorp Utilities and Oman Investment Corporation in November last year.

In order to head off its looming electricity deficit, Oman has increasingly turned to the private sector for help, as the Duqm and Salalah schemes demonstrate. In theory, the foreign expertise enables clients to build large-scale, efficient plants with long life spans. But outsourcing also brings added complications, such as complex financing arrangements – Salalah has been delayed by nearly a year due to talks between bidders over the tariff structure.

The complex engineering of such projects can also lead to lengthy bidding processes. In mid-2009, OPWPC changed the scope of its two other planned independent power projects, the Barka 3 and Sohar 2 schemes, as it became apparent that developers would be hard pressed to meet an October 2009 deadline.

Although both 650-750 MW plants are comparatively manageable, not least because they do not contain a desalination component as at Salalah, the decision of OPWPC to request two separate bids for each project complicated matters. The first scenario involved bringing the plants on line in May 2012. The second, more relaxed schedule called for the two units to be at full capacity by April 2013.

The client eventually conceded ground, pushing back its bid deadline and opting for the latter schedule, with the result that in January seven commercial offers were opened for the projects. Only one other company, the US’ Balkan Energy, was eliminated from the running on the basis of its technical proposal.

Tapping supplies

Besides these major projects, Oman is also seeking other ways in which to tame consumption and top up local power production. Five firms submitted bids in January for a project to supply temporary power to the main interconnected system on a rental basis. Plans to expand the existing Al-Ghubrah power and desalination plant call for an additional 500MW to be built within the next five years.

Other options include enhancing existing gas turbine systems and building further connections within the national grid. This would enable the Salalah system, for example, to access into surplus electricity produced by Petroleum Development Oman, the country’s main oil producer.