Key fact

Power demand growth slowed in 2010 to about 7 per cent, from 12-13 per cent a year in 2008-09

Source: Oman Power and Water Procurement Company

Oman has long suffered from a tight demand/supply balance in its power sector. Over the past decade, rising consumption has strained the electricity system, prompting Oman Power and Water Procurement Company (OPWP) to embark on a series of new power projects in order to meet summer-time demand.

Oman uses seven-year forecasts, but is considering producing forecasts that look even further ahead

Growth in usage slowed in 2010 to about 7 per cent, from 12-13 per cent a year in 2008-09. Although temporary power facilities are still needed to meet peak demand, the slowdown is an opportunity to focus on long-term generation capacity building.

In July, OPWP awarded a contract to build a 2,000MW independent power plant (IPP) at Sur and it is evaluating Duqm as the potential site for the next major project.

Should Duqm not be chosen for the next project, another site will be identified within the Main Interconnected System (MIS), to come online in 2016-2017.

Preventing power outages

Oman will need to keep up the pace on tendering and constructing new power generation facilities if it is to avoid outages.

OPWP has stressed the importance of maintaining accurate demand forecasting. Its projections take low, high and average scenarios into consideration and this determines the rate of investment in new projects. The sultanate currently uses seven-year forecasts, but is considering producing forecasts that look even further ahead.

Aside from the temporary power generation projects, future power projects are to be gas-fired

The easing of demand gives Oman the opportunity to improve the balance in its power generation sector. Although the popular protests that began in January, major cabinet reshuffles and disruption due to corruption investigations have the potential to derail the plans.

Power demand in the MIS is expected to increase at about 9 per cent a year up to 2017. OPWP forecasts that consumption will grow from 3,500MW to 7,899MW by 2017 under a high-case scenario, to 5,402MW in a low-case scenario and to 6,371MW if electricity demand increases at a medium-case scenario. Such rates are similar to that seen by the sultanate throughout much of the 1990s and represents a decline in the growth rate in 2008-09.

In 2010, average demand for power in the MIS increased by 7 per cent to 1,924MW, while peak demand increased just 2 per cent to about 3,500MW. In the preceding years, this figure was about 12-13 per cent.

Power procured by OPWP in 2010
Plant Power capacity (MW) Quantity of power purchased (GWh)
Al-Ghubrah  457 2,388
Al-Rusail 653 3,394
Wadi al-Jizzi 284 910
Barka 1 427 2,328
Al-Kamil 285 1,310
Manah 271 1,321
Sohar 585 2,669
Barka 2 678 2,232
Others  116 302
MIS total 3,756 16,855
Salalah 298 1,891
Overall total 4,054 18,746
Source: Oman Power and Water Procurement Company

In Oman’s Salalah system, peak demand is expected to increase from 356MW to 719MW by 2017. Under OPWP’s low-case scenario, consumption growth is about 8 per cent a year. This would result in peak demand reaching 598MW by 2017. Under high-case assumptions, demand is increased substantially by a pick-up in large industrial loads, resulting in peak demand growing at an average of 14 per cent a year.

In January this year, OPWP awarded contracts to four companies to install temporary power generation units in the sultanate. Oman’s Ofsat, Rental Solutions and Services of Saudi Arabia, the UAE’s Sakr Energy Solutions and the US’ Energy International all submitted bids for a contract to supply 300MW of temporary power capacity in readiness for this summer.

Power generation contract divided

Instead of awarding the contract to one bidder, OPWP decided to divide the work and award contracts to each company. The original plan was to add 600MW in temporary power generation, but this was later revised down to 300MW due to changing demand projections. The diesel-fired units will be built next to existing substations and power will feed into the MIS.

Peak electricity demand  in MIS
Year Expected average peak demand in MIS (MW)
2010 3,500
2011e 4,048
2012f 4,383
2013f 4,714
2014f 5,079
2015f 5,488
2016f 5,923
2017f 6,371
MIS=Main Interconnected System, e=Estimate; f=Forecast. Source: Oman Power & Water Procurement Company

In the Salalah system, 75MW of additional temporary power capacity is scheduled to come online ahead of the commissioning of the Salalah independent water and power project (IWPP) later this year. The temporary capacity will be diesel-fired and is to be provided through Rural Areas Electricity Company. The units will be installed at two sites.

In terms of permanent capacity, two additional 744MW units at Barka and Sohar will have a positive impact. The Barka 3 and Sohar 2 IPPs reached financial close in September 2010. Early power for both is expected to be commissioned by May 2012, with full completion of the plants by April 2013.

In July, OPWP awarded the contract to build and operate an IPP at Sur to a consortium of Japan’s Marubeni Corporation, Qatar Water & Electricity Company, Japan’s Chubu Electric Power Company and the local Multitech. Under the scheme, 400MW of power capacity will be brought online by the summer of 2013. Full commissioning is scheduled for mid-2014.

Sur is located south of the capital on the coastline and offers a large area ready for construction, as well as access to an existing pipeline that feeds the Oman liquefied natural gas facility operating nearby. The Gas Ministry has allocated gas for the project.

Revised plans for Oman’s power sector

OPWP decided to develop the Sur scheme after dropping plans to build an IWPP at Al-Ghubrah. Although the Al-Ghubrah project was intended to take advantage of established infrastructure in the area and allow an existing plant at the site to be retired, it was cancelled due to concerns over its environmental impact and its proximity to residential areas in Muscat.

Peak electricity demand  in Salalah system
Year Expected average peak demand in Salalah system (MW)
2010 356
2011e 415
2012f 471
2013f 537
2014f 597
2015f 638
2016f 678
2017f 719
e=Estimate; f=Forecast. Source: Oman Power & Water Procurement Company

The advisory team selected to work on the shelved Al-Ghubrah project was transferred to the Sur IPP. The team comprises the UK’s Ernst & Young, DLA Piper, British Power International and Glen House Capital Strategies.

Beyond Al-Ghubrah, OPWP plans to develop another major power project in the MIS system, which could be brought online as early as 2016. In the event that demand growth appears to be tracking lower than the high-case projection over the next year or so, it may be possible to push back this start-up date to 2017 or even 2018.

This project could be built at Duqm, where a coal-fired IWPP was planned before OPWP shelved the project in March 2010, again due to environmental concerns. A study is under way at the Duqm site and is set to be concluded by the end of the summer.

“The study is primarily looking at the next option for power in Duqm,” says a source at OPWP. “It will determine whether a new project at Duqm will or will not be connected with the MIS. It will also consider the size of the new project, timing and fuel.”

The size of the project will determine whether the project will be connected to the MIS or remain a separate power island serving the electricity demand of the Duqm area. “It [would be] a long – and expensive – connection, so it would only make sense [to link the project to the MIS] if there was a lot of demand in Duqm,” says the OPWP source.

At 445MW, the Salalah IWPP will provide a sizeable portion of the region’s power needs. Nevertheless, OPWP has said it intends to add further capacity to the Salalah system no later than 2016. The utility is carrying out a detailed study for such a project.

OPWP is required to consider the opportunity for combining power generation with water desalination so as to benefit from economies of location and co-procurement. At the request of the Public Authority for Electricity and Water (PAEW), OPWP intends to consider the potential for combining desalination with power generation capacity as part of its strategic review of options for a plant at Duqm.

Oman’s primary fuel resource for power and water production is natural gas, which totalled about 5.7 billion cubic metres in 2010. Aside from the temporary power generation projects, all future power projects in the sultanate are to be gas-fired.

From 2015, Oman hopes to generate about 50MW (or 1-2 per cent of the total energy mix) from solar power. However, plans for the country’s first solar project have stalled while cabinet approval is pending.

Solar power

PAEW completed a study for a large-scale solar project and submitted the results in February. According to an official statement, “the government is reviewing PAEW’s proposal and has indicated that it will need some time to consider PAEW’s very detailed proposals. In the meantime, OPWP will continue to progress work to support the implementation of the project.”

If the project is revived, it will likely use a combination of photovoltaic solar and either concentrated solar power or tower technology and will have a capacity of 50-200MW.

Oman experienced severe power cuts in the summer of 2009 and 2010 due to rapidly rising demand and a failure to bring sufficient new generation capacity online in the preceding years. OPWP has since moved ahead with its capacity building programme, assisted by a significant easing of demand.

Looking ahead, OPWP’s plan to work with the government to develop a longer-term strategy for demand forecasting is an important development. This is expected to include reports that look beyond the seven-year horizon.

In doing so, OPWP intends to tender and commission private power projects at a manageable pace. As the first major project following social unrest, the Sur IPP will prove crucial.