Although Libya’s political and economic future has yet to form a coherent shape, the signs from Tripoli have so far been encouraging. Current Oil and Finance Minister Ali Tarhouni talks about a smaller state and a vibrant private sector. International executives from the oil and gas industry, among other sectors, believe that with Gaddafi gone the business environment in the country could be significantly improved.

The new order could be great, because doing business when Gaddafi was around was a nightmare

Business executive

Although it is too early to tell how quickly the country will develop in the coming years, one thing can be said with a degree of certainty: if the country’s economy does grow, power and water demand will increase with it. The growth will be even stronger if the National Transitional Council (NTC) and its successor government maintains existing subsidies, among the most generous in the world. If demand rises at pre-war rates or higher, then Tripoli will need to move quickly to boost the country’s production capacity.

Meeting power generation targets

Even before the 2011 uprising, state utilities faced huge challenges in meeting demand. The General Electricity Company of Libya (Gecol), the General Desalination Company (GDC) and executives overseeing the giant underground Great Man-Made River (GMMR) water system, struggled to hit production targets.

In 2009, Gecol estimated peak power demand would rise from 5,000MW in 2008 to about 8,582MW in 2010. By 2015, according to Gecol’s pre-war estimates, this would have risen to 12,621MW. The forecast for 2020 was double that of 2010, with peak usage of 18,417MW. Meanwhile, total installed generation capacity at the end of 2010 was less than 7,000MW and the transmission system was severely dilapidated.

In the water sector, the situation was similar. Figures obtained by MEED show that in 2009 the three main sources of potable water in the country – the GMMR network, other groundwater sources and desalination plants – provided about 1.6 million cubic metres a day (cm/d), 740,000 cm/d and 290,000 cm/d respectively, giving a total supply of 2.63 million cm/d. There are now more recent solid demand figures that are accurate, but in 2010, industry sources said that demand “far outstripped” supply by up to twice production capacity and, as with electricity, demand was expected to continue to grow.

With imported supplies of bottled water and fuel in increasingly short supply at the height of the revolution, the situation became even more acute. Power stations shut down, as did desalination plants in August and September during the dying days of the Gaddafi regime. Some water from the GMMR, which draws water from giant aquifers under the Sahara Desert, was cut off by Gaddafi loyalists retreating from Tripoli.

Tripoli residents reported frequent black- and brown-outs, along with a severe shortage of water in August and September. A lack of the most basic of commodities was seen across the country, with some analysts suggesting the NTC would struggle to resume public services.

The good news for Libyans is that it seems much of the country’s power and water infrastructure is mostly intact, having sustained minimal damage during the conflict.

By 21 September, the NTC’s ambassador to Dubai, Arif Ali Nayed, who headed up stabilisation efforts in the country, said that supplies of food, water and electricity had largely been restored across the country.

“There’s water, there’s electricity, there’s fuel and there are no more line-ups at the gas station,” he said. “People are back to work and shops are open. I think it has been a tremendous success.”

Mohanad Wetfani, a former member of the stabilisation team, now a Tripoli-based consultant, also says utilities are now largely up and running everywhere.

“When Tripoli had problems with water, we worked with key leaders from the water industry to get everything working,” he says. “I don’t think it is an issue anymore; that was back at the end of August. Most of the infrastructure damage has been fixed by now and the only issue is really with the telephone network.”

Beyond Tripoli

“There is everything in Tripoli now, although I don’t know about everywhere else,” says one resident, a former university lecturer and water sector analyst. “It is quite surprising how fast everything was fixed.”

However, even in late October, aid workers were reporting a lack of electricity and potable water in Sirte and Bani Walid, Gaddafi’s final strongholds, where some of the fiercest fighting in the civil war took place. Much infrastructure in the area, including water and electricity transmission facilities, was shattered and could take some time to repair or replace, says one non-governmental organisation worker, who visited both cities in October.

Key for the NTC and its successor government will be repairing and upgrading the country’s power and water networks, which were in a serious state of disrepair before the revolution. In 2007, Gecol, then in charge of most of the country’s desalination capacity, estimated that about 800,000 cm/d of capacity was either shut down or running at reduced rates because of neglect. Sources with ties to Gecol also say some of the country’s early heavy-fuel oil electricity plants were running at low rates before the revolution, due to a lack of maintenance and investment.

The Gaddafi regime’s solution to the deterioration of Libya’s power and water facilities was to invite investors into the country to build new power and water plants with the output sold on to the government. These schemes hit severe hurdles, largely because of the model Gecol was using in the power sector – awarding construction contracts for schemes before arranging funding – as well as the country’s notorious bureaucracy and huge subsidies in the power and water sector.

Planned power and water projects

In 2009, South Korea’s Hyflux signed a memorandum of understanding with Tripoli for the joint development of two new desalination plants, with a combined capacity of 900,000 cm/d. Another memorandum was signed the same year with Befesa of Spain for the development of plants at Misrata, Sirte and Tripoli West, but neither company had advanced beyond the contract negotiation stage when the civil war broke out.

After years of wrangling, in November 2009 South Korea’s Hyundai Engineering & Construction was finally awarded the $1.36bn engineering, procurement and construction (EPC) contract for a new power plant at Tripoli West. This was to be the country’s first independent power plant, with Abu-Dhabi based Oasis International Power set to take over the plant once it was commissioned. Neither Oasis nor Hyundai was available for comment on the project’s status.

Other power projects did proceed, with Gecol taking sole charge, but even these were troubled. In 2007, Turkey’s Enka Teknika and Libyan/South African contractor Global Electrical Services Company (Gesco) won deals to build power plants at Zuetina and Sebha, while Hyundai Heavy Industries and Gesco were awarded the EPC contract for a larger plant at Sarir.

Work on the Sebha plant, meanwhile, had not begun by the end of 2010 because of difficulties related to feedstock supplies. The Sarir plant was scheduled for commissioning in early 2011, but the status of the facility is not known.

MEED understands that the Enka Teknika project manager for the first two schemes has returned to Tripoli and is part of a team assessing the condition of the Zueitina plant, which was due to be commissioned in mid-2011.

Contractors working in Libya before the revolution say the NTC will focus firstly on restoring the country’s existing water and power output to pre-war capacity. They say it will encourage contractors to work on plants that were close to being commissioned before looking at potential upgrades or new plants. This means contractors with a history in the country are likely to win the most work with Gecol, GDC and the General Water Authority (GWA), which oversees the GMMR project along with the rest of the country’s groundwater resources.

This has surprised some observers, as has the decision to leave the management structures of the state utilities largely intact. Ahmed Elgmati has been kept on as chairman at Gecol as has his GDC opposite number, Abdulgasem Uneas, say sources with ties to the NTC. It was unclear at the time of writing whether Omar Salem, chairman of the GWA, was still in his post. This should make it easier for contractors to re-establish links with state utilities and ensure continuity, but it is not enough for some contractors.

“I think that it is still very uncomfortable over there at this moment,” says a senior executive at one major international engineering firm. “There are a lot of tribal issues going on, and although they are sitting on a lot of investment wealth, it is unclear who they will favour when it comes to contracts.”

Retained management

Meanwhile, the NTC’s power to award deals is limited. It is a transitional council, so is only meant to manage the day-to-day running of the country until a unity government can be formed and democratic elections can be held, probably in mid-to-late 2012. The new government will also need time to bed in before making major new investment decisions, meaning that it could be 2013 or 2014 before major contracts in any sectors are tendered and as late as 2015 before they are awarded.

“The new order could be great, because doing business when Gaddafi was around was a nightmare,” says a business executive with extensive Libyan experience. “But we still don’t know what the new government will look like, whether they will be keen to use foreign contractors, whether they will want international development, or what. I think you’ll find it is a good few years before we really know how interesting it is going to be, and there have certainly been false dawns in Libya before.”