Saudi Arabia and Qatar prop up GCC power sector

09 July 2015

Power contract awards down 58 per cent year-on-year

  • Saudi Arabia and Qatar accounted for 67 per cent of power contract awards in first half of 2015
  • Packages on Jizan Integrated Gas Combined-Cycle (IGCC) project accounted for 37 per cent of awards in first half of 2014
  • Contract awards in power sector for first half of 2015 were 58 per cent down on same period last year

Saudi Arabia and Qatar propped up the GCC’s power construction contract awards for the first half of 2015, with the value of project awards totalling $5.6bn, 67 per cent of the total $8.3bn worth of contracts awarded.

Despite some sizeable contract awards, the value of power contract awards in the GCC in the first half of 2015 was 58 per cent lower than the $14.2bn of contract awards made in the power sector in the first half of 2014. Unsurprisingly, due to the size and value of individual projects, $6.5bn of the $8.3bn worth of power awards in the first half of 2015 were for power generation projects, with the remaining $1.8bn coming from the transmission and distribution sector.

A significant reason for the higher awards in 2014 was due to the multiple packages on the Jizan integrated gas combined-cycle (IGCC) project, which contributed to more than $5bn worth of awards in 2014.

In 2015, the final package on the IGCC project, which is part of the wider $20bn Jizan Refinery project, the $1.9bn air separation unit (ASU)/oxygen supply package, was awarded to the local Acwa Holding and the US’ Air Products.

If the Jizan IGCC project is removed from the analysis, the $6.4bn worth awards for the first half of 2015 are still significantly down on the $10.5bn worth of contracts awarded in the first half of 2014.

Apart from the air separation package, other major contracts awarded in the kingdom’s power sector in 2015 include various packages on the PP13 and PP14 power projects, which are being developed in the Riyadh area.

To date, $520m worth of civil and site utility packages have been awarded. In May, MEED reported that SEC was evaluating bids for the power island contracts on the power projects, with Turkey’s Gama having submitted the lowest price, SR2.4bn ($640m) for both projects. The contract awards for these should be signed in the third quarter of this year.

In addition to the PP13 and PP14 projects, state utility Saudi Electricity Company (SEC) has also received bids for the contract to upgrade the existing PP9 power plant to combined-cycle conversion. A consortium of Spain’s Initec Energia and the local Saudi Services for Electro Mechanical Works (SSEM) submitted a low bid of $320m for the conversion contract in May.

On 25 June, SEC received bids for the 550MW Duba integrated solar and combined-cycle (ISCC) power project, with Spain’s Abener submitting the lowest bid of $547m.

With bids due in July for the 1,050MW Waad al-Shamal ISCC and the 1,500MW Aramco/SEC joint venture Fadhili IPP in August, the kingdom will remain one of the GCC’s most lucrative markets into the second half of 2015 and into 2016.

Qatar was the second most lucrative GCC power market in the first half of 2015, with $1.6bn worth of contract awards. The majority of this was for the country’s next independent water and power project (IWPP), Facility D. A consortium led by Japan’s Mitsubishi was awarded the contract in. To develop the IWPP, which will have a power capacity of  2,280-2,520MWand a desalination capacity of 123.5-136.5 million imperial gallons a day (MIGD) of water.

Dubai has reaffirmed its commitment to implementing renewable energy on a large scale in 2015, with the Dubai Electricity and Water Authority (Dewa) awarding a developer contract to Saudi Arabia’s Acwa Power to develop the 200MW second phase of its Sheikh Mohamed bin Rashid al-Maktoum Solar Park in March, double the capacity of the initially planned 100MW second phase. The emirate has since increased its renewable energy target to 15 per cent in 2030, treble the original 5 per cent target. In May, Dewa received bids for the consultants to submit bids for the advisory services contract for an 800MW third phase of the solar park, which would be far the biggest single-phase development of a solar park in the region.

Moving into the second half of 2015, Kuwait is set to emerge as one of the most attractive power markets in the GCC, with tenders scheduled to be issued for two major IWPPS, Al-Khiran 1 and Al-Zour North 2. While Kuwait’s first IWPP, Al-Zour North 1, suffered from a long tendering and procurement process, recent amendments to the country’s PPP law and the reformation of the country’s PPP body, now called the Kuwait Authority for Partnership Projects (KAPP), there is renewed optimism that Kuwait can finally deliver on its growing pipeline of vital power projects.

In addition to the IWPPs, in May KAPP invited companies to prequalify for the planned 280MW ISCC project, as the country seeks to build up its renewable energy portfolio. With the country’s Ministry of Electricity and Water (MEW) estimating that 10,500MW of additional power capacity will be required by 2020, there should be a number of further major contracts tendered in the next 12 months.

In the first half of 2015, one of the largest power awards in the Gulf region was for the 400MW Salalah 2 IPP in Oman. A consortium led by Japan’s Mitsui and Saudi Arabia’s Acwa Power was selected in March to develop the $620m power scheme in the southern part of the sultanate.

One of the largest power projects currently in the GCC’s pipeline is the 3,200MW Ibri/Sohar 3 IPP, which will be developed over two sites. The Oman Power & Water Procurement Company (OPWP) received technical submissions from four groups in June, and has set a submission date in early August for commercial bids.

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