States push ahead with vital power and water schemes

19 December 2013

Rapid population and industrial growth will ensure demand for electricity and water continues to soar

Demand for electricity and water will continue to grow at a rapid pace throughout the Middle East and North Africa (Mena) in 2014 as a result of expanding populations and economies.

The challenge of providing adequate utilities has been given fresh impetus following the uprisings that swept across the region in 2011, with governments under pressure to meet the social and economic needs of their people.

Project investment

The largest demand for new power plants will be in Egypt, with an estimated 30,000MW of new capacity needed by 2020. Iraq is currently undertaking a programme to build more than 12,000MW of new capacity by 2016, while Saudi Arabia and Kuwait will require an additional 23,919MW and 9,797MW respectively by 2020. The actual newbuild requirement in both countries will likely be much higher, given the increasing amount of capacity that will need to be replaced due to age. This will also likely be the case in Libya, where much of the existing infrastructure is outdated or was damaged during the revolution in 2011.

Kuwait is set to become one of the region’s most active power and water projects markets in 2014

The region will also require significant investment in the water sector, as countries seek to increase desalination capacity and build sewage networks and wastewater treatment facilities. The Mena region is considered the most water-scarce part of the world. As populations continue to grow, governments are under increasing pressure to provide suitable water supply and sanitation facilities. Due to its low rainfall, the GCC is the largest consumer of desalinated water, with installed capacity reaching an estimated 16.8 million cubic metres a day (cm/d) in 2011.

While there was not much activity in the region’s private developer market in 2013, expenditure in power and water projects remained strong, with almost $27bn-worth of contract awards made in the utility sector by 24 November, slightly lower than the $29.6bn-worth of awards made in 2012.

The market will remain lucrative in 2014, with $200bn-worth of projects in various stages of the planning and bidding phase, according to regional projects tracker MEED Projects.

Saudi Arabia is set to remain the region’s biggest utilities market in 2014 in terms of new projects. By 24 November, $9.5bn-worth of contracts had been awarded in the kingdom’s power and water sector in 2013. The growth in Saudi Arabia’s power and water sectors is being driven by an increase in demand from both the residential and industrial sectors.

Saudi Electricity Company (SEC) finally signed a power purchase agreement (PPA) for the Rabigh 2 independent power project (IPP) with the local Acwa Power on 30 November, the biggest private deal since 2011. In January, SEC selected Acwa as the preferred bidder, but the signing was delayed due to the decision to change the configuration of the plant from oil to gas-fired.

The next planned IPPs in the kingdom are Duba 1 and Duba 2. The first scheme is planned to use integrated solar combined-cycle technology, which will combine solar and gas power for an output of 550MW. It will be the first IPP of this type in the region.

Saudi Arabia is also planning the region’s largest renewable energy programme. In early 2013, the King Abdullah Centre for Atomic and Renewable Energy (Ka-Care) set out a roadmap for delivering the first phase of its ambitious renewables programme, which is set to produce 23,900MW of energy by 2020 and 54,000MW by 2032. Riyadh is also currently working on plans to provide 21,000MW of power from nuclear generation by 2032.

IPP activity will be considerably less than engineering, procurement and construction (EPC) project work in the coming years, with SEC planning to build several major projects using the EPC procurement model. As of June 2013, the company had about 25,760MW of new capacity in the planning and bidding stages.

The kingdom’s desalination sector will also offer lucrative opportunities in 2014, with demand growing by 3-4 per cent a year. The largest contract awarded in 2013 was the estimated $310m deal to build a 178,000 cm/d desalination plant to supply the Sadara petrochemical complex in Jubail Industrial City.

The kingdom will also make significant investments in the wastewater sector. National Water Company is planning to spend $2.4bn a year on water projects until 2028. This includes an average of $600m a year on treated sewage effluent.

Kuwait demand

After a relatively quiet few years, Kuwait is set to become one of the region’s most active power and water projects markets in 2014. As with much of its infrastructure, the utilities sector has suffered from a lack of investment since the Gulf War in 1991 and requires a significant overhaul as it experiences rapid population growth. Industrial demand will grow too as it moves ahead with major infrastructure schemes.

Kuwait will require about 10,000MW of additional power and new desalination capacity of 270 million gallons a day (g/d) by 2020. After a protracted tendering and procurement process for the country’s first independent water and power project (IWPP), the contracts for the Al-Zour North scheme were signed on 12 December. It will have a power capacity of 1,500MW and 102-107 million g/d of desalinated water.

Following the conclusion of the Al-Zour North phase 1 negotiations, the Partnerships Technical Bureau (PTB), the government body set up to oversee Kuwait’s public-private partnership (PPP) programme, and the Ministry of Electricity & Water will push ahead with the next phase of the development, the Al-Zour North 2 IWPP. In June, the PTB invited companies to express interest in the second phase, which will have a similar scope and the same power and water desalination capacities as the first phase.

Kuwait is also set to invest heavily in building new wastewater treatment plants and upgrading its sewage networks. One of the largest planned projects is the Umm al-Hayman wastewater plant, to be developed as a PPP. It will have an initial capacity of 500,000 cm/d, which is planned to be increased to 700,000 cm/d by 2020. The PTB is currently waiting for approval from Kuwait’s Higher Committee before it issues a request for proposals.

Doha plans

Qatar is also due to award several contracts for major utility projects in 2014. Qatar General Electricity & Water Corporation (Kahramaa) has not tendered a major power project since 2008, having built up one of the biggest reserve margins in the GCC. However, with Doha now beginning to award contracts and execute projects in preparation for the 2022 Fifa World Cup, there is a need for additional power and water capacity. Demand for electricity is expected to grow by 10-12 per cent a year over the next five years.

The largest planned project is the Facility D IWPP, which is planned for the Qatar Economic Zone near Doha. The plant is expected to have a power generation capacity of 2,400MW and a desalination capacity of 130 million g/d. The desalination component will partly use reverse osmosis (RO) technology; the first time the country has employed it on a large scale scheme. Developers have been prequalified and Kahramaa has invited bids for February.

Kahramaa also plans to develop an independent water project (IWP) at Ras Laffan Industrial City, with a RO desalination capacity of 45 million g/d.

Both Abu Dhabi and Dubai are planning to move ahead with IWPP projects in 2014. Abu Dhabi Water & Electricity Authority is currently in negotiations over the award of the contract for the Mirfa IWPP, for which it received bids in March. The contract is expected to be awarded to the UK/French GDF Suez-led consortium by the end of the first quarter. The plant will have a capacity of 1,500MW of power and 53 million g/d of water.

Dubai Electricity & Water Authority (Dewa) is moving ahead with plans to develop its first IPP, which will use clean coal technology. In October, Dewa received bids for the advisory contract on the proposed 1,200MW IPP, which will be located at Hassyan.

Renewable energy

Both emirates are making progress with renewable energy schemes too. In March, Abu Dhabi Future Energy Company (Masdar) opened its 100MW grid-connected concentrated solar power plant, the largest in operation in the world. The UAE capital is also planning to build a waste-to-energy plant, which will receive about 1 million tonnes of municipal solid waste a year and convert it into 100MW of alternative energy. Abu Dhabi National Energy Company (Taqa) is currently evaluating prequalification entries for the scheme.

In October, Dewa began commercial operation of the 13MW first phase of its Mohammed bin Rashid al-Maktoum Solar Park. The utility company has also invited firms to submit bids for the advisory services contract for the 100MW second phase, which will be developed as an IPP.

The increasing focus on the use of renewable energy to generate electricity will be a key feature of the Mena power sector in 2014. Jordan is also pushing ahead with a number of renewable schemes and, in North Africa, Morocco is leading the way with several large projects. This includes the 350MW Abdelmoumen hydropower project and the next phase of the Noor solar power complex in Ouarzazate. The country plans to produce 42 per cent of its power through renewable energy by 2020.

Rapid population and industrial growth will ensure that demand for power and water in the region will continue to rise in 2014. While the GCC states, and Saudi Arabia in particular, will remain the key project markets in the next 12 months, strong population growth throughout the wider Mena region will put pressure on governments to develop major power and water projects. Progress will require political stability and a will from decision makers to push ahead with these vital schemes.

Power & Water

The utility sector will remain lucrative in 2014, with $200bn-worth of projects in the planning and bidding phase

Source: MEED Projects

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