The strange case of the missing Gulf energy strategy

30 March 2007

The MEED Power & Water conference in Abu Dhabi in early March was told that electricity demand in Qatar increased by 18.5 per cent in 2006 to more than 3,000 MW. The latest consumption estimate suggests it will grow by at least 200 per cent more by 2015.

The projection for Abu Dhabi is almost as startl-ing. According to the new Abu Dhabi Water & Electricity Company (Adwec) forecast, peak demand will rise to more than 14,000 MW in 2020, compared with less than 4,000 MW last year. Dubai's growth is likely to be similar. It is possible, therefore, that the UAE alone will need 20,000 MW of new capacity in the next dozen years. That's about 20 large power stations.

The pattern is being repeated across the region. The GCC may not be the world's largest electricity producer. It is, however, its most profligate consumer. The trend was once an issue of passing concern, but no longer. Despite having cash and world oil at its command, the region is encountering electricity constraints that could slow or even halt its economic ascent.

The most immediate is the limited number of engineering, procurement and construction companies that are able to accept the risks associated with building huge power stations.

Less pressing, but of greater significance, is diminishing GCC gas surpluses. Today, only Qatar can install generation capacity free from worries about long-term gas supply security. All new Saudi power stations are being designed to burn oil. Oman, which already has a gas deficit because of the fall in crude production, is studying the possibility of importing coal.

Despite runaway demand, none of the six GCC states has a credible policy for restraining electricity consumption. In some, nationals simply don't pay - hardly an incentive to turn the air conditioning down.

Conserving energy is policy throughout the region, but practically nothing has been done to cut consumption through building codes that promote insulation. Even the simple measure of orientating buildings to reduce the impact of intense sunshine is a rarity.

Desalination specialists grind their teeth in frustration at the failure to use spare power capacity in winter, when consumption is low, to produce desalinated water that could be stored in tanks or natural reservoirs for consumption in summer. The idea of a two-tier bulk tariff to spread demand across the whole day is yet to be tested.

In North America and Europe, imbalances in supply and demand are addressed through continental power links that allow power stations to operate optimally regardless of short-term swings in local demand.

In Arabia, only Bahrain, which is about the size of central London, and Abu Dhabi have integrated national grids. Work is proceeding on the GCC interconnection along the Gulf littoral. But by the time it starts, none of the six states it links will have a power surplus to sell.

Alternative energy sources are a distant prospect. One of the first constructive uses of wind power in the region will be seen this spring with the opening of Bahrain's World Trade Centre, which has three wind turbines. Despite its obvious potential in Arabia, the independent use of solar power is generally impossible because of government restrictions. The Abu Dhabi Future Energy Company's Masdar initiative is notable principally because it is so exceptional. Turbine suppliers say no GCC client has yet expressed interest in technology that monitors or moderates carbon emissions.

It is in this context that some are raising questions about the possibility of GCC nuclear power plants. Superficially, it appears ludicrous: why go nuclear when the region has so much oil and gas in the ground? The answer is that hydrocarbon reserves must dry and, eventually, alternatives will be found. Safe and efficient nuclear electricity power stations could play a constructive long-term role in the region's energy mix.

Meanwhi

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.