Turn it up: A number of new projects are set to take off

Increasing the country’s electricity supply will remain a major priority for Oman’s power sector through the foreseeable future. Indeed, the Oman Power and Water Procurement Company (OPWPC) reported in its most recent annual forecast that peak power demand across the country should rise from 4193 MW in 2011 to 7271 MW in 2018 – a substantial rise of around 73% over the seven-year period.

The Grid

There are four electricity systems in Oman, and OPWPC forecasting focuses on the two largest: the Main Interconnected System (MIS), which covers much of northern Oman, and the Salalah System, a relatively isolated network in the country’s south. The OPWPC has calculated that electricity demand should grow by 8% annually in the MIS, from 3845 MW in 2011 to 6582 MW in 2018. The procurement body has also considered a “high case” scenario that would put demand at over 8000 MW by 2018, or roughly 22% higher than expected demand in 2018, according to recent OPWPC data.

Demand Growing

Predicted power demand in the Salalah System should be slightly higher than in the MIS, with an annual growth rate of around 10%. The OPWPC estimates peak demand to reach close to 700 MW in 2018, up from roughly 350 MW in 2011. Taking account for a more rapid pace of industrialisation, the OPWPC’s “high demand” scenario for the system would put demand for electricity at over 1000 MW in 2018 – a close to 50% increase from the expected demand in 2018.

Oman’s increasing electricity demands are not unusual in the region. The World Energy Council (WEC) recently reported that the Gulf region would need an added 100 GW of electricity by 2020 in order to meet rising demand requirements. This represents growth of almost 8% per annum. The WEC attributed the uptick in demand to the region’s burgeoning population, which is forecast to rise by over 30% by 2025 to reach 500m. According to recent data published by Oman’s Authority for Electricity Regulation (AER), registered electricity customer accounts in Oman grew by almost 7.5% in 2011, from around 678,000 in 2010 to over 720,000 the following year. A similar rate of growth occurred between 2009 and 2010.

At 88%, the majority of new customer accounts in 2011 were registered in the MIS. The remaining 12% increase was attributed to new customer accounts created in the Salalah and the R. A. Systems, Oman’s third-largest electricity system.

The AER reported that electricity supply rose by 2.4 TWh between 2010 and 2011, from 16.1 TWh to 18.5 TWh. This represents an increase of almost 15%, up from an 11.4% jump between 2009 and 2010. Much of the new 2011 supply was in the MIS, with supply to industrial and commercial consumers growing significantly. The Majan Electricity Company, which operates in the MIS, reported a notable 32.7% boost in supply in 2011. At 67%, a significant portion of new electricity accounts in 2011 was made up of residential customers, according to AER data. Commercial accounts, representing 28% of the total, made up the next largest category. Although the industrial sector accounted for less than 1% of new electricity accounts, added supply in 2011 largely went to industrial customers. Almost 30% of added supply was used by residential customers, and commercial accounts consumed around 15% of the total.

New Plans

With rising demand, a number of projects are set to substantially increase production capacity. For example, a new natural gas-fired plant is under construction in the northern Musandam governorate. The new independent power project (IPP) is being built through a partnership agreement between the Oman Oil Company (OOC) and the South Korean conglomerate LG. The IPP will be located close to the Musandam Gas Plant, an integrated oil and gas processing facility being developed by the Oman Oil Company Exploration and Production (OOCEP), a subsidiary of the OOC. According to 2011 OPWPC figures, the new IPP should be capable of producing around 120 MW of electricity. This will be used to replace an existing system of diesel generation, with the new IPP becoming Musandam’s primary source of power. Fuel for the IPP will be drawn from the Musandam Gas Plant. While a commercial operation date for the power facility had been set for the end of 2014, the OOC reportedly aims to complete the project a year earlier in order to finish at the same time the OOCEP gas plant is scheduled to begin operations. According to the OPWPC, power from the new IPP will run through a 132-KV grid system to be built by the Rural Areas Electricity Company.

Southern Supply 

Another natural gas-fired power plant recently became operational. Located in Oman’s southern governorate of Dhofar, the independent water and power project (IWPP) successfully passed all its acceptance tests in late May of 2012. Developed by Sembcorp Salalah Power and Water Company (SSPWC), the $1bn IWPP will supply power and water through a 15-year purchase agreement with the OPWPC. In addition, the new facility has a power capacity of 490 MW, and its water desalination capacity is almost 70,000 cu metres per day, according to Sembcorp, the largest shareholder of SSPWC. Construction on the first and second phases of the project was completed in mid-2011 and the first quarter of 2012, respectively. The final phase was finished soon after, and Sembcorp announced that the IWPP would begin full commercial operations in May 2012.

Plans to build a second power plant in Dhofar were confirmed in April 2012. Known as Salalah IPP 2, the new facility is expected to generate a minimum of 200 MW of electricity, though this may be increased to 300 MW when plans are finalised, according to the OPWPC. With the project’s developers anxious to complete the project quickly in order to accommodate the region’s swift industrial, infrastructure and tourism development, the tendering stages of the new IPP are expected take place in 2013. If the process is finalised by the end of the year, a target date to complete the project by 2016 should be reachable.

Big Sur 

Perhaps the most significant power project in Oman is a natural gas-fired plant under construction in the coastal city of Sur. With a capacity of 2000 MW, the plant will be the OPWPC’s largest power project, according to recent figures provided by the body. The project’s developer, Phoenix Power, signed a 15-year power purchase agreement with the OPWPC in mid-2011 and the plant will become operational in two phases. Phase 1 is scheduled to be completed in 2013 and will provide early power of 433 MW through two gas turbines running in open cycle mode. The second phase includes three gas turbines as well as two steam turbines and will increase capacity by 1567 MW. Phase 2 is scheduled to be completed by 2014, according to the OPWPC. Mott MacDonald, a British firm, was awarded a contract for the project’s construction in April 2012. The Sur IPP’s impact on power supply in Oman is expected to be substantial. The OPWPC has reported that once fully operational, the electricity generated by the Sur facility will make up approximately 26% of the national supply capacity. The IPP will also be part of the Sur Industrial Estate and supply electricity to the MIS. Natural gas to the plant will be provided by the Ministry of Oil and Gas.

Future Potential 

More power projects are under way in Barka and Sohar. Al Suwaidi Power Company is constructing an IPP in Barka, and Al Batinah Power Company is building an IPP in Sohar. Both firms were created by a consortium of companies, led by France’s GDF Suez, which was granted contracts to develop the two combined-cycle gas turbine power projects. According to the OPWPC, the Barka and Sohar IPPs will provide identical power capacity – both are expected to supply 745 MW of electricity. This will be delivered on a phased basis. The first phase completed in the summer of 2012 with the delivery of 495 MW of capacity, and a further 250 MW capacity will be added with the completion of the second phase in 2013. Combined, the projects will increase Oman’s generation capacity by 1490 MW.

While the sultanate waits for new power plants to come on-line, the OPWPC has proven adept at temporarily increasing capacity during peak demand periods in the summer months. In 2011 the procurement body contracted 300 MW of temporary electricity through diesel-powered generating units. According to the OPWPC’s most recent annual report, six units were distributed throughout the MIS, and similar temporary generation plans were made the following year due to what the OPWPC saw as potential delays in the first phases of the Barka and Sohar IPPs. Approximately 300 MW of temporary power capacity was secured for the summer months of 2012. Zahir bin Abdullah Al Abri, the general manager of the Mazoon Electricity Company, told OBG, “In terms of distribution, the unbundling of the electricity sector has caused fewer interruptions in services and has increased transparency of operations.”