Qatar focuses on energy efficiency, reduced consumption of utilities

In the two decades since it first exported liquefied natural gas (LNG) in 1997, Qatar’s economy and population has expanded rapidly, bringing with it a significant increase in demand for electricity and water. A report published in 2015 by the US Energy Information Administration noted that the utilities sector accounts for most of Qatar’s natural gas consumption. From 2007 to 2017 the country’s annual consumption of natural gas doubled from 24bn cu metres to 47.4bn cu metres, according to BP’s “Statistical Review of World Energy 2018”.

In 2018 the country set the goal of boosting annual LNG output by 43% to 110m tonnes by 2024, the demand for which is expected to surge in the medium term given a number of major infrastructure projects in the pipeline, including a metro rail network and the planned city of Lusail. The embargo imposed on Qatar by Saudi Arabia, the UAE, Bahrain and Egypt has resulted in a new impetus for the construction of long-term storage reservoirs for drinking water and an increased need for irrigation as the country seeks to grow more of its own food.

Structure & Oversight

The state-owned energy company, Qatar Petroleum (QP), is the sole supplier of natural gas to independent water and power producers (IWPPs). IWPPs have a single customer: Qatar General Electricity and Water Corporation (Kahramaa), which possesses and maintains all the transmission and distribution systems for desalinated water and electricity.

Qatar Electricity and Water Company (QEWC) is a public shareholding company. It was established in 1990 and is Kahramaa’s main supplier, with a market share of 62% for electricity generation and 79% of water desalination. The government and its affiliates own approximately 60% of QEWC’s share capital, and the remainder is shared between private companies and individuals. At the end of 2017 QEWC’s total power generation and water desalination capacity, including projects under construction and overseas assets, stood at 11,087 MW and 536.5m imperial gallons per day (MIGD), respectively.

Performance

Growth of the utilities sector has slowed since 2013. According to data from the Planning and Statistics Authority (PSA), utilities was the fifth-most dynamic sector over the 2013-17 period, with a compound annual growth rate of 5.8%. At constant prices the sector grew by 11.9% in 2013, 11.1% in 2014, 7.2% in 2015 and 4.1% in 2016. In 2017 utilities’ contribution to GDP was QR3.7bn ($1bn) at constant prices and QR6.1bn ($1.7bn) at current prices, representing increases of 0.9% and 3%, respectively, on 2016 figures.

In the first quarter of 2018 the sector’s contribution to GDP at constant prices dropped by 8% yearon-year (y-o-y) from QR755m ($207.3m) to QR695m ($190.9m). At current prices, the sector was valued at QR1.1bn ($302.1m), representing a fall of 3.5% y-o-y.

Policy

Through its National Programme for Conservation and Energy Efficiency (Tarsheed) and other efficiency measures, Kahramaa has been attempting to reduce the consumption of both desalinated water and electricity since 2012. Water and electricity consumption tends to increase in the hot summer months, when domestic customers take more showers and use more air conditioning, before dropping in the cooler months after February.

In the second phase of the Tarsheed programme, which will run from 2018 to 2022, Kahramaa aims to reduce per capita consumption of electricity and water by 8% and 15%, respectively, in line with the National Development Strategy 2018-22. According to Kahramaa’s sustainability report published in 2016, consumption of water and electricity per capita had fallen by 20% and 18%, respectively, since the implementation of Tarsheed in 2012. Smart meters play an important role in Kahramaa’s efforts to help customers monitor and reduce water and electricity consumption. By 2018 Kahramaa had installed a total of 17,000 electricity meters and 17,000 water meters, and plans to make them smart – able to be read and controlled remotely – by 2024.

According to PSA data for November 2018, consumption of both utilities has seen a marked decline: water use was down 16.8% y-o-y from 41.8m cu metres to 34.8m cu metres, while electricity usage fell by 16.7% from 3.0 GWh to 2.5 GWh.

Tariffs & Subsidies

In 2018 the International Energy Agency (IEA) produced comparative data on the nominal value of subsidies for oil, natural gas and electricity for the 2015-17 period, in addition to providing a per capita measure of total subsidies in 2017. The figures show that Qatar’s electricity subsidies decreased from $1.5bn in 2015 to $529.1m in 2016, before increasing slightly to $608.3m in 2017. Meanwhile, natural gas subsidies fell significantly from $950.7m in 2015 to $297.8m the following year and then rose to $493.1m in 2017.

Over the three-year period, total subsidies, including coal and oil, declined from $3bn to $1.2bn before rising to $1.5bn in 2017, representing 0.9% of GDP, or $577 in subsidies per capita. These figures were lower than those of its neighbours in the Gulf: total subsidies in Saudi Arabia equated to 5.4% of GDP, or $1127 per capita; in Kuwait it represented 5% of GDP, or $1440 per capita; and in the UAE total subsidies were equal to 2.1% of GDP, or $846 per capita.

In its 2018 Article IV Consultation on Qatar, published in May of that year, the IMF noted that customers were paying $0.05 per KWh for electricity, compared to $0.02 in Kuwait, $0.04 in Bahrain and Oman, $0.10 in Saudi Arabia, $0.12 in the UAE and $0.10 in the US. The report deemed the government’s approach to energy and water reforms appropriate, noting that a gradual reduction in water and electricity subsidies will remain important. Qatari authorities have stated that utility companies will continue to adhere to a 10-year plan to achieve full market price commercialisation, and a 2017 IMF research report entitled “If Not Now, When? Energy Price Reform in Arab Countries” noted that from October 2015 electricity prices in Qatar were raised and tiered in accordance with higher consumption levels.

Meanwhile, Kahramaa disclosed in its 2016 sustainability report that it had received government subsidies valued at QR2.7bn ($741.5m) for operational expenses, though it also noted that it would like to reduce its reliance on government contributions and improve revenue generation. In 2016 total revenue from net sales and investment stood at QR9.5bn ($2.6bn), up from QR7.4bn ($2bn) in 2015, while operating costs increased from QR8.2bn ($2.3bn) to QR11.8bn ($3.2bn).

Supply & Demand

Although increased tariffs and reduced subsidies may have helped to lower demand for electricity and water per capita, Qatar is still looking to build more capacity to help power economic diversification and expansion. In a report published in April 2018 by the Arab Petroleum Investments Corporation estimated that Qatar will need to invest $9bn in the utilities sector between 2018 and 2022 to cope with rising demand, of which $5.4bn will be required for generation projects, and the remaining $3.4bn to finance transmission and distribution. Electricity generation capacity was estimated at 8.8 GW in 2018; however, with rising demand and peak load reaching 7.1 GW in 2015, capacity expansion will be required in the medium term.

According to Kahramaa’s 2016 sustainability report, peak demand that year reached 7.4 GW, up 2.3% on the previous year, with industrial sector peak demand accounting for 1.6 GW. Total energy transmitted stood at 39,667 GWh, representing a growth rate of 2.1%. More than 19,800 new customers signed up for water services, while electricity received over 15,100 new users. Between 2006 and 2016 Kahramaa estimated that the average annual growth rate for electricity demand was 8%, one of the highest in the world, and 10.6% for water demand. In April 2018 Essa bin Hilal Al Kuwari, president of Kahramaa, noted in a briefing with the Advisory Council that between 2013 and 2017 the rate of electricity and water consumption increased by 6% and 7%, respectively. He also reported that electricity production capacity reached 10,170 MW in 2017, 19% higher than in 2013, and that it was anticipated to rise to 12,883 MW in 2024.

Infrastructure Development

QEWC owns seven power plants outright with a combined installed capacity of 1552 MW and 181.2 MIGD of desalinated water. Six of these facilities are located at Ras Bufontas and a small water desalination facility is at Dukhan. QEWC has significant stakes in five IWPPs, a planned solar facility and energy development firm Nebras Power, which is headquartered in Doha and seeks investment in overseas projects.

Meanwhile, Kahramaa is also investing in the development of the electricity and water transmission and distribution systems. In April 2017 the company signed contracts worth QR8.3bn ($2.3bn) for the supply of transmission cables and the construction of new substations as part of phase 13 of the Qatar Power Transmission System Expansion Programme (QPTSEP). While these awards were being made, work was taking place on the 12th phase of the plan, including the construction of five power substations at a combined cost of QR700m ($192.2m) to support the Doha Metro. The first substation opened in July 2017, and the second was commissioned in March 2018. In June 2018 the third substation at Al Waab City was completed at a cost of QR100m ($27.5m), followed by the completion of the West Doha substation in September 2018 at a cost of QR165m ($45.3m). The fifth substation, at Al Bidda, is due to come on-line in the second half of 2019.

In preparation for the 2022 FIFA World Cup, Kahramaa is investing in an additional five electricity substations to support stadiums. The fourth facility, which will feed power to Al Bayt Stadium, opened in July 2018 at a cost of QR138m ($37.9m). The fifth, which will help power the Ras Abu Aboud stadium, is expected to become operational in 2019.

Qatar is also investing QR14.3bn ($3.9bn) in the construction of 15 mega-reservoirs, which are set to increase storage capacity to about 1.4bn gallons of water once completed. The facilities will be located in Umm Salal, Umm Berka, Radat Rashed, Abu Nakhla and Al Thumama. The entire project, which includes the installation of a 650-km network of pipelines that will connect the reservoirs to desalination plants, is due to be completed by 2026.

Foreign Investment

Among the companies granted engineering, procurement and construction contracts for the substations outlined in the 12th phase of the QPTSEP were Germany’s Siemens, India’s Larsen & Toubro, and Turkey’s BETAŞ Consortium. International firms supplying Kahramaa with new transmission cables included South Korea’s LS Cable & System and Japan’s Furukawa Electric.

For its part, Qatar is also investing in the utility sectors of other countries through Nebras Power, a joint venture between QEWC, which holds a 60% stake, and Qatar Investment Authority, which holds the remaining 40%. Its investment portfolio includes seven projects in four countries, including a 36% stake in Indonesia’s Paiton power plant acquired in 2017. QEWC anticipates that net profits from Nebras Power’s overseas operations will constitute 40% of QEWC’s profits over the next 10 to 15 years.

Independent Power Producers

Qatar has attracted considerable international interest with the build-own-operate-transfer contracts, which fall under the public-private partnership model. Five companies have been established to generate power and water, with QEWC sharing the equity with multinational companies and QP. The independent companies sell their electricity and water to Kahramaa under 25-year purchase agreements. According to its annual report for 2017, QEWC has an 80% stake in Ras Laffan Power Company, which has capacity of 756 MW and 40 MIGD; a 60% share of Umm Al Houl Power Company, which has capacity of 2520 MW and 136.5 MIGD; a 55% stake in Qatar Power Company, which can produce 1025 MW and 60 MIGD; a 45% share of Ras Girtas Power Company, which has estimated capacity of 2730 MW and 63 MIGD; and a 40% stake in Mesaieed Power Company, which has a generation capacity of 2007 MW.

The latest of QEWC’s assets to be completed was the QR11bn ($3bn) Umm Al Houl plant in 2018, which has the capacity to provide 25% of Qatar’s current electricity demand and 30% its water needs. Mitsubishi and Tokyo Electric Power Company holds a combined 30% of the plant. In October 2018 Ras Girtas Power Company, a subsidiary of QEWC, signed a 15-year service agreement with Mitsubishi Hitachi Power Systems valued at QR360m ($98.9m).

Kahramaa also looks set to work closely with an international firm as it prepares to open a new chapter in Qatar’s power landscape by commissioning a 500-MW solar power plant (see analysis). In October 2018 the corporation pre-qualified 16 bidders, including France’s Total and ENGIE, and Italy’s Eni. The first phase of the project, which is estimated to cost between $500m and $600m, aims to add 350 MW of solar capacity by the end of 2020.

Waste Management & Desalination

The agency responsible for constructing and maintaining the network of sewers and drains, in addition to distributing treated water and ground water, is the Public Works Authority, also known as Ashghal. Among other projects, it is currently working on drainage infrastructure in southern Doha, which is due to be completed by the second quarter of 2019. The QR2bn ($549.3m) project involves the construction of a 16-km main trunk sewer; the design and building of 11 shafts, which will be used to excavate the main sewer; and the construction of seven lateral tunnels totalling 24 km, which will carry waste through a 40-metre deep foul sewage pipe to the Doha South Sewage Infrastructure. Completion of the project will enable the decommissioning of 20 old pumping stations in residential areas.

Another project being carried out by Ashghal is the QR1.5bn ($411.9m) Al Thakhira Sewage Treatment Works. It was due to be completed by the third quarter of 2018; however, according to international media, Ashghal had begun the second phase of the project in early 2019. Once complete, the infrastructure is expected to serve a population of 203,500 with a peak flow of 1386 litres per second. The sewage-transmission system will consist of 21 km of 800-mm twin rising mains and 10 km of 500-mm twin rising mains, while the treated sewage effluent transmission system comprises 36 km of mains.

Under the National Development Strategy 2018-22, the country is seeking to improve the way it disposes of domestic and industrial waste, with the goal of recycling 15% of solid waste by 2022. The total volume of waste generated in 2017 was 8.2m tonnes, down from 8.4m tonnes in 2016. Construction waste accounts for 70% to 80% of total solid waste. The National Development Strategy 2018-22 aims to crush and recycle construction waste, which includes cement, brick and tile waste, to use as gravel. It also seeks to increase the recycling of household refuse, such as glass, paper, cardboard, metals, plastics, tyres, textiles and electronics.

The Domestic Solid Waste Management Centre is using alternative technologies to recycle 100 tonnes of manure and compost per day for agricultural use. A waste-to-energy plant at the centre disposes of 2300 tonnes of solid waste per day, supplying the power generated in the process to the electricity grid. The site also has the capability to recycling old tyres and turn them into composite material.

Alternative technologies are also being used in new desalination projects. Spain’s ACCIONA Agua will be the first to use reverse-osmosis technology on a large scale in Qatar with its Ras Abu Fontas 3 and Umm Al Houl projects. The former is expected to be able to produce 164,000 cu metres per day of desalinated water, while the latter has a generation capacity of 214,000 cu metres per day.

Outlook

After more than two decades of robust economic growth driven by natural gas projects in its North Field, Qatar is ramping up infrastructure investment as it prepares to host the 2022 FIFA World Cup. The expected arrival of international visitors will require more electricity and an increase in the availability of clean drinking water, which presents new opportunities for foreign power companies to invest in utility projects. Qatar is notably set to begin construction on its first solar power facility in 2019, which has the potential to increase LNG exports and reduce its CO emissions, which rose from 53m tonnes in 2007 to 114.8m tonnes in 2017.