OMAN - The Power Sector.

Oman is a pioneer of private power in the GCC region, having seen the first independent power producer (IPP) in the sultanate begin generating electricity in 1996. Demand for electricity in Oman has been growing at 4-5% per annum in recent years, fuelled by private industrial activity. The government's goal is to raise power generation capacity by 2010 to 4,000-4,500 MW, up from just over 3,000 MW at present and more later this year. The target was revised from 3,600 MW in view of big industrial projects added to the list in recent years.

The power sector is being restructured so private firms can participate in all areas of this business. Companies are being created to take over the assets of the Ministry of Housing, Electricity and Water (MHEW), under a law for this sector issued in 2002. The government is unbundling the MHEW assets into corporatised entities. In the end there will be three generation companies, three distribution companies, one transmission company and a rural firm to cover remote areas.

The first assets sold off in a 12-month plan announced in late 2001 were the 541 MW Ghubra co-generation plant, the 690 MW Rusayl plant and the 337 MW Wadi Jizzi plant. But the government will retain the rural systems company. The private sector is to be involved in all new, gas-based water and power ventures (IWPPs) to be built in Oman.

Advising the state in this is a group led by ABN AMRO bank, with Denton Wilde Sapte of the UK providing legal services and Mott MacDonald (UK) acting as technical consultant. The three firms were contracted in June 1999. The National Economy Ministry is in charge of power projects launched by the private sector. Privatisation of the state assets is under the supervision of a Privatisation Committee which consists of eight ministers led by Sultan Qaboos. According to the advisory group in early 2002, privatisation of existing assets and getting new power and water desalination plants to be built privately was to allow the state to save RO750m ($1,923m) from its capital budget over ten years. In addition, increased efficiency through private involvement has lowered costs and enabled the state to cut subsidies without affecting tariffs set for end-users.

One the gas-fired IWPPs built on fast-track basis was a 427 MW power and 20m gallons/day desalination complex in Barka. The first phase of the IWPP went on stream in 2003. This is a JV called AES Barka Holdings (ABH) of the US power firm AES Corp. (85%) and a local Bahwan Group unit Multitech (15%), which has a 15-year power and water sales agreement with the MHEW. It also has a 15-year gas purchase contract with the Ministry of Oil and Gas. The combined cycle (CC) plant has been built by Enelpower (Italy) and Hitachi Zozen (Japan), with Ansaldo (Italy) supplying the gas turbines and steam generators. AES Barka pays $1.50/m BTU for the gas, in line with a pricing formula affecting all IWPPs. This is a 25-year BOT venture. ABH has pledged to offer 35% of its shares on the Muscat Securities Market (MSM) within four years of incorporation. The IWPP is to be expanded to 1,880 MW and 56m g/d of water by 2010.

The Salalah IPP, a 200 MW plant built at Salalah's Raysut port and industrial zone, started up in 2003 after delays since 1996. This IPP has also taken the MHEW power assets in the Dhofar province which have been privatised. The IPP group is called Dhofar Power Consortium (DPC), led by PSEG Global of the US, which includes Shell and local investors. The IPP is a BOO venture and is responsible for all generation, transmission and distribution in Dhofar province.

The 250 MW gas-fired al-Kamil IPP went on stream in 2002. The JV, called al-Kamil Power Co. (AKPC), is between UK-based International Power and the local OHI Petroleum & Energy Services. The plant, in Sharqiya of the Sur area, was built by Hyundai of South Korea in partnership with AIC of Egypt, with General Electric of the US having provided three gas turbines. AKPC has a 15-year power sale contract with the MHEW and a 15-year gas purchase contract with the Oil & Gas Ministry similar to those of the Barka and Salalah IPPs. AKPC had to offer 35% of its shares on the MSM within four years.

Captive power units were built in Sur by Oman LNG; and such plants are planned for the big industrial projects. Most important is an IWPP in Sohar built on BOO basis with its first phase having been on stream since the start of 2006. The other phases should be completed before end-2007. The engineering, procurement and construction (EPC) contractor for this is Doosan Heavy Industries & Construction of South Korea. The owner and operator of the IWPP is consortium led by the Belgian power group Tractebel. Its partners are local - National Trading, WJ Towell & Co., The Zubair Corp. and Sogex Oman. The IWPP has a 15-year power and water sales agreement with the MHEW and a 15-year gas purchase contract with the Oil and Gas Ministry. Advisers to the Economy Ministry on this have been Societe Generale, Denton Wilde Sapte, BankMuscat and Fichtner of Germany.

The first IPP in Oman, the 90 MW Manah plant, was built at record speed in 1996 by Powerfin, a unit of Tractebel, at $218m. The IPP is run by United Power Co (UPC) in which Tractebel holds 35%. It is a 20-year BOT venture. It has expanded to 270 MW at MHEW's request and the new units were completed 2000 at the cost of $120m (see detailed background in DT 5 of Vol. 62).

The GCC power grid, run by the Gulf Electricity Link Authority (GELA), is an important back-up factor and source for Oman. The sultanate was first linked to the UAE grid through al-Ain, near the Oman border, in 2001.

(See details of the GCC grid in the October 2005 survey of Saudi Arabia in Vol. 65).