OMAN - The Power Sector.

Demand for electricity in Oman has been growing at a rate of about 9% 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 MW, up from about 1,700 MW at present. The target has been revised from 3,600 MW in view of big industrial project added to the list.

The power sector is being restructured. The private sector will participate in all areas of Oman's power business within a three-year period. A new utility privatisation programme was to be issued this week, together with a new law for this sector and a regulatory framework. The power plants and related facilities of the Ministry of Electricity and Water (MEW) will be unbundled for privatisation, with a sell-off of the first generating units to take place in late 2000. The sell-off of transmission and distribution assets is due to follow in 2001/02. The private sector is to be involved in all new, gas-based power ventures (IPPs) to be built in the country.

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

The first two gas-fired IPPs to be implemented on a fast-track basis are a 400 MW power and 20m gallons/day desalination complex in Barqa to start up in April 2002; and a 240 MW plant in Sharqiya, Sur, to start up in 2003. Requests for proposals (RFPs) for the two IPPs were issued in early 2000 to international developers and the selection is due in May. The foreign developers are granted 100% ownership from the outset. But at a later date they should sell about 35% down to Omani investors. To make sure the plants will be ready on time, the MEW will be responsible for installing their transmission infrastructure. The Barqa IPP is to be expanded in stages to have a capacity of 1,880 MW and 56m g/d by 2010.

The first IPPs in Oman and the GCC, the 90 MW Manah plant, was built at record speed in 1996 by Powerfin, a unit of Belgian power group Tractebel at $218m. The IPP, owned by United Power Co (UPC) in which Tractebel holds 35%, is a 20-year BOT venture. It is expanding to 270 MW at MEW's request and the new units will be completed in May 2000 at the cost of $120m.

The Salalah IPP, a 200 MW plant to be built at Salalah's Raysut port and industrial zone, is being speeded up after delays since 1996. This IPP will also take the MEW power assets in the Dhofar province which will be privatised in 2000. The winning group is called Dhofar Consortium, led by PSEG Global of the US, which includes Shell and local investors. The IPP will be responsible for all generation, transmission and distribution in that province. These are just examples of new IPPs being set up in Oman. Captive power units have been built in Sur by Oman LNG; and such plants are planned for the big industrial projects, including a 400 MW unit for the proposed Sohar aluminium venture, and a 1,200 MW plant for the petrochemical project and other downstream industries (see DT No. 6).

The GCC power grid, to be run by the Gulf Electricity Link Authority (GELA) which is being formed, will be an important back-up factor and source for Oman. The sultanate will first be linked to the UAE grid through Al Ain, near the Oman border, by early 2001 or late 2000. By 2004, Oman and the UAE will be linked to the grids of the other four GCC states.

Each state will be given a load capacity option and an allocation to buy power. The central body, GELA, will do the buying and selling on behalf of the six GCC networks and will handle the payments for them. It will charge a service fee, which will be its income to cover the operations, administrative expenses and capital costs. Saudi Arabia would have a load option of 1,800 MW, compared with 1,200 MW for Kuwait, 900 MW for the UAE, 750 MW for Qatar, 600 MW for Bahrain and 400 MW for Oman. Bahrain, Kuwait, Qatar and Saudi Arabia in late 1999 paid 5% of their 35% equity in GELA (see details in the 1999 survey of Saudi Arabia in Vol. 53).