Sustainable utilities


The Sultanate is now witnessing huge changes in its water and electricity sectors, creating new opportunities for investment and infrastructure in the process

By Oliver Cornock
 

The two main challenges facing the Middle East as a region concern resources. Most debated, discussed and dissected is economic dependency on oil and how the Gulf will diversify for the days when crude supplies run low. The second, perhaps even more fundamental, concerns water and power supply. Just as towering cities such as Doha and Abu Dhabi owe their existence to the huge revenues generated by energy, the growing populations of the Gulf cannot be sustained without adequate water and electricity. Furthermore, the solutions must themselves be sustainable.

Oman is a good example of how this second regional challenge of provision is being met head on. The Sultanate is now witnessing huge changes in its water and electricity sectors, creating new opportunities for investment and infrastructure in the process.

This is largely due to demand driving the need for increased access to – and supply of – water, as well as power generation. Over the next five years to 2017, domestic-sector demand for desalinated water in Oman is set to rise from 163m cu metres to 278m cu metres – a 70 per cent rise – according to estimates from the Oman Power and Water Procurement Company (OPWP). In addition, the OPWP expects electricity demand to grow from 16.9 TWh to 30.3 TWh in 2017. One of the reasons for this is Oman’s rising population, which World Bank statistics show has grown by around one million in the past 20 years.

In fact, the Sultanate now represents the fastest-growing power and water sectors in the Middle East, with demand for utilities set to grow at an average yearly rate of 9 per cent until 2017, according to the OPWP’s December 2010 report.

To cater for this, a range of major developments are in the pipeline. In mid-February, it was announced that the Sultanate will make sector investments to the tune of $2.9bn, spread across 13 new power, water and energy projects, to begin construction in 2012. Although specific details were not available at the time of writing, it was reported that the focus of these projects will be on increasing desalinated water supply and improving network efficiency.
The government is looking to the private sector to take on the majority of its utilities projects. In late October 2011, for example, engineering and contracting company Galfar was awarded a water pipeline project worth $36.4mn by the Public Authority for Electricity and Water (PAEW). On completion – estimated to be a year and a half away – the pipeline will transport water from Wadi Adai to Amerat.

Although Oman benefits from slightly higher rainfall in comparison to other GCC states, it is still a desert country, and drinking water is never in abundance. However, early March 2012 saw the awarding of a contract to develop an important new water desalination facility move one step closer, with the short-listing of seven international firms for the bid.

The plant, to be built in Ghubrah in the Muscat governorate, will cost around $400mn and will process some 42 million gallons of desalinated water per day when completed in 2014, according to estimates. Two other private sector-led “independent water projects” are planned for Qurayat and Al Suwaiq.

These projects will be high-efficiency reverse osmosis desalination plants, which will draw electricity from the main grid, as opposed to being co-located with power generation capacity. In line with the OPWP’s environmental strategy and seven-year planning process, old facilities are to be decommissioned by 2017.

Furthermore, the treatment of wastewater for reuse is a central part of Oman’s irrigation strategy, called the “Muscat Wastewater Master Plan”, which is aimed at reducing pressure on groundwater resources within the Muscat governorate. By reusing treated wastewater for agriculture and landscaping, the Sultanate will help reduce the water deficit, which has been estimated at more than 300m cu metres of water each year.

Two projects, with a combined value of over $1bn, were launched in 2008; in A’Seeb and in Al Ansab. These are being overseen by Omani wastewater service company Haya Water. A’Seeb has now entered its second phase of development, and will reach full operating capacity by 2017, although the facility is already partially operational.

Al Ansab, on the other hand, opened in early 2011, and is the world’s largest submerged membrane bio-reactor system with a capacity to handle up to 74,000 cu metres. Taken together, these two projects will serve 80 per cent of the Muscat population by 2014 and about 90 per cent by 2017, delivered across the Muscat area by more than 280km of pipeline that will replace the inefficient septic tank system currently used by most properties in the governorate. By end-2011 it was estimated that 20 per cent of properties within the Muscat governorate had been connected to the new system.

Despite some criticism that Oman has been slow to develop alternative means of power generation, renewables are increasingly being looked to as the future source of Oman’s energy provision. According to the first renewable energy country attractiveness indices of 2012, published by professional service firm Ernst and Young, Oman’s solar resources rank among the highest in the world, and have the potential to supply a sizeable share of Oman’s current energy demand. Indeed, the government aims to produce 10 per cent of its energy needs from renewable energy resources by 2020.

This potential looks set to offer huge opportunities for not only private-sector – but also international – involvement. In January it was announced that German private investment firm Middle East Best Select (MEBS), and Terra Nex Financial Engineering of Switzerland, are looking to fund a project valued at over $2bn to build a 400-megawatt solar panel facility in Oman, which could be utilised by power stations. A further $600mn of project investment is being provided by direct equity capital, as well as loans from European financiers, mostly from Germany. MEBS and Terra Nex are looking to secure a quantity of the generated power for export.

Going forward, the issue of developing an expanded and sustainable water and power sector is likely to gain increasing prominence on the Omani agenda. In May, the PAEW will host the Second Annual Oman Power and Water Summit in Muscat, where high-profile infrastructure and investment opportunities will be presented, as well as the latest sector innovations and strategies. Specifically, this will represent a key opportunity for foreign companies to share knowledge and become involved in upcoming projects in Omani utilities.

By taking a proactive approach and finding solutions to an environmental challenge, the Sultanate is ensuring its long-term economic progress. Such action now will not only guarantee environmental stability, but is also set to be highly lucrative for Oman in the future.

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