Interview: Omar Al Wahaibi
How would you assess the feasibility of privatising aspects of the utilities sector?
OMAR AL WAHAIBI: The power generation segment of the utilities sector is privatised by law. It is mandatory for all new water and power generation projects to be floated to the private sector. Old power plants will be decommissioned, so there is no point in privatising them, but all new plants and projects will be private. The objective is to encourage more participation and to enable private investors to take advantage of the growth in the electricity sector. The supply and distribution networks are now being examined to determine the potential benefits of privatisation. If the decision is made to continue in this direction, private companies will become more involved in the sector. As it stands, the private sector is participating in the transmission and distribution segments through construction and maintenance contracts. Going forward, we will look into the management, investment and the service itself. The aim is to bring more efficiency to these services and to lift the burden of financing off the government balance sheet by involving private investors in the service. Lastly, it will facilitate knowledge transfer in the form of international companies bringing their best practices to Oman. International operators and experience will drive the skills and capabilities of those currently working in these segments.
How effective will investments in energy efficiency and loss reduction solutions be in reducing government subsidies to the electricity sector?
AL WAHAIBI: Subsides will remain in place until the government decides to transfer the cost of generating and distributing electricity onto the public. However, we will need to continue investing in new networks and in improving the reliability of the existing system. Much of the subsidy currently goes towards paying for capital outlay. As long as we have this continuous expansion, these subsidies will keep growing. There has been a move from open-cycle gas to combined-cycle power generation turbines, which increases the efficiency of the units dramatically. The new plants that are being commissioned in Oman will all use combined cycle gas turbines, which will mainly impact gas consumption. It may increase the initial capital outlay, but the real subsidy will decrease. The real subsidy includes both the money given by the Ministry of Finance to the sector, as well as the cost of subsidising the gas. Indeed, the more energy we can get out of each unit of gas, the lower the overall subsidy will be, which in turn frees up more gas for other uses. It will also reduce the carbon intensity per megawatt produced, thus decreasing negative impacts on the environment.
To what extent have subsidies hindered the development of alternative energy sources?
AL WAHAIBI: Oman is slowly moving towards introducing more renewables into the power system. The slow implementation here stems from the fact that Oman, and the GCC as a whole, has an abundance of cheap gas. As a result, it is very difficult to justify spending a lot of money on solar panels and other alternative energies when it is so cheap to use the gas we already have available. When the government looks at the economics of renewable energies it examines the real cost of using gas to produce power versus the cost of implementing renewables. Therefore, the abundance of cheap gas has been the main deterrent in the development of alternative energies in the GCC.
Energy policy is very important when it comes to implementing renewables. The problem we face in Oman is our lack of a comprehensive energy policy: we do not really know where our energy will come from in the future. There is a variety of options, ranging from gas to coal to nuclear to solar, but at the moment we do not have such a policy. The Public Authority for Electricity and Water is currently working on generating an energy policy, which will guide decisions on the subject. The key issue is to decide what direction we want to take; the implementation of the policy will follow.
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