Oman: Powering up

Text size +-

Oman is scaling up investments in its electricity sector in a bid to boost production to meet spiralling demand. Plans are in hand to construct new power stations across the country and diversify sources of supply, though it will take some years before the Sultanate will have a comfortable cushion of excess generation capacity.

Currently, Oman has some 3700 MW of installed capacity, with production struggling to meet demand, especially during the peak summer months. Demand has already exceeded operational output once this year, on May 21, when requirements hit 3900 MW. While measures such as the use of diesel generators can make up for shortfalls temporarily, these are not permanent solutions and any sustained rise in demand or the need for maintenance work on an existing facility could have widespread repercussions.

According to data from the Public Authority for Electricity and Water (PAEW), the demand for electricity is increasing at around 10% a year. While currently the greatest single call on the grid comes from private clients, who account for 52% of all consumption, this is expected to shift somewhat in the coming years as the growth and diversification of economy translates into a greater need for electricity, with the requirements of the industrial and commercial sectors in particular expected to jump.

It is not just Oman that is working to get ahead of increasing demand for electricity, with a report issued by accountancy and consultancy firm Deloitte on June 13 saying that a number of other countries in the Middle East and North Africa region face a similar situation. Ensuring that local populations have sufficient electricity and water supplies in the coming years will require significant additional generating and desalination capacity, said Kenneth McKellar, a partner and Middle East energy resources leader at Deloitte. “Meeting demands for electricity will necessitate substantial investment throughout the value chain,” he said.

Authorities are working to bring new capacity on-line, with a tender having been called for the construction of a 1500-MW plant in the wilayat (province) of Sur, due to begin operation in 2014; and two smaller facilities, one in Sohar and the other in Barka, with a combined output of 750 MW, set to start production in 2012.

Under Oman’s eighth five-year investment plan, which covers the period 2011 to 2015, more than $2.6bn has been allocated for investment in electricity, with projects being undertaken by the private sector accounting for a further $3.9bn.

Though new investments are in the works limitations on the available supply of natural gas are a potential obstacle for Oman. The Sultanate already imports gas from Qatar and will need to secure long-term supplies to ensure a steady flow of feedstock to the power industry. While officials have said there will be no problems in meeting the supply requirements of the new Sur facility, future projects may need additional sources of gas to keep the turbines moving.

While pushing ahead with longer-term plans to increase generation capacity, Oman is also looking at ways to reduce the public’s consumption. In mid-June, the Muscat Electricity Distribution Company (MEDC) launched a campaign to promote conservation of resources, including the installation of fluorescent light bulbs and insulation in new homes, as well as the reduction of air conditioning use.

Power lines are also being upgraded to cut wastage and efforts have been stepped up to eliminate illegal siphoning from the grid. These losses have been reduced to 15% of total production, having peaked at nearly 25% in the middle of last decade, according to the World Bank.

One option that Oman is actively pursuing is solar energy, with the cabinet expected to green light a proposal to construct a 200-MW solar power plant. According to Andrew Charles Rackham, the director of projects development at the Oman Power and Water Procurement Company (OPWPC), the state-owned entity charged with managing production and supply capacity as well as planning to meet future needs, a fall in the cost of photovoltaic (PV) cells has made the project viable. It had been put on hold after the initial budget cost was estimated to be $1bn, though with the price of materials now lower, the state is again keen to get work back on track.

“We are already seeing the price of PV dropping, and it will probably drop through the $3000 floor, down to $2000. Then you’re looking at a project in the region of $500m to $600m,” Rackham told the Times of Oman in late May.

If Oman can maintain the flow of new projects, generation capacity should overtake and then keep in front of the growing demand for electricity.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart

Read Next:

In The Middle East

Can the “buy now, pay later” model unlock e-commerce potential in...

Building on the e-commerce momentum from the Covid-19 pandemic, the “buy now, pay later” (BNPL) model is one of the fastest-growing segments in consumer finance, particularly in emerging markets...

In Energy

The emerging technologies that could herald a greener future for...

With fossil fuels still powering roughly 99% of global shipping, the sector is seeking to reduce emissions through cleaner fuel sources – including methanol, ammonia and wind – that could soon see...


The Philippines: IT outsourcing earmarked for growth

Although India has long dominated information technology outsourcing (ITO), the Philippines is fast making up ground by carving itself a place as an alternative destination for offshore IT service...