New project and opportunities switch on in Ras Al Khaimah's energy sector

With little in the way of hydrocarbons reserves and limited domestic exploration under way, Ras Al Khaimah’s energy sector has expanded on the back of its two major upstream players: RAK Gas and RAK Petroleum. The two firms each have interests in international exploration and production (E&P), and have undertaken efforts to improve domestic power supply through private sector investment and the development of renewable energy. The late-2014 plunge in oil prices is set to have a mixed effect on RAK’s energy sector. Although the cost of fuel and gas imports for the emirate’s industrial companies will decline, falling prices have also had a negative impact on the country’s two major oil and gas players.


In utilities, rapid population and industrial growth have presented major challenges for the industry, with the supply of electricity standing as the most significant impediment to future economic growth. While efforts are under way to develop local capacity, the Federal Electricity and Water Authority (FEWA) continues to supply the majority of RAK’s utilities. With demand for power and water expected to increase considerably in the coming years, private sector development is increasingly being seen as a solution to ongoing electricity and power constraints. A handful of private providers have sprung up in recent years, most notably Utico, which has announced plans to invest millions in new renewable and coal-fired power projects. However, planned projects have faced delays, with industrial and residential consumers struggling to manage rising electricity tariffs and water supply interruptions, creating a less optimistic outlook for near-term energy expansion in the emirate.

Major Players

Government-owned RAK Petroleum stands as the sole upstream oil company in the emirate, while RAK Gas is the only gas E&P player. RAK Petroleum has been active in international exploration activities in recent years, and in 2014 the firm’s long-awaited initial public offering (IPO) saw it list on the Oslo Børs, the Norwegian stock exchange.

RAK Gas is primarily concerned with procuring and supplying natural gas for the emirate, but has also expanded its global E&P activities in recent years, with assets including offshore blocks in Somaliland and Malawi. RAK Gas is the main operator of Blocks SL-9 and -12 in Somaliland, with 75% ownership, while the other 25% is owned by a local group, Independent Energy Capital Corporation. A joint venture (JV) between the aforementioned two players will see a 750-km, 2D seismic survey acquired in late 2015. In Malawi, RAK Gas is the 100% operator of Blocks 4 and 5. The group also operates the emirate’s sole processing facility in Khor Khwair.

Oil produced from RAK Gas and RAK Petroleum’s international interests is not shipped for domestic use, but sold on the international market, forming an important revenue stream for the government. However, all gas is consumed domestically.

Regarding utilities, FEWA acts as the emirate’s electricity and water supplier, and meets the bulk of RAK’s demand, while the RAK Investment Authority (RAKIA) owns two power plants in Al Ghail and Al Hamra, serving two industrial parks of the same name through Al Ghail Power, a wholly owned subsidiary.

Utico is the largest private desalination firm in the UAE, with operations concentrated in RAK, where its desalination capacity is 160,000 cu metres per day (cmd). It also has 120 MW of power and more than 480 km of transmission and distribution lines. Completed projects include a seawater-reverse-osmosis (SWRO) and gas-fired power plant, with a production of 90,000 cmd and total-installed capacity of 100 MW, as well as a SWRO desalination plant built for a golf course, with an output of 25,000 cmd.

The emirate is also home to a number of research centres, including the RAK Research and Innovation Centre, which develops application-based solar power and waste management projects under the aegis of the American University of RAK and École Polytechnique Fédérale de Lausanne, a campus of the Swiss federal university, which is also active in researching renewable energy and waste management projects, among other areas.

RAK Petroleum

Founded in 2005 and based in Dubai, RAK Petroleum holds an indirect interest in a diversified E&P portfolio spanning eight countries in the MENA region. Its resource base stood at more than 245m barrels of oil and gas on an oil equivalent basis in 2015 through its stake in two investment entities, DNO ASA and Foxtrot International. Company assets totalled $692m as of December 2014.


During the late 2000s, RAK Petroleum expanded its working relationship with Norwegian E&P firm DNO, later acquiring a minority stake in the company. In July 2011 the UAE firm moved to merge operations with DNO under an assets-for-shares agreement. The deal was finalised in 2012 and RAK Petroleum’s stake in the company rose from 30% to 42.8%.

DNO has been listed on the Oslo Børs since 1981 and in March 2015 issued 60.5m new shares as part of a $124.5m equity offering. RAK Petroleum did not purchase shares in the offering, and its shareholding interest fell from 42.8% to 40.45% as a result. The local player is the only shareholder with more than a 5% stake in DNO, with the market value of its stake standing at $971m in 2014.

DNO holds stakes in onshore and offshore oil and gas blocks in the Kurdish Regional Government (KRG), Yemen, Oman, the UAE, Tunisia and Somaliland. The company’s proven and probable reserves totalled 483.6m barrels of oil equivalent (boe) in 2014, down from 541.9m boe in 2013, as a result of an ongoing shift away from appraisal drilling, with the firm focusing on expanding production at the KRG’s Tawke field.


RAK Petroleum also holds a 33% stake in private firm Foxtrot International, acquired in 2013 via its wholly owned subsidiary Mondoil Enterprises. Established in 1994, Foxtrot International is an E&P company active solely in Côte d’Ivoire. The group operates and holds a 27.27% stake in offshore Block CI-27, which contains the two largest producing gas fields in the country, Foxtrot and Mahi, as well as operates and holds a 27.5% stake in Block CI-502, after acquiring an offshore exploration licence in 2014 (see analysis). Foxtrot produces more than 70% of Côte d’Ivoire’s gas from the Foxtrot and Mahi fields, and in 2014 reported being near completion of a four-year campaign to develop two additional discoveries, the Marlin oil and gas field and the Manta gas field, with the first round of production expected in 2015.

At present, RAK Petroleum holds indirect interest across 22 blocks of various stages of exploration, development and production in eight different countries. The company reported a compound annual growth rate of 59% from 2008 to 2014, and boasted five consecutive years of profit through 2014.

Bad Timing

In May 2013 RAK Petroleum announced a plan to restructure and list on a then-unspecified stock exchange, a move which was approved by shareholders and saw the group transfer its assets to a newly formed Dutch firm, with a parent shell company based in the UK. The firm recorded net profits of Dh58.1m ($15.81m) in the same year, after reaching a record Dh271.57m ($73.92m) in net profits in 2012.

In October 2014 the company announced plans to raise $25m through an IPO on the Oslo Børs, offering shares to institutional and retail investors in Norway, as well as a private placement for selected international institutions. The restructuring, migration and IPO came to fruition when RAK Petroleum listed in November 2014. The company’s IPO came in the midst of turmoil on commodities markets as the price of oil fell by more than 50% from June 2014 to January 2015. RAK Petroleum recorded $90.53m of associate losses in 2014 and $16.9m in JV impairments, which led to a total loss of $110.91m.

Company share prices reached a high of $3.08 on November 10, 2014, before dropping by 46.7% of their value by April 2015 and closing at $1.37 on August 4.

DNO reported similar losses, with total operating revenues at $452m in 2014, though full-year operating losses were $243m, after the group wrote down the value of its oil and gas assets in response to the lower price of crude, which created $297m of impairments. Net losses were $226m as a result, without which profits would have been $53m. DNO shares fell from $3.34 in early July 2014 to $1.39 on April 1, 2015, as a result of uncertainty in global oil markets, as well as concern around the timing of export payments to DNO in the KRG. On August 4 its value stood at $1.24.


Established in 1984 as the emirate’s sole government-owned gas E&P company, RAK Gas remains the only supplier of natural gas in the emirate. In 2007 the company converted into a limited liability corporation, and today the group is 99% government-owned, with RAKIA holding a 1% stake, distributing power to its tenants via its subsidiary Al Ghail Power. The company’s E&P portfolio includes indirect interest in several exploration-stage blocks, including assets in Malawi and Tanzania, respectively.

The firm’s core activity is gas marketing, with sales centred on the emirate’s three industrial areas of Al Hamra, Khor Khwair and Al Ghail. RAK Ceramics, one of the largest ceramic tile manufacturers in the world, and RAK Cement, a major regional cement company, stand as RAK Gas’ largest customers, in addition to a number of glass and gypsum-board manufacturers, smaller cement companies and other industrial consumers. In late 2009 the company signed an agreement to supply power to RAKIA’s 84-MW Al Ghail and 45-MW Al Hamra power plants for 10 years.

RAK Gas sources its supply from the Bukha Alpha and West Bukha fields in Oman, the Atlantis field in Umm Al Quwain (UAQ), RAK’s Saleh field and via the Egyptian General Petroleum Corporation. In May, Qatari group Dolphin Energy announced that it had begun supplying 40m cu ft of natural gas daily to the emirate through RAK Gas for a period of two and a half years. The Saleh field, meanwhile, is close to the end of its economic lifespan and today supplies limited amounts of oil and gas on an intermittent basis, according to DNO’s 2014 annual report.

RAK Gas also holds an onshore block in Egypt, at Al Ghazaliyat, with plans to begin drilling in the second quarter of 2016. The group is currently in the process of acquiring 612 km for seismic 2D analysis. On the Tanzanian islands of Pemba and Zanzibar, RAK Gas is the 100% owner and operator of an onshore and offshore licence, and is set to undertake 2D seismic analysis, further details of which were not available.

Gas Processing

RAK Gas owns a processing plant at Khor Khwair, and uses two separate gas treatment trains to treat raw gas from the Bukha Alpha and West Bukha fields, as well as at the Atlantis field.

This facility was originally constructed to process gas from the Saleh field, and in 1991 the company signed a long-term lease agreement for the processing plant with Oman’s Bukha Alpha field, under which the company processes gas, stripping liquids and liquefied petroleum gas at its Bukha train.

In 2006 RAK Gas began construction on the second train, Atlantis, with the train eventually processing raw gas from the UAQ field. In December 2009 the company upgraded its Bukha train to accept gas from the West Bukha field, as well as introduce crossover capabilities for its trains.

RAK Gas invested a total of $300m to upgrade its facilities between 2007 and 2011, with production expected to reach 150m standard cu feet per day (scfd) by the end of 2012, although the company reported that production stood closer to 95m scfd as of April 2015, the most recent figures available.

Although major industrial tenants, most notably RAK Cement, had previously cited rising gas prices as a significant factor cutting into their profits, with RAK Gas diverting most of its Qatar imports to the national grid in the wake of sky-rocketing prices in the late 2000s, the 2014 price collapse bodes well for future availability of affordable gas supply. In addition, rising industrial connections to the FEWA grid have considerably improved gas supply in the emirate.


Obtaining a clear picture of RAK’s electricity sector has been challenging for stakeholders, with the RAK Department of Economic Development (RAK DED) reporting that the total number of power and water consumers dropped by 12% in 2013 to 73,832, while total power generation fell 53.7% to 526.05m KWh. The department also noted four consecutive years of declining output, with total generated power falling from a high of 1.5bn KWh in 2010 to 1.2bn KWh in 2011 and 1.13bn KWh in 2012. “This decline raises doubts about the accuracy of the figures,” wrote RAK DED of electricity output in its 2014 Statistical Yearbook. RAK DED’s 2014 quarterly updates reported that generation at Nakheel had reached 58.46m KW in 2014, although figures for total kilowatts per hour generated were not available.

According to a 2012 FEWA report, the Northern Emirates had total installed capacity of 387 MW via the Nakheel power station, the largest on FEWA’s grid, which comprised 41.8% of the authority’s total 924 MW of installed capacity in 2012. Utilised generation capacity at Nakheel stood at 182 MW in 2012, or 32% of the grid’s total. According to FEWA data, customers in RAK are supplied solely by the Nakheel power station. Outside of FEWA, RAKIA’s Al Ghail Power supplies its Al Ghail and Al Hamra industrial parks, as well as residents of Al Hamra Village, although figures for total generating capacity were not available, while Utico can supply 120 MW of generating capacity. A further 50 MW of capacity is being added. Off-grid, power demand is about 340 MW per consumer as of December 2014. This represents potential for new entities to invest in increasing capacity and existing providers to serve the region.

Tariffs & Supply

With a growing number of firms establishing operations in the emirate, RAK Free Trade Zone (RAK FTZ), the emirate’s largest free zone, reported 2900 new tenants in 2013, and RAKDED issued 1791 new business licences in 2014, a five-year high. Demand for power is thus set to soar, with the availability of affordable electricity cited as one of the biggest impediments to future expansion.

As of August 2014 FEWA customers paid between Dh0.23 ($0.06) and Dh0.38 ($0.10) per kilowatt per hour, the same price as Dubai Electricity and Water Authority customers, but above the Dh0.05-0.30 ($0.01-0.08) paid by customers of Abu Dhabi Water and Electricity Authority (ADWEA). However, during 2015 ADWEA increased water and power charges by 40%, reducing the gap between DEWA, FEWA and Sharjah Electricity and Water Authority. Al Ghail Power, meanwhile, charges a flat rate of Dh0.43 ($0.12) per KWh, in addition to a fluctuating surcharge that stood at Dh0.17 ($0.05) per KWh in August 2014, with residents of Al Hamra Village reporting in 2014 that they were paying electricity tariffs up to 160% higher than those charged by FEWA. Although in December 2014 FEWA raised its rate for industrial customers by Dh0.04-0.05 ($0.011-0.014) per kilowatt per hour for residential, commercial and government consumers – a move which brought tariffs to a maximum of Dh0.60 ($0.16) per kilowatt per hour – Al Ghail Power customers, particularly energy-intensive industrial tenants, continue to pay some of the highest electricity tariffs in the UAE. Utico, meanwhile, has the lowest power and water tariff, at Dh0.38-0.43 ($0.10-0.12) as a maximum tariff, including fuel surcharge, which is lower than FEWA. However, Utico has a maximum capacity of 100 MW to offer consumers.

A connection to the FEWA and Utico grid has therefore become the preferred option in RAK, with RAK FTZ announcing in February 2015 that it had connected the last of the light manufacturing warehouses in its industrial cluster to this source, removing the need for these warehouses to provide their own power via diesel generators. The savings provide a significant competitive advantage, according to company officials, while the move highlights RAK’s ongoing effort to achieve energy self-sufficiency.

Eenergy Dependence

Under UAE federal law, FEWA is responsible for providing water and power to UAE citizens living in RAK, as well as other RAK residents. Nonetheless, rising local demand, in addition to elsewhere in the UAE, has enhanced the need for greater local capacity. In March 2013 RAK established its own regulator, RAK Electricity and Water Authority, with FEWA retaining responsibility for power and electricity in the emirate. The RAK government has also collaborated with India’s Tata Power (which has since left RAK) to conduct a needs assessment and 10-year forecast for the emirate’s domestic energy sector, though the results have not been made public. Independent power plants (IPPs) and water and power plants rolled out by private developers under a public-private partnership scheme are therefore the most likely channel under which demand will be met.

Utico Investment

The largest single project under development by Utico is a planned $500m clean-coal power project, the first of its kind in the world, which is set to offer generating capacity of 270 MW upon completion. The plant will capture carbon dioxide emissions, making it more environmentally friendly than traditional coal-fired plants, while the falling price of coal globally has presented a unique opportunity for power generation in RAK.

Utico has partnered with Shanghai Electric to develop the plant, which will use carbon capture and storage to reduce emissions. In July 2014 Richard Menezes, managing director of Utico, told Construction Week Online that regulatory and permit issues had delayed the start of the project by six months, reporting that it expected to begin commercial operations by December 2016.

The company is also active in the development of renewables projects and plans to invest $450m in new UAE utilities projects. Projects the company is working on in RAK include a 40-MW solar power plant and a solar-powered desalination plant that, with a capacity of 22m imperial gallons per day (MIGD), would be the world’s largest such facility. The project has been awarded to ACS Holdings of Spain with an investment of about $195m. The new entity is owned by Utico and ACS. The desalination plant will help meet rising demand and optimise Utico’s existing facilities. FEWA is already an existing purchaser of water from Utico, and this project will increase this off-take agreement.

The company projects that RAK’s regional total water demand will rise to 100 MIGD in the coming years, from 70 MIGD in 2014 (see analysis). The desalination plant tender process concluded in early November 2013 and the company floated a tender for construction of the 40-MW power plant in January 2014. The projects will be developed on a 20-year guaranteed take-off agreement by Utico, with the successful bidder funding 40% of the project and Utico providing the remaining 60%. The solar IPP will provide power to both the desalination plant and Utico’s grid, while planned connections to FEWA’s grid could boost solar power capacity to 120 MW.

In March 2014 Utico announced participation in both tenders, with 116 firms from 15 countries bidding on the projects. Major energy players, including France’s GDF Suez, Spain’s Abengoa, Italy’s Elf Energy and ACWA power, were among the international companies bidding. While this process highlights RAK’s attractiveness as a utility investment destination, delays in contract awards will exacerbate ongoing water shortages and gives a less optimistic outlook for private-sector-led energy development.


Although the RAK government is already feeling the impact of lower global oil prices, with RAK Petroleum recording its first year of losses since 2007 in 2014, falling oil prices will benefit RAK Gas’s major industrial customers and should improve the availability of affordable fuel necessary for ongoing industrial expansion. Population and industrial growth dictate that energy demands in the emirate will rise, and access to affordable electricity remains a concern. Meanwhile, private sector players are likely to see opportunities to enter the market as a result.

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The Report: Ras Al Khaimah 2015

Energy chapter from The Report: Ras Al Khaimah 2015

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