As the sultanate looks to manage its energy transition and inject capital into its fiscal balance, privatisation, sector reorganisation and renewable energy are key topics on the agenda for Oman’s utilities sector. Reducing reliance on natural gas is a top priority, with a number of large-scale projects using solar energy helping the country achieve its goal of 30% renewable energy on the grid by 2030.

As several large-scale power and water projects are on the horizon, the utilities sector’s short-term outlook is promising, although stakeholders are increasingly aware of the limitations of the electricity segment and the need to reduce consumption. The shift from conventional to renewable sources is deemed a positive move, yet as the power segment approaches capacity, the water segment is looked to as having more long-term growth potential.


The sector’s main oversight bodies are the Authority for Electricity Regulation (AER), which is the independent regulator of the electricity segment; the Ministry of Oil and Gas (MOG), which is the policymaker for the electricity segment; and the Public Authority for Water (PAW), which is the regulator, policymaker and distribution company for water.

In October 2018 the sector began a process of reorganisation following recommendations from an energy lab organised by the National Programme for Enhancing Economic Diversification, known as Tanfeedh. As part of this process, the MOG is set to be the policymaker for all forms of energy, including power. The AER will remain as is, given that Oman believes in the independence of regulators, with water regulation likely to pass to the AER as well, becoming the Authority for Electricity and Water Regulation. The restructuring movement is intended to streamline governance, as there has been an over-abundance of public authorities with interests in the sector. The ultimate outcome is that the energy sector in its entirety will have a cohesive policy directed by the MOG.

Although the integration process was ongoing as of December 2019, the key legal arrangements for the restructure were passed in December 2018. As a result, the Public Authority for Electricity and Water (PAEW) was renamed the PAW and its electricity responsibilities were transferred to the MOG. PAW, also known as Diam, is still tasked with managing and overseeing the water segment. At the same time, the AER acquired some of the PAEW’s former roles, such as issuing tariff regulations. Following the energy labs, the AER was also tasked with integrating renewable energy into the mix in the most economical way – with solar taking precedence over wind in this regard – as well as permitting licensed suppliers to purchase output from auto-generators on behalf of the Oman Power and Water Procurement Company (OPWP).


As defined by the AER, Oman’s utilities supply chain can be divided into three stages: generation, procurement and transmission, and distribution and supply. There are three main power systems in Oman. The largest network in the country is the Main Interconnected System (MIS), which contains 17 power generators. The output from these generators is procured and transmitted via the OPWP and the Oman Electricity Transmission Company (OETC), while distribution and supply is divided among the Muscat Electricity Distribution Company (MEDC), the Mazoon Electricity Company and the Majan Electricity Company. The MIS provides electricity to the capital and six other governorates, mostly in the north of the country, and its water network covers Muscat, Al Batinah North, Al Batinah South, Al Dakhiliyah and Al Buraimi, with plans to add Al Dhahirah to this list in 2020 following the completion of a new pipeline.

The rural system is administrated by the Rural Areas Electricity Company (Tanweer), which is a vertical integrated utility licensed in generation, transmission, distribution and supply. Tanweer offers its services in authorised areas in the governorates of Musandam and Al Wusta, most of Dhofar Governorate and parts of Al Dakhilia, Al Dhahira and Sharqiya South. In addition, Tanweer operates six desalination plants, mainly in Duqm and Masirah. However, this is set to change with the construction of the Duqm Integrated Electricity and Water Station, a $483m project that will have an installed generation capacity of 326 MW and an installed water capacity of 1667 cu metres per hour. The plant is expected to begin operating in the third quarter of 2020, and the OETC is in the process of developing the transmission network needed to support the development. Meanwhile, the Dhofar Power System, in the south of the country, has three power companies that feed into the OPWP and the OETC, with the Dhofar Power Company (DPC) holding responsibility as the sole distributor and supplier.

The North-South Interconnector Project is under way to transition from four power grids in the country – the MIS, the grid ran by DPC, the supply at Duqm and that of Petroleum Development Oman – into one homogeneous grid for increased efficiency. This will also allow for greater renewable energy penetration, as the locations best suited for renewable energy are often away from load centres. Musandam will continue to be supplied by a micro-grid run by Tanweer.


A number of companies in the utilities sector are fully or partly owned by the government. For example, the Ministry of Finance owns 100% of Nama Group, which in turn owns Nama Holding, a joint-stock company that is the custodian of the government’s shares in 10 different electricity and water generation, procurement and transmission providers. These include the OETC, which is responsible for 95% of electricity circulation in the sultanate; and OPWP, the country’s sole electricity and water procurement agency. In addition, Nama owns the main electricity supplier and distributor for the capital area, the MEDC. Other major power administrators in Nama’s portfolio include Majan, Mazoon, the DPC and Tanweer.

As part of the sector’s long-term shift towards privatisation, in 2019 Nama Holding planned to sell a 49% share in the OETC and a 70% stake in the MEDC. In March 2019 international press reported that Nama had received 14 offers for the MEDC and 11 for the OETC from 23 strategic and financial investors, with the latter being sold to a subsidiary of the State Grid Corporation of China in December 2019. The second phase of this process will involve the privatisation of the MJEC, the MZEC and the DPC. According to local media, the five companies have a collective asset base worth approximately $6.5bn.

Size & Performance

According to the AER, there were 1.2m registered electricity customer accounts in Oman at the end of 2018. This was a 6.3% increase on 2017, when there were around 1.1m registered accounts. Of the 2018 total, the MIS network accounted for 90.2% of the growth in customer accounts, the DPC network 6.6% and Tanweer 3.2%.

In terms of electricity supply firms, Mazoon accounted for 35.8% of customer accounts in 2018, with 436,774. The second-largest company, the MEDC, had 338,548 accounts, or 31.8%, followed by Majan with 239,239, or 19.6%. The remaining 12.8% was made up of smaller suppliers such as Tanweer, which accounted for 3.3% of the total registered accounts. Residential customers made up 69.1% of the 71,755 increase in accounts, commercial customers represented 30.2% and the remaining 0.7% was composed of other sectors such as agriculture and fisheries, tourism and public services.

The sultanate’s electricity supply in 2018 totalled 33.5 TWh, an increase of 3.7% compared to the previous year. The MEDC contributed the largest portion of this supply, accounting for 11.5 TWh or 34.4%, followed by Majan and Mazoon, with 9.5 TWh and 8.6 TWh, or 28% and 26%, respectively.

Water production, meanwhile, rose by 7.8% to reach 328.7m cu metres in 2018. Echoing patterns in the electricity segment, the largest gross increase in water production occurred within the MIS network, up by 10.2% over the year. Gross water production grew by 3.2% in the rural system, while it fell by 10.6% in the DPC network. The power generation capacity of Oman is currently around 9000 MW, while in summer 2019 peak demand reached 6500 MW and as of late December it stood at 3500 MW.

According to the OPWP’s “Seven-Year Statement 2019-25”, demand for power and water from the MIS is expected to increase at a rate of 5% per year over this period, which would result in peak demand of 8600 MW in 2025. This is slightly lower than the annual growth seen between 2011 and 2018, which averaged 6.4%. The more cautious outlook for the years ahead reflects a combination of factors, including the impact of reduced economic growth and the introduction of cost-reflective tariffs (CRTs).


CRTs were introduced in 2017 for large commercial, industrial and governmental customers, defined as using more than 150 MWh of electricity per year. CRTs encourage customers to reduce their energy usage during peak hours, which have the highest tariffs. According to the OPWP, the introduction of CRTs reduced peak power demand by 130 MW between 2017 and 2019. The company predicts that in 2025 peak demand will have fallen by 400 MW as customers invest in systems to control the extent and timing of their energy consumption.

Measures to promote efficient electricity usage have been driven by the AER, which launched its energy conservation programme, known as Yaseer, in December 2018. In March 2019 it was also announced that Danish Energy Management had been appointed to advise the AER on its energy efficiency strategy. The company’s advisory services will include providing recommendations on a working model for energy service providers in Oman; advising on the design of the national programme; and assisting the retrofitting of public buildings to improve energy efficiency.

Independent Plants

Oman has a strong track record for developing independent water and power plants (IWPPs) and independent power plants (IPPs), having launched the GCC’s first IPP in 1994. The sultanate’s largest IPP is the Sur power plant, which is operated by local provider Phoenix Power and consists of five gas turbine units with five heat recovery steam generators and three steam turbines. It has a total capacity of 2000 MW. Other important sites include IWPPs at Sohar and Salalah, two of Oman’s primary ports. The Sohar IWPP has 585 MW of combined-cycle, gas-fired power generation capacity and 150,000 cu metres of water desalination capacity per day, while the Salalah IWPP is a 490-MW, gas-fired power plant and seawater desalination plant with a total water production capacity of 69,000 cu metres per day.

Grid Developments

As the sole transmission company for the MIS and Dhofar networks, the OETC is responsible for most of Oman’s grid. Notable developments in 2019 included the inauguration of three grid stations in Al Sharqiyah North, which form part of the OETC’s efforts to improve the country’s transmission network. The new sites included the first 400/132-KV grid station, which is located in Al Qabil and cost around OR18m ($46.7m) to develop. The station is intended to increase grid reliability and reduce dependence on the Al Kamil Power Plant.

Other grid projects under way and expected for delivery in the coming years include the OR8m ($20.8m) Ibri Solar Grid Station, which will serve the new 500-MW Ibri Solar Power Plant when it begins operation in late 2020. At the end of 2019 the OETC was also in the process of floating a tender to build a grid station to support the Manah Solar IPPs. Upgrades to the OETC’s network-management systems were also inaugurated in 2019, at an estimated cost of OR3.6m ($9.3m). The upgrades included changes to the pre-existing supervisory control and data-acquisition system, a new system at the Muscat control centre and a new Dhofar control room in Salalah.


The sultanate is looking to expand its generation capacity further by developing renewable IPPs. To this end, a wind farm was commercially commissioned in Dhofar in November 2019, two solar IPPs in Manah are in the tendering stage, a solar project is under construction in Ibri and Tanweer plans to build 11 solar-diesel hybrid facilities. In addition, Oman is looking to reduce domestic energy consumption by promoting the Sahim initiative, a scheme to encourage the installation of small-scale solar panels on residential and commercial buildings. These developments would increase the proportion of renewables in Oman’s power generation mix and reduce gas consumption, allowing domestic natural gas resources to be used for projects with higher value added. While gas currently accounts for around 98% of the country’s power generation mix, one of the aims of Oman Vision 2040 and the National Energy Strategy is to derive at least 30% of electricity from renewables by 2030.

Small Business

Small and medium-sized enterprises (SMEs) in the utilities sector have benefitted from initiatives rolled out by the AER to promote energy saving and the use of renewables. Services expected to see increased involvement from SMEs include auditing and retrofitting, infrastructure outsourcing and energy conservation projects. For example, SMEs are expected to play a contributory role in a national programme to improve the energy efficiency of government buildings by evaluating the design of air conditioning units and other electrical fittings. In October 2018 the AER supported 50 Omani nationals to train as certified energy auditors in an effort to open up the energy services market to local start-ups and entrepreneurs; as of December 2019, 27 people had passed the exam.

Promoting Desalination

Conscious of the natural limitations of Oman’s springs and aquifer systems, the authorities have sought to encourage international companies to develop independent water projects (IWPs) with desalination technology. Government officials estimate water demand will continue to grow by 6-8% per year through to 2022. At the same time, decreasing annual rainfall figures have caused approximately 1095 aflaj (traditional irrigation channels) to dry up.

In July 2018 a consortium of Japan’s Itochu, French utility companies Suez Environnement and Engie, and Omani firm Towell Engineering inaugurated the $300m Barka IV IWP, the country’s largest desalination project. This was followed by the launch of the country’s second-largest desalination plant in Sohar, on the Al Batinah coast, in October 2019. The Sohar 4 IWP has the capacity to produce 250,000 cu metres of water per day, supplying around 220,000 people. The project’s lead investor was Spanish infrastructure and services company Sacyr Agua, with a 51% stake, followed by Oman Brunei Investment Company with 25% and Sogex Oman with the remaining 24%. Project investment up to initiation is thought to have totalled approximately €200m. Other notable developments include the Barka II power and desalination plant, which has a capacity of 26.4m imperial gallons per day (MIGD), the 17.7-MIGD Sur desalination plant, and the 15-MIGD Salalah power and desalination plant.

Waste Management

The Oman Environmental Services Holding Company (be’ah) is in the process of taking over waste-management operations in the capital from the Muscat Municipality. be’ah had been operating in Al Seeb and part of Bausher since August 2017, but in July 2019 it started to take over operations in the rest of the city. The transfer is scheduled to be completed by the first half of 2020.As part of the envisaged structure, Dubai-headquartered Averda Waste Management will operate the engineered landfill site at Al Amerat and the waste-management station at Bausher. In 2017 be’ah had completed its transfer of collection and disposal duties to private sector operators in each governorate. Averda won the contract for Al Dakhiliyah and Dhofar, and Spain’s Urbasar operates in Al Batinah South. The Al Batinah North and Musandam governorates went to a consortium of India’s Ramky Enviro Engineers, the UAE’s Imdaad and local firm Khimji Ramdas, while Portugal-headquartered Suma is responsible for Al Sharqiyah South. be’ah also owns three medical waste plants that are now operated by Averda: the Al Multaqa facility, which has two lines of incinerators and autoclaves, and receives waste from Muscat, Al Dakhiliya, Al Sharqiyah North and Al Sharqiyah South; a site in Sohar that serves Al Batinah North, Al Batinah South, Al Buraimi and Al Dhahirah; and the Thumrait facility, which processes medical waste from Dhofar.


Oman’s first waste-to-energy project is currently under development, with local media reporting that it will enter the pre-qualification stage in 2020. The $800m development, which is located in Barka, is being coordinated by the OPWP in partnership with be’ah and the AER, and it will have a capacity of 125-160 MW. The plant will be structured as an IPP, with the selected developer providing the design, engineering, technology and finance, as well as operational and maintenance assistance under a long-term power purchase agreement. The waste-tooutput ratio will be roughly 1.4m tonnes of waste to 150 MW of power per year.


In terms of staffing, the sector is characterised by high rates of Omanisation, a policy introduced to increase the proportion of nationals in the workforce. According to the AER, 2429 of the 2695 people directly employed by the sector in 2018 were Omani. In percentage terms, Omanis make up 90% of those directly employed by the electricity sector, 55% of those indirectly employed and 65% of the sector total. The procurement segment had the highest rate of Omanisation, with 96% of its employees recorded as Omani nationals. Conversely, there are a large number of expatriate contractors, with Omanis accounting for 3773 out of 6867 contractors, or 55% of the cohort.

In September 2019 the Ministry of Manpower issued a decision to identify Omanisation targets for private sector companies in the utilities sector. The decision is understood to be part of the sultanate’s ongoing utilities privatisation programme. Some of the key changes include the requirement that leadership positions in water companies are completely Omanised within three years of the contract’s start, and electricity companies are 90% Omanised by the fourth year of the contract.


The reorganisation and privatisation of the utilities sector has created opportunities for companies to benefit from foreign investment and government support, particularly experienced renewable energy firms and local SMEs. As the sultanate pushes to achieve its target of using renewables for 30% of the energy mix by 2030, it is likely that new solar IPPs will be tendered in the years ahead, as well as wind and concentrated solar power projects. Meanwhile, in terms of privatisation, the success of the test cases of the MEDC and the recently sold stake in the OETC will become clear in 2020, and this should determine the direction of the sector’s ongoing sell-off strategy.