Oman Vision 2040, the national plan to diversify the sultanate’s economy and put it on a more sustainable footing, is the most important driver of change in the country’s utilities sector. In March 2019 the Oman Power and Water Procurement Company (OPWP) forecast the share of renewables in the energy mix would reach 30% by 2030, compared to Vision 2040’s initial projection of 20%. Following the country’s announcement in October 2022 of its goal of reaching net-zero emissions by 2050, the sultanate plans to invest $190bn in climate and energy-transition projects by 2050, including energy efficiency measures and renewable power projects.

Structure & Oversight

Oman has been increasingly centralising control of its overall energy policy, including the public provision of power. The Ministry of Energy and Minerals, and the Ministry of Agriculture, Fisheries and Water Resources (MAFWR) are responsible for policy decisions regarding power and water, respectively. The Authority for Public Services Regulation (APSR) handles the electricity sector and some aspects of the water sector, as well as complaints. It also formulates regulations designed to encourage the deployment of new renewable capacity.

The government-owned OPWP ensures there is sufficient power and water production capacity to meet Oman’s needs, which it fulfils by offering new contracts through public tenders. It is the sole buyer of power and water from all independent water projects and independent power projects (IPPs), as well as the operator of the national spot electricity market.

Oman Electricity Transmission Company (OETC) is the operator of the country’s two primary grids, and the owner and operator of the sultanate’s primary high-voltage transmission network. The company aims to develop a smart grid capable of regulating the flow and delivery of electricity in a sector that aims to rely on renewable energy for at least 30% of its total power requirements by 2030. The task’s urgency was underscored in September 2022, when a wave of blackouts interrupted services across the country, with a technical glitch at OETC pinpointed as the cause. The APSR is seeking to prevent such disruptions in the future by linking Oman’s two major grid networks in the north and south by 2026, and installing backup generation capacity. Work is ongoing to install 220-KV and 132-KV transmission lines with associated new grid stations for both the Main Interconnected System (MIS), which services the northern half of the sultanate, and the Dhofar System, which services the region around Salalah. This should reduce power outages and serve as a driver of future sector growth. OETC’s key projects in this field include the North-South Interconnector Project, the Duqm Power Transmission Project, the Saih Al Khairat grid station and the New Rusail grid station.


Nama Group, owned by the Oman Investment Authority (OIA), the sultanate’s sovereign wealth fund, is the holding company under which all the government-owned power, water and wastewater service providers operate. In June 2021 a significant restructuring saw the Oman Water & Wastewater Services Company (OWWSC) formed from the consolidation of the former Public Authority for Water and the Oman Wastewater Services Company. The OWWSC seeks to achieve 98% water network coverage by 2040, apart from in the Dhofar Governorate, where water distribution and wastewater management are handled by the Dhofar Integrated Services Company.

Meanwhile, a parallel restructuring of the highly consolidated electricity market is also under way among the government-owned firms in charge of power distribution. In January 2022 the OIA announced it would bring Muscat Electricity Distribution, Mazoon Electricity, Majan Electricity and the Rural Areas Electricity Company (Tanweer) under the same umbrella, while the Dhofar Integrated Services Company would again be treated separately. That same month Oman launched the Middle East’s first spot market for electricity. Improved efficiency is its aim, allowing licensed generators to sell their excess power at the most competitive rate. The OPWP operates the market, allowing Oman to move beyond a commonplace deal structure in which the price of power is agreed by the electricity and water distributor when a project is finalised under a power purchase agreement (PPA). Although they offer certainty and security, PPAs do not incentivise more efficient production, whereas the spot market drives cost savings by allowing the most competitive producers to sell their surplus.

The OWWSC restructuring helped raise the value of Nama Group’s assets to OR9.5bn ($24.7bn) as of the end of 2021, a 42.6% increase when compared to the pre-merger period. The OWWSC merger, the electricity company restructuring and the spot market debut are the result of a need to improve the management of resources under Vision 2040, and there is already some evidence of progress having been made in this regard. As a result of related subsidy reforms, electricity subsidies were down 7.5% in 2021 to OR568.6m ($1.5bn), while water and wastewater subsidies fell by 31% to OR136.4m ($354.5m). Nonetheless, Nama Group earned about half its revenue of OR1.4bn ($3.6bn) from government subsidies in 2021.


The power sector was severely impacted by the Covid-19 pandemic, and many projects faced delays and setbacks. That said, the national drive to develop renewable energy and improved grid connections is expected to contribute to a compound annual growth rate of 5% in the country’s power sector from 2022 to 2027, according to market research firm Mordor Intelligence. As of November 2022 total electricity generation year-to-date was 39,081 GWh, up 1.5% from the corresponding period in 2021, which saw 38,484 GWh. Total electricity production in the Dhofar Governorate as of November 2022 was up 9% year-to-date at 3935 GWh. The Al Batinah North, Al Batinah South and Al Dhahirah governorates noted a 5.2% increase to 25,456 GWh.

As of early 2023 over 90% of electricity was supplied by natural gas power stations, the largest of which is the 2000-MW Sur natural gas-fired combined-cycle power plant that has been in operation since 2014. Moving forwards, Oman has committed to meet future demand for electricity from renewable sources alone, easing its dependence on natural gas. As such, the APSR is preparing to roll out regulations to support bilateral agreements and wheeling, or initiatives to increase the supply of private-led green energy to large customers. Such arrangements between the generator and the end user – typically a large industrial consumer – would sidestep the OPWP.

“A solid regulatory framework is needed to attract investment and create value in renewable energy,” Walid Hadi, country chairman of Shell Development Oman, told OBG. “Companies will be able to invest with a clear understanding of the returns. Public-private partnerships are essential to develop the local value chain and fulfil the country’s potential in this space.”

Tariffs & Subsidies

In December 2020 Oman announced it would cut subsidies for water and electricity entirely by 2025 but rolled back the plan after complaints over sharp increases in bills, leading to a new timeframe stretching to 2031. Subsidies on oil products in the first nine months of 2022 were OR563m ($1.46bn), close to the OR575m ($1.49bn) budgeted by the government for all of 2022, but down from OR578m ($1.5bn) for the corresponding period in 2021. That said, the public subsidy per unit of electricity supplied in 2021 fell to OR15.90 ($41.32) per MWh, down from OR18.60 ($48.34) per MWh in 2020. Customers received an average subsidy of OR418 ($1090) in 2021, 10.5% less than the corresponding figure of OR467 ($1210) in 2020.

The government capped 2022 residential power tariffs at December 2021 rates, and the country is on track to complete an adjustment. The authorities have also unified tariffs for citizens and non-citizens at OR0.14 ($0.36) per KWh, with the option to increase that rate at OR0.02 ($0.05) per year. Ultimately, the idea is to eliminate subsidies to all but those who are most in need of the support. As of December 2022, 80,000 Omani households were eligible for monetary support under the National Subsidy System, a targeted support system designed as a more cost-effective alternative to blanket subsidies.

Energy usage is more likely to be measured by smart meter as this transition occurs, and the APSR is undertaking a national smart-meter programme to install 1.2m devices nationwide by 2025. The push, which applies to both large-scale and residential customers, should make billing more efficient.

Water & Wastewater

Efficiency is an issue of paramount importance in Oman’s water sector, as the country faces an annual water deficit of 316m cu metres, according to the MAFWR. Agriculture, which is responsible for 83% of water use, is putting the available resources under increasing pressure.

Oman’s reliance on groundwater for more than 80% of its freshwater needs has spurred it to install 12 cloud-seeding stations on mountains in the eastern and western Hajar ranges and in the Dhofar Governorate, along with 634 rain gauges to measure their efficacy. Cloud-seeding technology helped increase Oman’s rainfall by 15-18% between 2016 and 2022.

The MAFWR issued 8380 water licences over the first nine months of 2022. As of May 2022 the ministry had built 174 dams – 56 ground recharge, 115 surface storage and three flood-protection facilities – with eight more under construction. The sultanate’s year-to-date total water production as of the end of November 2022 was 469.7m cu metres, marking increases of 9.2% and 7.1% year-on-year in the Dhofar and Muscat governorates, respectively.

The ministry is also working on a project to utilise Oman’s aflaj – or ancient water channels dating back to 500 – to collect groundwater and distribute it to modern irrigation systems, with 223 aflaj restored in 2022. The OWWSC, for its part, is working on two major projects to improve water transmission lines, having completed a pipeline project linking Suhar with Ibri in the Al Dhahirah Governorate in 2022.

Energy Mix

Oman has long relied on hydrocarbons for the vast majority of its domestic energy mix. In 2021 gas was the source of 71% of energy consumed in the country, while oil accounted for 28%. Coal and renewable sources provided less than 1% combined. Oman’s current target is for renewables to constitute 30% of its energy mix by 2030.

The sultanate is a regional leader in developing IPPs, having launched its first one in 1994. “Oman has been a pioneer in the Middle East for public-private partnership (PPP) projects. Initial PPPs have been predominantly IPPs and independent water and power projects (IWPPs). Since its first PPP in 1994, the Manah IPP, Oman has regularly used the PPP model,” Muneer Al Muneeri, CEO of Rakiza – an infrastructure fund focused on Oman and Saudi Arabia, and co-managed by Oman Infrastructure Investment Management and Equitix – told OBG. “Compared to other Middle Eastern countries, the Omani tendering process is both streamlined and transparent and Oman’s developed PPP environment is a testament to a strong and well-banked IWPP model, which gives comfort to international investors and financier communities.”

As the sole off-taker of output from power generation and water desalination projects, the OPWP plans to add at least 2200 MW of additional renewables-based IPP capacity to the MIS by 2027. As of August 2022 Oman had about 650 MW of renewable capacity connected to the grid, up from 159 MW in 2021. The goal is a capacity of roughly 3.4 GW by 2027.


Oman has large-scale potential for wind power thanks in part to higher wind speeds in the evening and at night, compensating for solar downtime and allowing for sustained renewable power generation.

Oman’s first wind farm, the 50-MW Harweel farm in the Dhofar Governorate, was brought on-line in August 2019. The project is typical of the opportunities that are opening up in the sector for foreign firms, with GE Renewable Energy supplying 13 turbines and Spanish engineering firm TSK carrying out the building work. Tanweer and Abu Dhabi renewables giant Masdar are the joint owners of the wind farm.

Looking ahead, Oman is targeting $300m of investment in new wind projects in the Al Sharqiyah South and Al Wusta governorates, and the sultanate was in the process of selecting investors for the three projects in April 2022. The one in the Al Sharqiyah South Governorate is expected to have a capacity of 100 MW, while the two projects planned for the Al Wusta Governorate are expected to have capacities of 160-200 MW each. The OPWP is also planning to augment the Harweel project with an additional wind farm, adding 100 MW of capacity.

Oman’s primary oil and gas major, the majority government-owned Petroleum Development Oman (PDO), was a pioneer in the domestic solar industry, and it aims to reduce its carbon emissions to 50% of 2019 levels by 2030. PDO is seeking to establish itself as a player in the domestic wind market after announcing the Riyah I project in September 2022. The wind farm – the first of several planned projects – is expected to be commissioned in the first quarter of 2024.


Oman has one of the highest solar densities in the world, which allows for power projects to operate at low costs and high margins, making the sultanate an attractive place for new projects.

In January 2022 a consortium of Saudi operator ACWA Power, Kuwait-based company Gulf Investment Corporation and fellow Kuwait-based enterprise Alternative Energy Projects inaugurated the 500-MW Ibri II solar IPP, the first to be connected to the primary national grid. The project’s photovoltaic (PV) solar panels are cleaned by robots. The consortium, which was backed by a $60m loan from the Asian Infrastructure Investment Bank, is set to produce renewable energy over a 15-year period for the OPWP, supplying 50,000 homes and displacing 340,000 tonnes of carbon emissions per year. The $417m project was completed in 13 months, underlining the viability of commercial solar power in Oman and paving the way for future foreign direct investment.

Indeed, the OPWP announced that two 500-MW solar projects – the Manah I and II solar IPPs – would be deployed in the Al Dakhiliyah Governorate, with commercial operations expected to start in the fourth quarter of 2024. The OPWP also envisions the need for two more solar projects: a 500-MW MIS-connected solar IPP in the Al Dakhiliyah Governorate, which is tentatively scheduled to start commercial operations in the second quarter of 2025, and a 600-MW solar PV facility in the Al Wusta Governorate, which is tentatively slated for commercial launch in 2027. In addition, a feasibility study on a potential concentrated solar power project with thermal storage near Duqm was being carried out as of April 2022.

Further, Oman is undertaking a project to place solar panels on rooftops. Currently in its second phase, the Sahim programme aims to promote the deployment of small-scale, grid-connected PV systems in 10% to 30% of residential premises, or around 250,000 rooftop installations, which equates to roughly 1 GW of solar capacity. In 2023 the programme aims to reach 100,000 homes in Muscat. Under Sahim, private developers build, own and operate the PV systems, recovering their costs via contracts with licensed suppliers. Customers also make contributions based on expected savings on their electricity bills.

Alternative Sources

SLB, formerly oil services company Schlumberger, announced in November 2022 that it was partnering with the Ministry of Energy and Minerals and the OIA to develop a national strategy for Oman to utilise the potential of its geothermal resources after mapping hotspots by evaluating data provided by the Oman Oil & Gas Data Repository.

In addition, the OPWP has reinvigorated Oman’s first waste-to-energy (WTE) project, which had been delayed after the pandemic led to a drop in power demand. In March 2022 the OPWP signed a memorandum of understanding with the Oman Environmental Service Holding Company to build a WTE plant with a capacity of 130-150 MW in the coastal city of Barka in the Al Batinah South Governorate.


As it works towards achieving net-zero carbon emissions by 2050, Oman is committed to weaning itself off carbon-intensive forms of power and replacing them with renewable alternatives. Early forays into the space have been successful, and the rollout of a direct sales framework should accelerate activity as existing PPAs expire. Meanwhile, a restructuring of both the power and water sectors is paving the way for efficiency savings as government assets are consolidated, and the market opens up to private participation and competition, leading to positive prospects for investors. Ultimately, Oman is looking to harness its solar and wind resources to reduce the effects of climate change, and strengthen its energy security while enabling its sustainable development.