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GCC grid and Iraq sign electricity contract

10 October 2024

Saudi Arabia Eastern Region deputy governor Prince Saud Bin Bandar Bin Abdulaziz has witnessed the signing of a contract to implement the project to connect the Gulf electricity market with Iraq.

Prince Saud also inaugurated the project to upgrade the control centre systems of the GCC Interconnection Authority (GCCIA) in Dammam, the Saudi Press Agency reported on 9 October.

According to an industry source, the electricity tariff appears to have been finalised or signed, although this has not been formally disclosed.

"I doubt it will be less than $c10 a kilowatt-hour," the source said.

GCCIA chief executive Ahmed Al-Ebrahim and Gulf Laboratory CEO Saleh Al-Omari attended the contract signing ceremony in Dammam.  

The updated control centre systems of the electricity interconnection network aims to "improve the efficiency and flexibility of electricity systems to be able to face potential challenges".

Prince Saud inaugurated the so-called Gulf electricity market project in October last year.

The platform is expected to enable Iraq to exchange and trade electricity with the GCC countries collectively, separately or individually.

At the time, the Eastern Region governor's office said: "The GCCIA will replace the current electricity market management system with a new one that aligns with the new phase, enabling it to respond effectively to the ongoing market developments and achieve the specific goals and needs of the GCCIA in connecting the GCC countries with Iraq."

In February last year, GCCIA confirmed the award of five contracts worth $220m for the construction of infrastructure linking the region’s electricity grid with Iraq’s.

The project involves the construction of a double-circuit 400-kilovolt (kV) transmission line from the Wafra station in Kuwait to the Al-Faw station in south Iraq with a total transmission capacity of 1,800MW and a length of 295 kilometres.

To be completed within 24 months, the project’s first stage is expected to supply Iraq with 500MW of electricity, the GCCIA added.

The contracts were signed with:

  • KEC International (local)
  • Kalpataru Power Transmission (India)
  • Calik Enerji (Turkey)
  • Cegelec Saudi Arabia (local/France)
  • National Contracting Company (NCC)

The following month, GCCIA awarded Japan’s Hitachi Energy a contract to upgrade the Al-Fadhili high-voltage direct current (HVDC) converter station in Saudi Arabia.

Once upgraded, the Al-Fadhili station will be able to exchange up to 1,800MW of electricity between the six states.

The GCC regional grid extends over 1,000km from Kuwait to Oman.

Al-Ebrahim said that the project has contributed to saving some $3.6bn; the investment and operating costs of the project since its establishment amounted to about $1.5bn.

He said that the contract with Iraq will contribute to higher energy security, and enable the GCC countries to supply Iraq with about 3.94 terawatt-hours a year by 2025, at prices lower than the cost of local production, which will help Iraq reduce public spending.

https://image.digitalinsightresearch.in/uploads/NewsArticle/12683246/main.jpg
Jennifer Aguinaldo

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    The comments by ministerial speakers and business leaders at the event underscored how the GCC has grown closer both politically and economically since the signing of the Al-Ula declaration in 2021, which effectively ended the Qatar diplomatic dispute that began in 2017, and kickstarted a new era of regional cooperation. 

    The drive to bind the GCC as a more integrated economic bloc contrasts sharply with the political backdrop of the first Gateway Gulf. That event in May 2018 started the day President Donald Trump withdrew the US from the Joint Cooperative Plan of Action, better known as the Iran nuclear deal, and was set amid the GCC’s diplomatic dispute with Qatar.

    Closer ties

    The political backdrop is very different in 2024; the six GCC states enjoy warm relations, and tensions with Iran have cooled following a series of diplomatic rapprochements involving Tehran, Riyadh and Abu Dhabi. 

    These diplomatic efforts have resulted in a more stable business environment that has produced robust economic growth, record levels of inward investment and record spending on projects. 

    “As with every great moment in history, our region’s progress depends on continued unity and collaboration with current geopolitical complexities. A unified GCC can serve as a stabilising force shaping not only our own future but influencing the future,” said Bahrain’s Finance & National Economy Minister, Sheikh Salman Bin Khalifa Al-Khalifa, during his opening address at Gateway Gulf. 

    The stability that the Gulf offers has enhanced its appeal to investors at a time of war and instability in other areas. 

    “We have become one of the most promising destinations, not only for those looking to raise capital, but also for those looking to deploy it,” said Sheikh Salman. “Dynamic transformation is sweeping across the region.”

    Saudi Arabia’s Investment Minister Khalid Al-Falih also highlighted how the GCC has managed to prosper while other regions struggle with challenges. “GCC countries come out of these tensions stronger. We know how to navigate unfortunate difficulties. We’ve seen it over many, many decades … and if you look at the numbers, our credit ratings are going up, our stock markets are strong, unemployment is coming down across the region,” he said.

    Regional integration will be crucial to the GCC’s ongoing economic success story

    Attracting investment

    Investment funds also play a key role in the region’s success. “The GCC also has [Saudi Arabia’s Public Investment Fund] the PIF and the Emirati, Qatari and Kuwaiti funds that are all well-capitalised sovereign funds that can co-invest with global investors,” said Al-Falih. 

    Over the past year, some of the world’s leading investment companies have formed joint ventures with the GCC’s sovereign wealth funds. 

    In November, US-based Apollo and Abu Dhabi’s Mubadala Investment Company extended their multibillion-dollar partnership, initially formed in 2022, to capitalise on global private debt and equity opportunities. This extension enhances Apollo’s Capital Solutions division, supporting large-scale investment origination to meet rising demand for private financing. 

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    In April 2024, BlackRock and the PIF agreed to establish BlackRock Riyadh Investment Management, a multi-asset investment firm based in Riyadh. The venture began with an anchor investment of up to $5bn from the PIF, aiming to accelerate the growth of Saudi Arabia’s capital markets by supporting foreign institutional investment.

    Al-Falih also highlighted changes in how sovereign wealth funds that traditionally used to invest overseas to offset volatility in the oil markets are increasingly looking to domestic investment within the GCC. 

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    Sheikh Salman echoed Al-Falih’s comments. “I chair Mumtalakat, [Bahrain’s] sovereign wealth fund, and we look at where we deploy capital. What we have found is that the most compelling investment opportunities, with the highest return on equity, are increasingly at home or in the region. 

    “Mumtalakat has in effect turned itself into the joint venture partner of choice for inward investment because it provides a higher return on equity versus other investments in other places,” he said.

    Many of those investments have involved infrastructure, with notable transactions in oil infrastructure, the power and water sector and real estate. 

    An example came in September, when Bahrain’s state-owned Bapco Energies sold a stake in the Saudi Bahrain Pipeline Company (SBPC) to a fund managed by BlackRock. SBPC owns a portion of the 112-kilometre pipeline supplying crude oil from Saudi Aramco to Bahrain’s Sitra refinery.


    Sheikh Salman and Saudi Investment Minister Khalid Al-Falih met at Gateway Gulf 2024. Credit: Bahrain News Agency

    Another emerging trend could be cross-border mergers and acquisitions across the GCC. Over the past decade, there has been a steady stream of consolidation as companies combine their operations. This has remained within national borders and typically involved government or government-related entities. 

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    On a similar note, Al-Falih explained that what is good for one GCC country will ultimately benefit all. “If it is good for Bahrain, it is good for Saudi Arabia, and what is good for Saudi Arabia is good for the rest of the GCC. It is the old adage that a rising tide lifts all boats.” 

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  • Bahrain’s projects sector drags on economy

    21 November 2024

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    Photo credit: Mitsubishi Power (for illustrative purposes only)

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12964755/main.jpg
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    The Saudi Energy Ministry recently said that the kingdom plans to procure 20,000MW of renewable energy capacity annually, starting this year until 2030.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12964642/main.gif
    Jennifer Aguinaldo
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    The PIF and its partners are currently developing several solar PV projects with a total capacity of 13.6GW, involving over $9bn in investments. These joint projects – including Sudair, Shuaibah 2, Ar Rass 2, Al-Kahfah and Saad 2 – are intended to enable and support the local private sector through domestic supply-chain participation.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12963512/main.jpg
    Jennifer Aguinaldo