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Carbon capture path for thermal plants still elusive

23 October 2024

 

The decarbonisation path for upcoming thermal power plants across the GCC region remains vague, according to industry sources.

Both clients and utility developers are understood to be exploring options to include carbon capture, utilisation and storage (CCUS) provisions in ongoing and upcoming tenders for developing gas-fired power plants in line with their net-zero carbon emissions targets.

Two sources said several independent power projects (IPPs) in Abu Dhabi and Saudi Arabia, as well as independent water and power projects (IWPPs) in Qatar and Kuwait, have considered or are considering available options.

“So far, the only option at the table appears to be that the offtaker and the project company implementing the scheme agree to achieve decarbonisation of a power plant asset at a specific time, mainly by 2049,” one of the sources said. “If not, the international developer reserves its right to leave the project company.”

Most European and Japanese utility developers and investors aim to achieve net-zero carbon emissions between 2045 and 2050. 

Regional utilities and offtakers such as Abu Dhabi’s Emirates Water & Electricity Company (Ewec), Saudi Power Procurement Company (SPPC), Qatar’s General Electricity & Water Corporation (Kahramaa), Kuwait’s Ministry of Electricity, Water & Renewable Energy (Mewre) and Bahrain’s Electricity & Water Authority (Ewa) have either thermal IWPP or IPP schemes that are under tender or about to be awarded.

These entities have specified parameters related to carbon capture or CCUS in their recent and upcoming tenders.

Commercial viability

Introducing CCUS in utility assets, particularly for combined-cycle gas-turbine plants (CCGTs), is becoming a high priority for both offtakers and developers. However, there is less certainty on how and when integrating the solution will become commercially viable.

In a recent interview with MEED, Tomaz Guadagnin, Engie’s managing director for Flex Gen in Asia, Middle East and Africa, said building a power station with CCUS today requires significantly bigger land and capital expense as the asset will require additional gas turbine exhaust systems, among other things.

As such, “it is an important requirement that predictability of the operation of that product is provided”.

Guadagnin says it is key for international developers to consider that these factors need to be built into the tariffs so that companies can reach a financial investment decision.

It is also imperative that developers and offtakers understand what will be done with the captured carbon dioxide.

“What will be done with the captured CO2, where does it fit in, how is it transported and the work required around that and its utilisation. We still don’t have clear visibility on how these will materialise,” the executive noted.

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Jennifer Aguinaldo

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    7 March 2025

     

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    The value of public-private partnership (PPP) contracts in Saudi Arabia has risen sharply over the past two years as the government seeks to develop projects through the private sector and diversify funding sources.

    According to MEED Projects data, in 2023, the value of PPP concession contracts hit an all-time high of $28.2bn, equivalent to more than 23% of the total value of all project contracts awarded that year. Although that figure fell to 18.3% last year, it was still far higher than the historical average in the kingdom.


    Source: MEED Projects

    The figures are even starker when taking only government spending into account. In 2023, the value of signed PPP contracts totalled more than a third of the value of government or government-related projects awarded in 2023 and more than a quarter last year. This is compared to the average of 15.6% between 2019 and 2022, and just 3.5% recorded in 2018. 

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    The government increasingly views the development of projects through the PPP framework as a means of delivering strategic schemes like power and desalination plants off-balance sheet using private sector funding, thereby reducing its capital expenditure requirements. 

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    *Government contracts include awards made by ministries, municipalities and royal commissions, in addition to state-managed key project clients such as Saudi Electricity Company, the National Housing Company and Jeddah Airports Company. Public Investment Fund (PIF) subsidiaries like Neom and Rua Al-Madinah are also included. Capital expenditure by Saudi Aramco is excluded from the analysis | Source: MEED Projects

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    PPPs have been used in Saudi Arabia and the wider GCC region for over two decades, but have been mainly limited to power generation and water desalination plants, where the developer benefits from guaranteed take-or-pay power-purchase agreements that eliminate demand risk.

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    NMDC, for example, will seek companies over the next five years to finance and operate its water treatment, power, district cooling, waste collection, telecommunication, secondary roads, street lighting, social infrastructure and EV charging infrastructure requirements under its partnership strategy. 

    The use of PPP contractual frameworks will be critical to ensure delivery of the gigaprojects as soaring construction costs have resulted in delays to the programme and put a strain on the PIF and government’s finances. 

    Growing appetite

    Power and water production schemes aside, it remains to be seen whether the private sector and banks will have the appetite to take on the investment risk these projects will entail, especially if they do not come with government guarantees, explicit or otherwise.

    However, the experience to date suggests that there is a big appetite in the private sector – at least locally – to take on an expanded role in absorbing some of the state’s financing burden. Whether this will remain the case as the PPP pipeline continues to grow will be key to Saudi Arabia’s project and 2030 Vision ambitions.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/13466076/main.gif
    Edward James
  • Aljomaih team engages lenders for $2.2bn water pipeline PPP

    7 March 2025

     

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    SWPC issued the request for proposals for the Jubail-Buraydah IWTP scheme to prequalified bidders in October 2023.

    The transaction advisory team for the client comprises the US/India’s Synergy Consulting as financial adviser and the local Amer Al-Amr and Germany’s Fichtner Consulting as legal and technical advisers, respectively.

    An advisory team comprising UAE-based financial advisory Cranmore, UK legal advisory services firm Pinsent Masons and Canadian engineering services firm WSP advised the winning developer consortium.

    SWPC’s obligations under the water transfer agreement will be guaranteed by a credit support agreement entered into by the Finance Ministry on behalf of the Saudi government.

    The project is part of the kingdom’s National Water Strategy 2030, which aims to reduce the water demand-supply gap and ensure desalinated water accounts for 90% of the national urban supply to reduce reliance on non-renewable ground sources.

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    https://image.digitalinsightresearch.in/uploads/NewsArticle/13465608/main.jpg
    Jennifer Aguinaldo