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Manama jumpstarts utility sector

4 November 2024

 

On 21 October, Bahrain’s Electricity & Water Authority (EWA) held a market-sounding event in Manama to gauge investor interest in its two upcoming utility public-private partnership (PPP) schemes, the Sitra independent water and power project (IWPP) and the Al-Hidd independent water project (IWP).

The event did not disappoint, attracting 60 representatives from regional and international utility developers and contracting firms such as France’s Engie, Japan’s Mitsui and Saudi Arabia’s Acwa Power, among others. The EWA is expected to launch the prequalification process for both projects imminently.

The Sitra IWPP replaces the previously planned Al-Dur 3, which was in the early planning phases following the completion in 2021 of Al-Dur 2.

The planned Sitra IWPP is a combined-cycle gas turbine (CCGT) plant, which is expected to have a production capacity of about 1,200MW of electricity. The project's seawater reverse osmosis (SWRO) desalination unit will have a production capacity of 30 million imperial gallons a day (MIGD) of potable water. It is expected to reach commercial operations in 2029.

The Al-Hidd IWP is Bahrain’s first independent, standalone SWRO plant. It is expected to have a production capacity of about 60MIGD of potable water and be completed in 2028.

The imminent launch of the two projects boosts Bahrain’s lean projects pipeline, which has experienced muted growth in the aftermath of the Covid-19 pandemic and the completion of the Al-Dur 2 IWPP, which delivered 1,500MW of gas-fired generation capacity and 227,000 cubic metres a day (cm/d) of desalination capacity.

MEED understands that both the Sitra and Al-Hidd plants are being procured to cater for a combination of demand growth and some replacement capacity with more efficient and sustainable technology.

Commenting on the Al-Hidd IWP, Robert Bryniak, CEO of Dubai-based Golden Sands Management (Marketing) Consulting, says that it will be interesting to see what the tariff comes in at for a desalination plant of its size, and how many bids are received.

“Traditionally, Bahrain has done combined power and water plants, but given the inroads reverse osmosis (RO) technology  has made over the years, it does make sense to plan them as separate plants,” says Bryniak. “Capacity-wise, the Al-Hidd IWP can be considered a mid-size plant in the region these days, although at around 270,000 cm/d, this is a large RO plant for Bahrain.”

A different set of factors will be at play for the Sidra IWPP, however.

For one, it is likely to be the last IWPP for Bahrain, which aims to reach net-zero carbon emissions by 2060.

According to a source familiar with utility projects in the country, the EWA is planning for future capacity to be sourced from renewables despite Bahrain's space and land constraints, which have hampered the execution of at least one solar photovoltaic (PV) independent power project (IPP) in the past.

The source says that Bahrain could also consider other options to decarbonise its electricity systems, such as by developing offshore wind or importing clean energy – Bahrain, after all, has consistently secured electricity from the GCC grid – to supplement its available capacity and meet future demand.

Solar PV projects

The EWA awarded its first utility-scale solar PV IPP to a team comprising Acwa Power and Mitsui in 2019. However, the 100MW Askar solar PV was subsequently put on hold, with the utility issuing a new design-and-build tender for a similar-sized project in February this year.

China's TBEA Xinjiang Sunoasis Company is the sole bidder for the contract, offering to build the 90MW-100MW solar PV farm for BD27.6m ($73.4m).

In 2018, Bahrain's Electricity & Water Affairs Ministry awarded Deft Contractors a contract to build, own, operate and maintain grid-tied solar PV power panels with a minimum capacity of 72MW in Sakhir in the south of the country.

The power plant will be located at several premises, including­ at Bahrain International Circuit, the University of Bahrain, Bahrain International Exhibition & Convention Centre and Al-Dana Amphitheatre.

The solar panels are to be built on the rooftops, car park shades, electric vehicle (EV) charging stations and grounds of these organisations’ facilities, a measure that directly addresses the country’s space and land constraints.

The 20-year power-purchase agreement for the project was signed in August last year, at which time Electricity & Water Affairs Minister Yasser Bin Ebrahim Humaidan said that project is in line with Bahrain’s broader vision to adopt a circular carbon economy, with the aim of bringing carbon emissions to net zero by 2060.

Water and waste

Bahrain’s Works, Municipalities Affairs & Urban Planning Ministry is the other client for the island-state's power and water infrastructure-related projects.

It launched the prequalification process in 2022 for a project to develop an integrated waste PPP project, which is understood to include a waste-to energy (WTE) plant.

The WTE plant’s intended outputs are electricity, fed into the national grid through a power-purchase agreement; incinerator bottom ash and flue gas; and recyclable materials

However, no further developments on the project have been forthcoming since early 2023, when the ministry prequalified several consortiums to bid for the contract.

The construction of new power and water desalination plants in Bahrain will likely require the building of new power stations. Nine such schemes are in the planning stage, according to data from regional projects tracker MEED Projects.

As of November, bids are under evaluation for a contract to build two water distribution stations, one in Al-Hunayniyah and the other in South Saar. The bidders for the estimated $100m contract include the local Mohammed Abdulmohsin Al-Kharafi & Sons, Ahmed Mansoor Al-Aali and Panorama Contracting, as well as the UAE-based Tecton Engineering.

The scope covers the construction of two ground storage tanks, each with a capacity of 10 million gallons; two pump stations; and elevated storage reservoirs, in addition to the distributions stations.

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Jennifer Aguinaldo

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    In 2023, power generation projects accounted for an estimated 79% of total contract awards, with T&D projects accounting for the rest.

    A different picture is emerging in 2024, with data in the first nine months of the year suggesting that generation contract awards are retreating to about 64% of the total. This is due to increased T&D capital spending that has so far driven a 150% increase in award value compared to full-year 2023.

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    A developer consortium comprising the UAE-based Abu Dhabi National Energy Company (Taqa), Japan’s Jera Company and the local Albawani Company successfully bid for the contracts to develop and operate the Rumah 2 and Nairiyah 2 IPPs. Meanwhile, Saudi Electricity Company (SEC), Riyadh-based utility developer Acwa Power and South Korea’s Korea Electric Power Corporation (Kepco) won the contracts to develop and operate the similarly configured Rumah 1 and Nairiyah 1 IPPs.

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    The $5.3bn high-voltage direct current network project connecting the central, western and southern regions of Saudi Arabia was the single largest power contract awarded in Saudi Arabia in 2024.

    The UAE, meanwhile, has awarded three key power contracts this year, including for the Al-Ajban solar IPP, which was won by a team of France’s EDF and South Korea’s Korea Western Power Company (Kowepo), and for the Dhafra waste-to-energy project, which a team of Japan’s Marubeni Corporation, Japan Overseas Infrastructure Investment Corporation and Zurich-headquartered Hitachi Zosen Inova is developing.

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    2025 outlook

    The Mena power projects pipeline remains robust, with over $45bn-worth of contracts under bid evaluation and another $50bn in the prequalification stage as of late 2024, according to MEED Projects.

    Saudi Arabia is likely to remain dominant, particularly if SPPC and the PIF activate a plan by the Energy Ministry to procure 20,000MW of renewable energy capacity annually until it reaches its target for renewables to account for half of its energy production mix by 2030.

    Morocco has the second-largest power projects pipeline thanks to several planned schemes to export clean energy and green hydrogen to Europe. Notably, the tender is under way for the country’s first two solar PV plus battery energy storage system (bess) projects, Noor Midelt 2 and 3.

    Abu Dhabi also maintains a substantial renewables and gas-fired generation project pipeline. It has several upcoming IPPs with a total combined capacity of over 7,000MW, of which more than 6,000MW is in the tendering stage.

    While the procurement process for Saudi Arabia’s first nuclear power plant in Duwaiheen has been delayed, the UAE has plans to procure the next phase of its nuclear power plant project in Barakah.

    Green industrial development in steel and aluminium, as is being undertaken in the UAE, is a driver for ongoing clean energy capacity buildout, notes Karen Young, senior research scholar at Columbia University’s Centre on Global Energy Policy.

    Egypt, Iran, Kuwait and Iraq have the next largest power projects pipelines. The key drivers in each state vary, with populous countries Egypt and Iran seeking to develop integrated green hydrogen hubs and nuclear power capacity, respectively, while Kuwait remains a promising market with extended plans to procure both conventional and renewable energy capacity to address peak demand.

    There are indications that Iraq’s first utility-scale solar PV scheme – a 1GW project being developed by France’s TotalEnergies – will head into the construction stage in the coming months, along with other similar projects for which preliminary agreements were signed by Iraqi authorities in 2021-22.

    Oman is actively pursuing renewable energy capacity, with the state offtaker having tendered the contracts for two wind IPPs in September 2024.

    In Oman and Qatar, the main downstream companies, Petroleum Development Oman and QatarEnergy, are developing renewable energy capacity as a means of mitigating their greenhouse gas emissions, as well as to support their respective government’s net-zero targets.

    In November, Bahrain started the procurement process for its fourth independent water and power project (IWPP) in Sitra, which replaced the previously planned Al-Dur IWPP 3 scheme.

    Other trends

    SEC affiliate National Grid Saudi Arabia has awarded EPC contracts for several bess packages to local firm Algihaz this year. In August, it tendered a contract for the construction of a further 2,500MW of energy storage capacity. 

    In parallel, the procurement process is under way for the first independent bess packages in Saudi Arabia and Abu Dhabi, with other utilities expected to follow suit in procuring bess using an IPP model. Bess will boost grid flexibility and spinning reserves in the face of increased renewable energy capacity and demand.

    In addition to bess and several gigawatts of solar and wind capacity, Saudi Arabia gigaproject developer Neom, which plans to be powered 100% by renewable energy by the end of the decade, is also considering a network of large-scale pumped hydropower storage plants.   

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    She adds that a telephone survey of 1,000 small and medium-sized businesses in Morocco about their perception of the accessibility and affordability of renewable energy yielded surprising results.

    “They strongly suggested a lack of support, given that smaller enterprises continue to see power outages and this has in many cases caused damage to their equipment and abilities to stay open and service customers.

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    25 December 2024

     

    The Middle East’s projects market in 2024 has been fuelled by the same heady cocktail of favourable oil prices, continued investment into oil and gas projects, government infrastructure spending, the energy transition, real estate investment and economic diversification that propelled the total value of awards in 2023 to record levels.

    By the end of October 2024, there were $262bn of contract awards across the Middle East and North Africa (Mena) region, according to regional projects tracker MEED Projects. By the end of the year, the 2024 total may top the $290bn recorded in 2023. 

    While economic diversification is a priority for governments across the region, oil and gas remains a key sector for project awards. The three largest contract awards in 2024 were from the sector.

    The top-ranked contract by value was a $20bn deal awarded to Iranian companies Petropars, Oil Industries Engineering & Construction, Khatam Al-Anbiya Construction Headquarters and Mapna Group for the South Pars gas field pressure-boosting project in Iran by Pars Oil & Gas Company.

    Next was the $8bn deal won by China’s Hualu Engineering Technology Company for delivering the Al-Faw refinery in Iraq for Southern Refineries Company.

    The third-largest award was a $5.5bn contract won by a joint venture of France’s Technip Energies, Japan’s JGC Corporation and the UAE’s NMDC Group for the Ruwais low-carbon liquefied natural gas terminal project by Abu Dhabi National Oil Company (Adnoc).

    These contract awards mean that the oil and gas sector accounted for 32% of the $262bn total that was recorded in the Mena region by the end of October 2024.

    Breaking down the sector into oil and gas separately reveals a telling trend. Oil accounts for 12% of awards, while gas accounts for 20%. These numbers reflect the growing importance of gas as a transition fuel that is cleaner and more environmentally friendly than oil, but still provides the dependable energy that many renewable alternatives still do not offer. 

    Strong performances

    Construction is the second-largest sector after oil and gas, accounting for 23% of awards. Its significance has dropped in 2024 compared to 2023, when it accounted for 32% of contract awards. 

    In terms of value, there were $68bn of contract awards in 2024 until the end of October. If the same pace is maintained during November and December, the 2024 total is expected to be about $81bn, which falls short of the 2023 total of $97bn. 

    While the total value of contract awards may have dropped, there was the largest construction contract award on record in 2024 – a $4.7bn deal secured by Italian contractor WeBuild for the construction of three dams for the Trojena mountain resort at Saudi Arabia’s Neom gigaproject. 

    The power sector accounted for 18% of the total awards during the period, the largest of which was the $5.3bn contract won by Saudi Arabia’s Alfanar Projects and China Electric Power Equipment & Technology Company for the 7,000MW Saudi Central, Western and Southern Regions high-voltage direct current overhead transmission lines project being developed by Saudi Electricity Company.

    When analysed by country, Saudi Arabia and the UAE dominate the market, and together they account for over 60% of contract awards across the region in 2024 up to the end of October. 

    As the region’s largest economy, it is unsurprising that Saudi Arabia accounts for the largest share, with 38.6%, followed by the UAE, which had 22%. The next most significant country was Iran, which came in a distant third with 8% of contract awards. 

    The outsized contribution of Saudi Arabia and the UAE reflects the relative economic stability found in the GCC compared to other countries in the region that are grappling with the impact of conflict and other associated financial pressures. 

    Looking beyond the contract awards numbers, the biggest project announcement in 2024 came in April, when Abu Dhabi investment vehicle ADQ released details of plans to invest $35bn in Egypt. The plans involve ADQ acquiring the development rights for Ras El-Hekma, a planned new city on Egypt’s northern Mediterranean coast, for $24bn. 

    The development has been billed as having the potential to attract over $150bn in investment.

    In October, ADQ appointed its subsidiary Modon Holding as the master developer for Ras El-Hekma. Modon will act as the master developer for the entire development, which covers more than 170 square kilometres (sq km). 

    Modon will develop the first phase, which covers 50 sq km, and the remaining 120 sq km will delivered with private developers.

    Key partners for delivering the project have already been found. For construction, Modon has signed a framework agreement with Egyptian firm Orascom Construction to serve as the primary contractor for the project’s first phase. 

    Modon also signed a deal with Abu Dhabi National Energy Company (Taqa) for developing, financing and operating greenfield utility infrastructure projects, water desalination projects, electricity transmission and distribution projects and wastewater projects at the Ras El-Hekma development.

    While economic diversification is a priority for governments across the region, oil and gas remains a key sector for project awards

    Future prospects

    Looking ahead, the performance of the projects market in 2025 will depend  on the favourable macroeconomic conditions remaining in the GCC, which if the other four members of the six-nation bloc are added, accounted for nearly 72% of the Mena region’s total contract awards during the first 10 months of 2024. 

    The key metric to watch in 2025 will be the oil price. In mid-November, the price of Brent Crude was $72 a barrel, which is below what many in the region, including Saudi Arabia, require if they are to maintain their project spending plans. 

    The outlook for oil prices is uncertain and after oil producers’ group Opec cut its global demand growth forecasts for both 2024 and 2025 for the fourth time, highlighting economic weakness in China, India and other regions, there are concerns prices will dip in 2025. 

    The election of Donald Trump as US president adds to those concerns. He has promised to “drill, baby, drill”, and a sharp uptick in output from the US could cause oil prices to soften further.

    Trump is also a protectionist and has said ‘tariff’ is his favourite word. Most of his new tariffs are expected to be aimed at China, which could mean that Chinese companies look to other markets that remain open to them, including the Middle East.

    The appeal is clear to see. Chinese contractors already command a dominant position in the region – particularly in North Africa and Iraq – and Chinese companies will find great appeal in affluent markets such as Saudi Arabia and the UAE, which can offer large-scale project opportunities.

    The other metric that will drive the projects market in 2025 is real estate. In the UAE, much of the ongoing development work is supported by the buoyant property market, particularly in Dubai, which has grown strongly throughout 2024. 

    According to a report by data and analytics company Reidin, property sales in the UAE reached AED46.52bn ($12.7bn) in October 2024, marking a 55% year-on-year increase. Demand also remains robust, with 19,500 transactions recorded in October, reflecting a 72% rise compared to the same period in 2023. 

    Looking ahead to 2025, Reidin says that the outlook remains optimistic as sustained demand, rising property values and steady inventory turnover are all expected to continue driving growth. 

    While the forecast supports a positive outlook for construction in the UAE, those who have seen Dubai’s property market collapse before will be keenly watching the data in 2025.

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