Muscat performs tricky budget balancing act
12 December 2023
On 11 November, Oman’s Etco Space sent its first nano-satellite, Aman-1, into orbit aboard a SpaceX Falcon 9 rocket launched from California. It is the sort of endeavour Muscat is keen to promote as it tries to diversify its economy.
Etco Space chief executive Abdulaziz Jaafar said his company will be “pushing the boundaries of our space programme in the coming months and years”. It aims to launch more satellites and get involved in deep-space missions.
Oman’s economy needs to find new areas to exploit. GDP growth slowed from 4.3 per cent in 2022 to 1.3 per cent in 2023, according to the Washington-based IMF. The organisation expects the growth rate to revive to 2.7 per cent in 2024, but that is at least partly dependent on a rebound in hydrocarbons production.
This may not come to pass. Oman is part of the wider Opec+ arrangement to curb production and at the group’s meeting on 30 November, Oman agreed to cut 42,000 barrels a day (b/d) from its output during the first quarter of 2024. Opec said the cuts will be gradually unwound later in the year “subject to market conditions”.
Soft oil prices
It is not just about output, however. Oil prices have also been weaker in 2023. The Finance Ministry says Oman received $81 a barrel on average in the first nine months of 2023, compared to $94 in the same period last year.
Caroline Bain, chief commodities economist at Capital Economics, said the Opec+ cuts “should at least act as a floor under prices at current levels, but we would be surprised if it prompted a sustained price rally”.
As it stands, Oman’s net oil revenues were RO4.8bn ($12.5bn) in the first nine months of 2023, 10 per cent lower than a year ago.
Gas revenues have fallen even more significantly – by 42 per cent to RO1.6bn – prompting an overall drop in public revenues of 16 per cent, or RO1.7bn.
Wider market dynamics mean the pressure is likely to continue into 2024. Bhushan Bahree, executive director at S&P Global Commodity Insights, says that crude prices are “under pressure from a looming oil over-supply early next year”, amid strong oil production growth in the Americas.
The economic pressures follow a period of fairly benign conditions. High oil revenues in recent years have enabled Omani authorities to post fiscal and current account surpluses and pay off some sovereign debt.
Such trends have prompted the main credit ratings agencies to issue upgrades. In May 2023, Moody’s Investors Service promoted Oman from Ba3 to Ba2, while both Standard & Poor’s and Fitch Ratings upgraded the sovereign from BB to BB+ in September.
Debt and spending
Government debt rose from just 5 per cent of GDP in 2014 to a peak of 68 per cent in 2020, but since then there has been a concerted effort to reverse that trend. By 2022, it had dropped to 40 per cent of GDP and Fitch predicts it will stabilise at about 35 per cent in 2024-25.
Overall public debt is now at about RO16.3bn, levels last seen in 2018-19.
Despite the lower oil and gas revenues, the government has kept its spending discipline, with expenditure down 14 per cent in the first nine months of the year. This has meant the budget remains in surplus, albeit at lower levels than in 2022. Figures from the Finance Ministry show a surplus of RO791m for the first nine month of 2023, down from RO1.1bn in the same period a year earlier.
In the longer-term, Oman is pinning much of its hopes on hydrogen production. Hydrogen Oman (Hydrom) signed five deals for projects in Duqm in mid-2023, involving total potential investment of $30bn. It is hoping a second round of deals, covering blocks of land in the Dhofar region, could attract a further $20bn-$30bn, with awards due in early 2024.
Hydrom managing director Abdulaziz al-Shidhani has said total investments in the sector could reach $140bn by 2050, by which time the country is hoping to produce 8 million tonnes a year (t/y) of green hydrogen. There is an interim target of 1 million t/y by 2030.
Even if these investment and production targets are achieved, oil and gas will remain central elements of the Omani economy for some time. In a sign of the sector’s continuing importance, the $7bn OQ8 refinery project in Duqm is due to be completed by the end of 2023, with partners OQ and Kuwait Petroleum International aiming to process about 230,000 b/d of oil once it is up and running.
Compared to the undulations in oil and gas and the wider economy, Oman’s political scene is far more stable. Since taking over in 2020, Sultan Haitham bin Tariq al-Said has pushed economic reforms but made few changes on the political side, other than gradually adjusting some of the key personnel. In late October, he appointed new governors to take over in South Al-Batinah, North Al-Sharqiyah and Al-Wusta.
There have also been public protests in Muscat over the Gaza war, but they have been more limited than some other demonstrations in recent years, such as the protests against high unemployment and inflation seen in 2018 and 2019 in cities around the country.
As long as the government can keep the economy relatively stable, it should also be able to maintain the political equilibrium.
MEED's January 2024 special report on Oman also includes:
> BANKING: Omani banks look to projects for growth
> POWER & WATER: Oman expands grid connectivity
Exclusive from Meed
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Dubai prequalifies developers for $22bn tunnels PPP
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Bankability remains hydrogen’s unbreakable challenge
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Qatar maintains stable growth heading
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Dubai prequalifies developers for $22bn tunnels PPP
6 February 2025
Dubai Municipality has prequalified developers for the first four packages of the $22bn Dubai Strategic Sewerage Tunnels (DSST) project.
According to industry sources, at least three companies have been prequalified as lead members of potential consortiums that can bid for the contracts.
These include:
- Etihad Water & Electricity subsidiary (local)
- Itochu (Japan)
- Vision Invest (Saudi Arabia)
Other companies have been prequalified as technical members.
MEED reported in October that over a dozen companies were keen to prequalify as investors or sponsors of the planned public-private partnership (PPP) project.
They included:
- Abrdn Investcorp Infrastructure Investments Manager (UK)
- Besix (Belgium)
- China Railway Construction Corporation (CRCC)
- China Railway Engineering Group (CREG)
- China State Construction Engineering Corporation (China)
- Itochu (Japan)
- Nesma Company (Saudi Arabia)
- Plenary (Australia)
- Samsung C&T (South Korea)
- Vision Invest (Saudi Arabia)
- Webuild (Italy)
The request for proposals for the project's first two packages is expected to be issued imminently.
MEED previously reported that the bidders for the PPP packages will be prequalified consortiums comprised of sponsors or investors, EPC contractors, and operations and maintenance contractors.
The overall project will require a capital expenditure of about AED30bn ($8bn), while the whole-life cost over the full concession terms of the entire project is estimated to reach AED80bn.
The investor prequalification process for the scheme comes after the client prequalified EPC contractors that can partner with the developers or investors to bid for the contracts.
MEED understands that packages J1 and W will be tendered together as separate contracts first, followed by J2 and J3, with the requests for proposals to be issued sequentially, staggered about six to 12 months apart.
DSST packages
Under the current plan, the $22bn DSST project is broken down into six packages, which will be tendered as PPP packages with concession periods lasting between 25 and 35 years.
The first package, J1, comprises Jebel Ali tunnels (North) and terminal pump stations (TPS). The tunnels will extend approximately 42 kilometres (km), and the links will extend 10km.
The second package, J2, covers the southern section of the Jebel Ali tunnels, which will extend 16km and have a link stretching 46km.
The third package, W for Warsan, comprises 16km of tunnels, TPS and 46km of links.
J3, the fourth package, comprises 129km of links.
J1, J2, W and J3 will comprise the deep sewerage tunnels, links and TPS (TLT) components of the overall project.
J1, J2 and W will be procured under a design-build-finance-operate-maintain model with a concession period of 25-35 years.
J3 will be procured under a design-build-finance model with a concession period of 25-35 years. Once completed, Dubai Municipality will operate J3, unlike the first three packages, which are planned to be operated and maintained by the winning PPP contractors.
The project’s remaining two packages entail expanding and upgrading the Jebel Ali and Warsan sewage treatment plants. MEED understands that these packages will be procured at a later stage.
https://image.digitalinsightresearch.in/uploads/NewsArticle/13370610/main.jpg -
Iraq and GE Vernova complete plants upgrade
6 February 2025
US-headquartered energy technology provider GE Vernova has completed the upgrades of “several key” power plants in Iraq.
The firm and the Iraqi Ministry of Electricity (MoE) announced the upgrade’s completion on 5 February.
The overall upgrade project, which GE Vernova previously announced, covers 46 gas turbines across 12 power plants, adding up to 500MW to Iraq’s national grid before the summer of 2025.
They did not specify which power plants have completed upgrade works.
According to GE, some of the power plants included in this project already transitioned from heavy fuel oil (HFO) to natural gas, with a capacity increase of approximately 260MW. These plants include Ninawa, Al-Diwaniyah, Hilla, Karbala, Shat Al-Basra, Najibiya, Samawa, Dhiqar, Al-Khairat and Al-Haidariya.
GE Vernova added: “The other plants are expected to be modernised within the summer of 2025, with an expected additional increase in capacity of approximately 250MW.
“This modernisation is expected to improve operational flexibility and boost output, efficiency and availability of the power generation assets.”
In addition, the firm announced the successful installation of its Advanced Gas Path (AGP) upgrades on several 9. E gas turbines powering the Al-Quds and Dhiqar power plants, and MXLII upgrades on 13E2 gas turbines powering the Al-Mansouriya power plant.
According to GE Vernova, the expected output increases of up to 6% for each power plant will enable the MoE to generate more electricity using the same amount of fuel.
In addition, as part of the services and upgrade agreement announced in 2024 with the MoE to enhance the availability of power plants across the country, GE Vernova completed comprehensive maintenance projects across several of these power plants, corresponding to a total capacity of 3.7GW.
These power plants include Qayyarah, Diwaniyah, Al-Haydariyah and Baghdad South.
Iraq periodically suffers from power outages, especially during the summer months, when increased cooling requirements overwhelm its power plants and electricity grid.
READ THE FEBRUARY MEED BUSINESS REVIEW
Trump unleashes tech opportunities; Doha achieves diplomatic prowess and economic resilience; GCC water developers eye uptick in award activity in 2025.
Published on 1 February 2025 and distributed to senior decision-makers in the region and around the world, the February MEED Business Review includes:
> AGENDA 1: Trump 2.0 targets technology> AGENDA 2: Trump’s new trial in the Middle East> AGENDA 3: Unlocking AI’s carbon conundrum> GAZA: Gaza ceasefire goes into effect> LEBANON: New Lebanese PM raises political hopes> WATER DEVELOPERS: Acwa Power improves lead as IWP contract awards slow> WATER & WASTEWATER: Water projects require innovation> INTERVIEW: Omran’s tourism strategies help deliver Oman 2040> PROJECTS RECORD: 2024 breaks all project records> REAL ESTATE: Ras Al-Khaimah’s robust real estate boom continues> QATAR: Doha works to reclaim spotlight> GULF PROJECTS INDEX: Gulf projects market enters 2025 in state of growth> CONTRACT AWARDS: Monthly haul cements record-breaking total for 2024> ECONOMIC DATA: Data drives regional projects> OPINION: Between the extremes as spring approacheshttps://image.digitalinsightresearch.in/uploads/NewsArticle/13370380/main.jpg -
Bankability remains hydrogen’s unbreakable challenge
6 February 2025
Commentary
Jennifer Aguinaldo
Energy & technology editorThere is some indication that green hydrogen as an industry has arrived at the valley of disillusionment if the Gartner hype cycle is anything to go by.
This is evident with the dwindling number of attendees and absence of offtakers – global commodity trading companies that are expected to buy premium green hydrogen and derivative products – at previously well-attended green hydrogen summits in major cities in the Gulf.
Following frenzied announcements of multibillion-dollar integrated green hydrogen and ammonia plants in the Middle East and North Africa region, particularly Egypt, Morocco, Oman and the UAE, between 2021 and 2023, it appears that key stakeholders have started coming to grips with reality.
Of the close to 80 green hydrogen projects that MEED and MEED Projects track, only three have so far signed an offtake agreement, and only one has managed to reach financial close.
The $8.4bn Neom green hydrogen project in Saudi Arabia reached financial close in March 2023, nearly two years after it was announced.
The project, the largest of its kind requiring over 4GW of renewable energy and 2GW of electrolyser capacity, managed to reach financial close based on one of the three co-developers, the US’ Air Products, assuming the full offtake and construction risks for the project, note some experts.
A project’s bankability ultimately relies on suitable stakeholders taking on the risks for every aspect of the project, from construction to operations.
Currently, the risks or threats include evolving global regulations related to consumption and carbon emissions pricing; lack of technology maturity; supply and demand uncertainty; and the lack of mainstream demand, according to Wael Almazeedi, chief executive at Abu Dhabi-based International Renewable Energy Certification (I-rec) certified firm Avance Energy.
Almazeedi said these risks “need to be mitigated to the satisfaction of project lenders” if the planned green hydrogen projects in the region are to secure financing and reach the construction phase.
The challenges do not necessarily mean all projects will fail, however.
Similar to predecessors such as solar and electrification technologies, the hope is for the planned green hydrogen projects to eventually emerge out of the realm of disillusionment and reach the so-called enlightenment slope and, ultimately, plateaus of productivity, using Gartner’s hype cycle model.
Government support in terms of regulatory frameworks, inevitably including some form of subsidies to bridge the so-called green premium, as well as global certification standards, are at the top of suppliers’ agendas.
Across the key aspiring Mena clean hydrogen hubs, like the UAE in particular, clearer regulatory frameworks have started to emerge, which could encourage more cohesive cooperation and enable projects to get off the ground.
Key EU countries also appear to remain committed to clean and green hydrogen imports as part of the green deal, while at least one power plant in Japan has completed a three-month trial of co-firing green ammonia with coal “with positive results”.
But until all these come together to ensure an unencumbered global supply chain, offtakers and project financing deals will likely remain elusive.
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Morocco explores salt caverns for hydrogen storage
6 February 2025
A feasibility study is under way for a project to explore underground salt cavern sites for green hydrogen storage in Morocco.
According to Samir Rachidi, director-general at Iresen, the underground salt caverns are located near the capital Casablanca.
“There is already an existing cavity used to store natural gas,” Rachidi told MEED.
It is understood the same process or principle will be used to store green hydrogen in salt caverns.
The potential storage capacity of the salt caverns for green hydrogen can only be determined once the feasibility study is completed.
Photo credit: Shutterstock
Underground salt caverns offer an option for the bulk storage of very large amounts of gaseous hydrogen.
According to Ireland-headquartered chemicals firm Linde, which operates the world’s first commercial hydrogen high-purity cavern in Texas, the gas has to be purified and compressed before it can be injected into a cavern.
It added that hydrogen-filled cavities can act as a backup for a pipeline network.
First green ammonia project
Rachidi also said that Moroccan phosphate specialist OCP is in the advanced stages of studying a project to produce 1 million tonnes of green ammonia annually by 2027.
The planned facility, which will cater to export markets, will include a 200,000 tonne-a-year (t/y) green hydrogen production plant and 4,000MW of renewable energy plants.
It will also include an electrolyser plant with a capacity of 2,000MW.
At least seven other green hydrogen or ammonia projects are under study or in the pre-front-end engineering and design stage in the North African state.
In April 2023, a team led by China Energy International Construction Group signed a memorandum of cooperation to develop a green hydrogen project in a coastal area in southern Morocco.
A year earlier, Serbia-headquartered renewables developer and investor CWP Global appointed US firm Bechtel to support the development of large-scale green hydrogen and ammonia facilities in Morocco and Mauritania.
The Amun green hydrogen project, which CWP Global plans to develop in Morocco, is understood to require 15GW of renewable energy and has an estimated budget of between $18bn and $20bn.
Morocco established a National Hydrogen Commission in 2019 and published a green hydrogen roadmap in 2021.
The roadmap entails the production of green hydrogen for local ammonia production and export between 2020 and 2030; the production and export of green hydrogen, green ammonia and synthetic fuels between 2030 and 2040; and the global trade of these products between 2040 and 2050.
Main photo: For illustrative purposes only (Adnoc)
READ THE FEBRUARY MEED BUSINESS REVIEW
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Published on 1 February 2025 and distributed to senior decision-makers in the region and around the world, the February MEED Business Review includes:
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Qatar maintains stable growth heading
6 February 2025
This month's special report on Qatar includes:
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> ECONOMY: Qatar economy rebounds alongside diplomatic activity
> BANKING: Qatar banks look to calmer waters in 2025
> UPSTREAM: QatarEnergy strives to raise gas and oil production capacity
> DOWNSTREAM: Qatar chemical projects take a step forward
> POWER & WATER: Facility E award jumpstarts Qatar’s utility projects
> CONSTRUCTION: Qatar construction shows signs of recovery
> DATABANK: Qatar maintains stable growth headinghttps://image.digitalinsightresearch.in/uploads/NewsArticle/13369431/main.gif