Oman expands grid connectivity

10 December 2023

Oman’s power and water sector has awarded an annual average of approximately $1.5bn-worth of contracts over the past 11 years – a relatively low value compared to the total awarded every year by some of its GCC neighbours.

However, 2023 can still be considered a good year for the sultanate, as contracts worth an estimated $1.2bn have been awarded.

This is an improvement on the performance of the previous two years, which saw very limited project activity within the sector, with contract awards valued at just $104m in 2021 and $244m in 2022.

Having adopted a policy to not procure further gas-fired thermal power plants, Oman awarded the contracts to develop its second and third utility-scale solar photovoltaic (PV) plants in early 2023.

The Manah 1 and 2 solar PV independent power projects (IPPs) each have a capacity of 500MW. Wadi Noor Solar Company, comprising France’s EDF Renewables and South Korea’s Korea Western Power Company (Kowepo), will deliver and maintain the Manah 1 solar IPP project for 20 years.

Another team, comprising Singapore’s Sembcorp Industries and China-headquartered Jinko Power Technology, will develop the Manah 2 IPP scheme. The country’s first utility-scale solar project, Ibri 2, became operational in 2021. 

Oman’s Ministry of Regional Municipalities & Water Resources also awarded a $108m contract for the construction of a flood protection dam in Wadi Ajay Gorge in Muscat in early 2023. The rest of the awarded contracts comprise water and power transmission pipeline projects across the sultanate.

Demand growth

Nama Power & Water Procurement Company (PWP), formerly Oman Power & Water Procurement Company (OPWP),  expects peak electricity demand for the main interconnected system (MIS), the sultanate’s main electricity grid, to grow by an average of 3.54 per cent annually from 2022 to 2029, reaching 8,350MW at the end of the forecast period.

Most of this growth is expected to occur in the near term, as the economy recovers from the effects of the Covid-19 pandemic, according to PWP’s most recent Seven-Year Statement, which covers the years 2023-29. It is also higher compared to the 2.5 per cent average annual peak demand growth rate seen between 2015 and 2022.

PWP’s low-case forecast scenario shows an average annual peak demand growth of 1.3 per cent, with the base growing from 6,628MW to just over 7,200MW. A high-case scenario, on the other hand, indicates an annual demand growth of 5.2 per cent, which can drive the demand to reach 9,430MW.

Annual peak demand growth in the smaller Dhofar grid is expected to average 5 per cent between 2022 and 2029.

The first phase of Oman’s North-South Interconnection project, known as Rabt, became operational in November. The 400-kilovolt (kV), 670-kilometre (km) project required an investment of about $966m.

The first phase of Oman’s North-South Interconnection project, known as Rabt, became operational in November

The project enables the MIS, serving the northern half of the Oman grid, to connect with Nihada in Al-Dhahirah Governorate and Duqm Special Economic Zone (SEZ) in Al-Wusta Governorate.

Al-Wusta offers an optimal location for solar and wind projects, which the country aims to develop as part of its green energy ambitions.

Also part of Rabt's first phase, the isolated networks of Petroleum Development Oman and the Rural Areas Electricity Company (Tanweer) in Duqm SEZ, have been interconnected.

A second phase is being planned for Rabt. To be launched later this year, it will comprise a 500km, 400kV transmission line from Duqm to Dhofar.

Water requirements

Peak water demand in the MIS is expected to increase by an average of 2 per cent annually between 2022 and 2029, while peak water demand in Dhofar is expected to grow by an average of 7 per cent a year.

To meet the expected demand rise in the MIS, several independent water projects are being developed or planned. These include the Barka 5 scheme, which has a capacity of 100,000 cubic metres a day (cm/d) and is expected to come online in 2024. Ghubrah 3, which has three times as much capacity, is expected to be operational two years later.

A third project, a replacement capacity for the Barka zone of about 102,000 cm/d, is also expected to be added in 2024.

Future projects

In addition to the second phase of Rabt, Oman is in the early procurement phase of several solar and wind projects, in line with meeting demand growth and replacing expiring contracted capacity.

The power and water purchase agreement for the gas-fired Barka 2 independent water and power facility, for instance, expires in 2024, while the contract for the Barka 3 IPP expires in 2028.

KPMG Lower Gulf, a subsidiary of the Netherlands-based consultancy company, has been selected to provide financial advisory services to Nama PWP for the Ibri 3 solar IPP, which will have a capacity of 500MW. Ibri 3, along with the planned 100MW Jalaan Bani Bul Ali wind power project, will cater to the MIS.

Another key scheme being planned to connect to the MIS is Oman’s first waste-to-energy plant in Barkah. When complete, the facility is expected to treat 4,500 tonnes of municipal waste a day, produce 130MW-150MW of energy, and reduce the carbon footprint of Oman's landfills by 1.3 million tonnes annually.

For the Duqm grid, a 100MW wind IPP is being planned, in addition to a potential concentrated solar power plant. These plants are expected to become operational in 2026 and 2028, respectively. A 100MW wind project is also being planned for Dhofar, although there has been no fixed target for when it is expected to become operational.

In May, it was also announced that Oman Electricity Transmission Company is planning a second link to the GCC grid. The planned 400kV power transmission link is scheduled to start operations in the first quarter of 2026.

Hydrogen hubs

There are major plans to develop green hydrogen hubs in Duqm and Dhofar, in line with Oman's ambition to produce up to 1.25 million tonnes a year of green hydrogen by 2030.

The proposed projects will integrate renewable energy plants that will supply power to the electrolyser plants, which split water into hydrogen and oxygen, as well as the other units of the facilities.    

The government has so far awarded land concessions to international consortiums looking to develop integrated green hydrogen and ammonia facilities in the country.

The programme will have a potentially significant impact in terms of Oman’s future gross renewable energy capacity growth, with some of the earliest announced projects requiring several gigawatts of wind and solar power.

However, since most of the planned projects include captive renewable energy power plants, they will not necessarily affect the Omani utility companies' future capacity procurement plans. 

On the other hand, water demand may be affected as the electrolysis plants require pure water to be split into hydrogen and oxygen.

https://image.digitalinsightresearch.in/uploads/NewsArticle/11354723/main.jpg
Jennifer Aguinaldo
Related Articles
  • Airbus, Sumitomo and partners plan Oman saf plant

    24 June 2024

    Several companies, led by Netherlands-headquartered aircraft manufacturer Airbus, have signed a joint service agreement towards developing a project that integrates sustainable aviation fuel (saf) and e-gasoline production in Oman.

    Airbus' partners include state-backed OQ Alternative Energy, Italy's Automobili Lamborghini, UAE-based Dutco Group Cleantech and the Middle East subsidiary of Japan's Sumitomo Corporation.

    The planned greenfield plant is classified as an integrated Power-to-X project, which commonly refers to converting renewable energy into various derivative products.

    The saf greenfield project adds "a new layer to Airbus' strategy in new energies, besides being already a pre-financial investment decision (FID) project equity investor in Australia and the US", according to Julien Lehalle, Airbus director for Investments, Project Origination & Strategic Partnerships. 

    In addition to an excellent potential for hybrid wind and solar power generation, green hydrogen and e-fuels production, Oman has two airlines Oman Air and SalamAir, cited Lahalle.

    The sultanate also has several airports managed by Oman Airports Management Company, energy infrastructure and industrial ports to reach export markets in Europe and Asia Pacific, the executive added.

    Saf pursuit

    MEED reported in March that a consortium, comprising Oman's Civil Aviation Authority, OQ Group and Netherlands-based saf specialist SkyNRG, is undertaking a preliminary study that looks at the potential of developing a sustainable aviation fuel (saf) production facility and an overall saf roadmap in Oman.

    The study is expected to be completed by the end of 2024.

    The consortium aims to identify the opportunities for saf production within Oman, including the expected demand and its commercial applications.

    According to an industry source, the feasibility study includes a feedback assessment and supply chain optimisation, and seeks to identify key regulatory and commercial measures to facilitate saf production in Oman.

    The three partners signed the memorandum of cooperation for the project in Muscat in October 2023.

    Alternative fuels like saf are among the top four energy transition technologies that offer varying potential in decarbonising maritime and aviation, two of the world's hard-to-abate sectors, according to a new GlobalData report.

    The other three technologies include electrification, carbon capture and storage(CCS) or carbon capture, utilisation and storage (CCUS) and hydrogen.

    Aviation and maritime represents two of the most difficult to abate sectors due to their demand for cost-competitive and energy-dense fuels. 

    Related readAwards buoy Oman's green hydrogen strategy

    https://image.digitalinsightresearch.in/uploads/NewsArticle/11984798/main.jpg
    Jennifer Aguinaldo
  • Riyadh to appoint water PPP advisers

    24 June 2024

    State-backed offtaker Saudi Water Partnership Company (SWPC) has received bids from consultancy companies for contracts to provide advisory services for its next batch of independent water projects (IWPs) and independent sewage treatment plant (ISTP) projects.

    SWPC has yet to announce the bid results although it is expected to appoint advisers shortly, according to an industry source.

    SWPC announced the start of the prequalification process for companies keen to participate in developing five desalination IWP and seven ISTP projects in the kingdom in May.

    SWPC invited developers and companies to express an interest in bidding for the projects by 4 July.

    The client said companies should submit separate expressions of interest for the IWP and ISTP projects. 

    The programme "will provide local and International developers the opportunity to obtain pre-qualification approval and receive the request for proposal documents for its future projects ... without the need to submit a separate qualification application for each project".

    The five IWP schemes have a total combined capacity of 1.7 million cubic metres a day (cmd). The seven ISTP projects have a total combined capacity of 700,000 cm/d.

    The tenders for these projects are expected to launch between 2024 and 2026.

    The kingdom's water sector has been undergoing a restructuring programme with the capacity procurement process linked to the National Water Strategy being undertaken by three other clients including the Saline Water Conversion Company, which has been renamed Saudi Water Authority; Water Transmission & Technologies Company (WTTCO) and National Water Company.

    Related readSaudi water projects boom amid uncertainty

    https://image.digitalinsightresearch.in/uploads/NewsArticle/11984154/main.jpg
    Jennifer Aguinaldo
  • Data centres meet upbeat growth

    21 June 2024

    This package also includes: Region plays high-stakes AI game


    Artificial intelligence (AI) is turbo-charging data centre demand in the Middle East and North Africa (Mena) region.

    This is in addition to the demand for accelerating digital capacity to accommodate Mena states’ energy and economic diversification agendas, not to mention data sovereignty regulations and widespread electronic commerce and social media use among the population.

    Khazna Data Centres foresaw this trend. The UAE-headquartered company set in motion an expansion strategy four years ago when it and another data centre provider, Injazat, became part of AI firm G42 after its original owner, Mubadala Investment Company, acquired a minority stake in the AI firm.

    In 2021, G42 and UAE telecom group Etisalat agreed to merge their data centres, quadrupling Khazna’s portfolio. The same year, G42 announced a plan to build data centres in Indonesia with an IT load capacity of up to 1,000MW.

    In late November last year, Khazna signed a shareholders agreement for its first data centre in Egypt as part of its commitment to invest more than $250m in the North African state. 

    The two countries announced a plan to build data centres across Egypt with a potential combined operational capacity of 1,000MW shortly after.

    This May, Khazna and the Abu Dhabi Investment Office launched the procurement process for a data centre facility in Mafraq in Abu Dhabi, which will have an initial capacity of 15MW.

    Vibrant market

    Khazna is not the only company looking to expand its presence in this sector. US-headquartered Amazon Web Services (AWS) plans to invest $5bn in the UAE over 15 years and $3.5bn in Saudi Arabia. This follows its initial foray into the region through a data centre in Bahrain, which was completed in 2019.

    For its part, Google began operating its cloud region in Dammam, Saudi Arabia, in November 2023 and plans to build a new cloud infrastructure in Kuwait. Both Microsoft and Oracle have also pledged multibillion-dollar, multi-year investments in Saudi Arabia.

    For international players, the need to be physically present in jurisdictions such as Saudi Arabia, due to data sovereignty policies, and the generally low cost of electricity are driving decisions to set up in the region.

    According to US-headquartered consultancy Turner & Townsend, Saudi Arabia has 22 active colocation facilities and over 40 data centres under construction as of February 2024.

    This comes less than three years after the Saudi government announced a plan to build a network of large-scale data centres that will require investments of up to $18bn by 2030. 

    This figure excludes the 300MW capacity that a local firm, DataVolt, aims to develop using a public-private partnership (PPP) model. Announced only this year, DataVolt’s projects are expected to require $5bn of investments.

    Another Saudi company, Quantum Switch Tamasuk, plans to design and operate data centre projects with a cumulative total capacity of 300MW for the Saudi Ministry of Communications and Information Technology by 2026.

    Building momentum

    The focus on AI by the government sector, sovereign wealth funds and the largest state-backed companies, such as Saudi Aramco, in addition to the digital strategies launched by countries including Oman and Egypt, guarantees a growing pipeline of data centre projects.

    AI is providing the momentum that previous generations of technologies, such as blockchain, cloud services and the Internet of Things, failed to deliver individually.

    The growing number of subsea cable landing sites in the region also puts some GCC states in a strong position to host large-scale data centres. For example, in May last year, the world’s longest submarine communications cable system, 2 Africa, reached its first two landing sites in Jeddah and Yanbu in Saudi Arabia.

    US-headquartered Equinix, which has built several data centre facilities in the UAE and Oman, envisages its first facility in Oman as a key interconnectivity point offering “ultra-low latencies” for traffic flows between Asia, Europe and Africa.

    These developments present interesting and challenging opportunities for the specialised engineering, procurement and construction (EPC) and mechanical, engineering and plumbing (MEP) contractors that build data centres on behalf of their clients.

    This is especially true given that the average cost per megawatt of data centre infrastructure, following a steady decline in the years leading to the Covid-19 pandemic, has taken the opposite course. 

    The cost is now rising within the $10m-$12m/MW band for data centres with a typical tier 3 configuration. 

    Saudi Arabia, for instance, has entered Turner & Townsend’s 2023 data centre cost index with an average cost of $10 a watt, “attracting investor interest as digital connectivity and investment continue to rise in support of the national building programme and gigaprojects”.

    Region plays high-stakes AI game

    https://image.digitalinsightresearch.in/uploads/NewsArticle/11889841/main3918.jpg
    Jennifer Aguinaldo
  • Syria’s reconstruction agenda stalls

    21 June 2024

    Commentary
    John Bambridge
    Analysis editor

    In the past year, the economic prognosis of Syria has deteriorated as the initial political step in the reacceptance of Damascus into the Arab League has failed to translate into substantial gains, with reconstruction efforts stalling and the economy floundering amid a lack of investor interest.

    The situation in Syria has been further complicated by the outbreak of the war in Gaza and the accompanying conflict in the Israel-Lebanon-Syria border region. Since the conflict began, Israel has intensified its bombing of targets in Syria in pursuit of the local branch of Hezbollah or other Iran-backed ‘axis of resistance’ groups in the country. This activity came to a head on 1 April, when Israel bombed the Iranian embassy in Damascus as it hosted a meeting of Iranian military personnel – a diplomatic violation that led to Tehran launching an unprecedented retaliatory strike on Israel.

    The upshot for Syria from this rising maelstrom of regional violence has been to downgrade it again from a high-risk but opportune investment landscape back to an unacceptably risky conflict zone. For the Gulf states that have re-embraced Syria, a further sticking point is Damascus’ reluctance to crack down on the shadow economy that has sprung up around the export of the amphetamine-like drug Captagon across the region. 

    This illicit trade is now a multibillion-dollar industry that by some accounts makes up much of Syria’s diminished GDP. It has also come at the cost of normal trade, which has been caught up in the customs crackdown on Syrian goods. 

    The trickle of aid coming from regional partners is meanwhile simply inadequate to do much to revive the country’s withered agricultural and industrial sectors, and is unlikely to entice Damascus to disassemble its lucrative narco-state.

    Western governments and institutions are loathe to get involved with the Assad government on any level, as this would involve facing up to the strategic failure of their support for regime change in the country. The US, which doggedly maintains a military presence on Syrian soil, is deepening its sanctions on Damascus.

    More generally, Syria’s territorial fragmentation and insecurity sit as barriers to the government’s resumption of a legitimate, tax-based revenue model. The end result is a lack of funds, support and stability for any reconstruction agenda.

    The situation leaves Syria needing a more dramatic reversal in its geopolitical fortunes than re-entry into the Arab League alone can provide.


    MEED's July 2024 special report on Syria includes:

    > GOVERNMENT: Gaza conflict reignites violence across Syria

    > ECONOMY: Regional diplomacy fails Syrian economy

    https://image.digitalinsightresearch.in/uploads/NewsArticle/11967746/main.gif
    John Bambridge
  • ESG to become AI differentiator says GlobalData

    21 June 2024

    Developments linking semiconductors, artificial intelligence (AI) and environmental, social and corporate governance (ESG) principles can trigger significant shifts in the rapidly evolving market landscape, according to a new GlobalData report.   

    AI is evolving rapidly from software, hardware, and regulation perspectives, making both information technology (IT) and financial commitments highly risky, it warned.

    AI algorithms are still evolving rapidly, which limits options for hardware acceleration to either use case or workload-specific chips developed by the dominant big technology companies, or more generic solutions using off-the-shelf graphics processing units (GPUs).

    The report further predicts that the big technology firms' advantage "will eventually vanish" when commercial AI chips emerge, which may be less than five years away.

    The report notes: "Hardware processing improvements are not keeping up with the increase in AI model sizes. So, barring a semiconductor breakthrough, demand for raw compute capacity in data centres is bound to dramatically increase, increasing AI’s contribution to carbon emissions."

    As the carbon footprint impact of large language models (LLMs) becomes more transparent, the report urges organisations to consider this factor when selecting an AI delivery model and the real-time orchestration of AI-enabled services.

    "Scope 3 emissions guidance will be needed, and AI vendors must step up disclosures. An LLM’s carbon footprint and its transparency will become a competitive differentiator," the report added.

    The GlobalData report says the increasing environmental cost of AI can lead to a shift away from increasingly larger models and the optimisation of AI chips for raw processing performance.

    It adds: "Future developments will focus on smaller models, including small language models (SLM), somehow reducing the scale advantage of LLM vendors providing extremely large models, and focusing on performance to power.

    "As a result, open-source LLMs would become a more compelling option, as a model’s sheer size and training would not be a barrier to entry any longer, democratising access to competitive AI technology." 

    Chart is sourced from GlobalData

    Related reads:

    https://image.digitalinsightresearch.in/uploads/NewsArticle/11967422/main.jpg
    Jennifer Aguinaldo