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Supply chain to challenge gas-fired plants pipeline

22 August 2023

Bid clarifications are proceeding in earnest for the 7.2GW first gas-fired independent power producer (IPP) projects being procured by Saudi Power Procurement Company (SPPC).

Each of the four developer consortiums has been allocated one day between 21 and 24 August to review the clarification questions. After this, the state offtaker is expected to complete the bid evaluation process and potentially shortlist bidders for the Taiba 1 and 2 and Qassim 1 and 2 IPP contracts.

MEED understands the four developer teams have partnered with the top gas turbine original equipment manufacturers (OEMs) for their bids, namely the US' GE, Germany's Siemens Energy and Japan's Mitsubishi Power. 

However, sources close to the project have raised serious concerns regarding the global production capacity for gas turbines.

"There are huge issues," notes a senior executive with one of the leading utility developers in the region. "Each OEM has only limited supplies and the schedule for these projects is very tight."

One Dubai-based OEM executive says their EU-made turbines are booked for several years, but they can still shuffle order deliveries between customers, so they do not expect major delays in delivering to clients.

However, it should be noted that in addition to the Qassim and Taiba IPP projects and the planned PP15 and Al-Khafji power plants in Saudi Arabia, countries such as Kuwait, Qatar and Iraq each have several mega power plant projects in procurement and design stages.

The turbine supply chain problem appears to arise from the decision by some OEMs to reduce capacity over the past few years owing to a combination of the Covid-19 pandemic and the threat of curtailed demand due to the push to decarbonise electricity systems.

The post-Covid-19 recovery, as well as the resurgence of demand for gas-fired power plants in the Middle East and even in some countries in Europe, has meant clients and utility developers will have to consider alternatives, including sourcing turbines from less well-known OEMs such as Italy's Ansaldo, South Korea's Doosan or even China's Shanghai Electric.

Alternatively, clients could be asked to sign off turbines manufactured in the Chinese factories of the top-tier OEMs.

"It's definitely a seller's market right now for turbines. We have capacity in other regions like China, but customers prefer [turbines made in] EU factories," the OEM executive says.

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Jennifer Aguinaldo

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