Arabs pump over $2bn into power grids

Gulf oil producers and other Arab countries are investing more than $2 billion in projects to link their electricity networks to ensure stable power supplies and cut operation costs, according to an official Arab study.

Nearly 60 per cent of the funds are being pumped by the six Gulf Cooperation Council (GCC) countries, which are pushing ahead with the most ambitious and expensive common power grid in the region, said the study by the Kuwaiti-based Arab Fund for Economic and Social Development (AFESD).

Other Arab nations have also gone a long way in their plans to connect their electricity networks and all projects in the region are scheduled to be completed at the end of 2015, said AFESD, a key Arab League establishment.

"By the end of 2015, the connection of 18 Arab electricity networks will be completed...the common network will then be linked to the European grid through three or four major connection lines....this will create a massive electricity market encompassing most regional nations," it said.

Its figures showed total investments needed for the Arab power connections are estimated at around $2.011 billion.

The GCC project, which covers six countries, involves the most expensive grid, with an estimated cost of about $1.2 billion, nearly 60 per cent of the total.

Investments were estimated at $229 million for the Egypt-Jordan grid, $144 million for the Syrian-Jordanian grid, $101 million for the Syrian-Turkish link, $99 million for Morocco's connection with Spain's network, $86 million for the common grid between southern and northern Yemen and around $49 million for the Egyptian-Libyan network. The remaining investments cover projects joint networks between Syrian and Lebanon and that of Libya and Tunisia.

The report, published in the quarterly bulletin of the Organization of Arab Petroleum Exporting Countries, showed regional governments will provide around $1.333 billion in financing for those projects while $678 million will be extended by AFESD. As for the GCC, all the funds will be provided by their governments on a proportionate basis.

The report showed such grids would save large funds as they will cut operation and production costs. On an annual basis, saved funds were put at around $22 million in the GCC, $74.8 million in the Morocco-Spain grid, $eight million in the Jordanian-Syrian network and between $1.6-7.5 million for the rest.

Total savings during the projects' operational life were estimated at $3.73 billion, including nearly $three billion in the GCC power grid.

Besides linking their power networks, GCC countries are also pursuing mega projects to expand their own electricity production capacity to meet increasing domestic consumption because of steady expansions in most non-hydrocarbon sectors and a rapid growth in their population.

According to official data, the six members need to invest nearly $53 billion in such projects over the next five years.

The investments account for nearly half the total required capital for electricity development projects in the Middle East and North Africa (MENA), showed the figures by the Arab Petroleum Investment Corporation (Apicorp).

Apicorp, an affiliate of the Kuwaiti-based OAPEC, said the GCC nations would also add nearly half the expected additional power general capacity in the region.

It estimated the total capital in power generation in MENA at $117 billion during 2011-2015 to add about 98.9 GW of electricity.

GCC states, which control nearly 45 per cent of the world's recoverable oil deposits, have nearly completed the three-stage power grid they launched several years ago within their overall economic merger plans.

Officials had put the investments needed for the project at far below $one billion but soaring construction costs have largely pushed up those investments. Officials have spoken of massive economic and financial benefits.

"For example, a GCC state which suffers from a shortage of a sudden disruption of its electricity supplies could get such supplies from another member....another thing is that one member with surplus supplies could lease part of its network to another member with a deficit," said The Dammam-based GCC Interconnection Authority  (GCCIA), which is overseeing the project.

"The project will also save funds because it means member states will construct fewer power stations in the future."

In a recent study, GCCIA said the project was needed because of a rapid growth in power consumption in the GCC as a result of a steady economic expansion and high population growth. It estimated electricity growth in the GCC at between 8-10 per cent annually, one of the highest rates in the world.

Power supplies will be shared proportionately by the six GCC members. The UAE will get around 900 MW, while supplies will be 1,200 MW for Saudi Arabia, 400 MW for Oman, 750 MW for Qatar, and 1,200 MW for Kuwait
The UAE owns 15.4 of the project while 31.6 per cent is controlled by Saudi Arabia, 26.7 per cent by Kuwait. 11.7 per cent by Qatar, nine per cent by Bahrain and 5.6 per cent by Oman.
 

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