Power Up

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Thanks to its abundant natural gas reserves, Qatar’s economy is still one of the fastest growing in the world. According to a report from Global Investment House, nominal GDP growth was a phenomenal 44% in 2008 and GDP per capita reached US $70,630.

Having made clear its intention to invest the receipts from gas sales, analysts predict real GDP growth of 13-18% in 2009. Growth is expected across the mineral and non-oil sectors and this, coupled with rapid population growth, is creating enormous demand for power and water in the country.

Demand for electricity grew 10% year on year in January and by 19% year-on-year in February. Consumption of water rose by an average of 20% year-on-year during the same period. Eisa Hilal Al Kuwari, director of the electricity network of Qatar General Electricity and Water Corporation (Kahramaa), attributed the rise to expansion of the distribution network. This has resulted in a dramatic fall in the number of people relying on water tankers and generators.

Growth and network expansion are all part of the hot-house economic environment that has made the cost of doing business high, with inflation in particular proving to be a burden for fresh start-ups. This burden is expected to reduce slightly, with predictions putting inflation at around 10% for 2009. While the utilities sector in Qatar is still developing, much of this is happening because of the country’s ability to feed international utility operations with gas. The resulting industrialisation efforts in the country have generated significant contracts and continue to do so.

Several projects are underway to further boost water and power capacity. The Ras Girtas Company for Power project involves the construction of Ras Girtas independent water and power plant in Qatar. The plant capacity is 2 730 MW of electricity and 63 million gallons per day of potable water, and will be located in Ras Laffan. When the plant is operational it will almost double the electricity generation of the country according to reports in the media. It is also expected to boost desalinated water production by around 33%.

If the plant allows the country to exceed its generation needs it could lead to some of the first commercial power trades, if the inter-connection grid becomes a reality later this year. Construction of the plant began in May, when the founding stone was laid.

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The Mesaieed Project will see the construction of a 2 000 MW power plant and a large substation, the output of which will serve the Qatar national grid and the proposed Mesaieed aluminium smelter.

GE was awarded the contract for installation six Frame 9FA gas turbines, two Frame 6B gas turbines, six 330H type generators, and three D11 steam turbines. Iberdrola Ingenieria Y Construction was awarded the engineering, procurement and construction (EPC) contract in November 2006. Completion is scheduled for 2010 and the projected project budget is US $2.4 billion.

Major transmission and distribution projects are also in various phases of completion, including cables crossing the capital city’s bay. Around 78 km of water distribution mains are currently being upgraded in different areas in Doha, in diameters ranging from 100 to 600 mm. The project is due for completion in May 2010.

Construction of seven new reservoirs, each with six MIGD of capacity, is underway in Muaither water station, in addition to a pump station with eight pumps and approximately 6km of 900 mm pipelines. The project is due for completion in March 2011.

At Mesamir water station, construction of four new reservoirs, each with nine MIGD of capacity, is underway, in addition to one pump station with eight pumps and 21 km of 600-900 mm pipelines. The project is due for completion in February 2011.

As well as investing in conventional power generation, Qatar is also embracing renewable energy. Qatar Foundation, a non-profit organisation, has unveiled its plans for a $500 million solar cell plant to produce the polysilicon required for solar cells.

The country’s interest in research and development, as well as industrial growth, is reflected in three key developments: Qatar Science and Technology Park, Ras Lafan Industrial City and Energy City Qatar.

With a focus on the upstream energy sector gas and infrastructure spending will remain the primary areas of investment for the short- and medium-term future. The added bonus for Qatar is that this continued spending is driving the non-oil economy along with it, allowing Qatar to outstrip its regional peers in 2009.

 “The growth in the hydrocarbon sector outpaced other sectors in 2008, bucking a two-year trend of stronger non-hydrocarbon growth,” said Waji Boustany, assistant economist at National Bank of Kuwait. “The gas sector doubled in size in 2008, partly on higher energy prices, but also on the continued increase in output volumes.”

This dependence is a cause for concern within the economy and although there are diversification efforts under way, they are in their infancy and rely on energy revenues to drive their development. Unlike some of its neighbours, Qatar’s property market continues to grow, driven by genuine end user demand. While this factor remains in play the outlook for utility demand and the associated contracts it generates will continue to be positive.  

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