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Special report: Oman

Rich in natural resources, but still struggling with power

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ANALYSIS

Oman might be rich in natural resources, but electricity supply problems during peak periods could see the nation embracing renewable sources to bridge the gap.

With significant reserves of oil and natural gas, it seems strange that power generation should be an area in which Oman struggles. Highly dependent on fossil fuels, attempts to expand the nation’s economy could become complicated as it looks to alternative energy sources to find solutions.

“If you look at Oman’s infrastructure today, they’re definitely struggling,” says Abhay Bhargava, industry manager for Middle East and North Africa in energy and power systems for Frost & Sullivan.

“They don’t have enough gas for managing peaking periods, and they
are already importing from the Dolphin project.”

For a country with 30 trillion cubic feet of natural gas reserves this seems unlikely, but after increases in domestic consumption in recent years, added to heightening obligations for exports, there is no question Oman’s feedstock is in enough deficit for there to be service interruptions during seasonal peaking – not an encouraging factor for economic growth.

Bhargava can’t see the situation improving without a radical change in attitude to employment and infrastructure, either.

“Looking at how consumption is increasing, I think the problem is only going to get worse. From an infrastructure point of view, they’re definitely lacking in power generation and over the next five to seven years, they’ll probably end up spending about $20 billion or more.”

“What’s really driving the country – the fact they’re trying to industrialise themselves and become less reliant on fossil fuels – stems from the fact that they have quite a large unemployment ratio.”

Bhargava estimates the nation’s unemployment level is around
15 per cent; out of a population of three million, it’s a huge impact
on the country.

“The government really needs to do something about this,” he says. “If we look at the Middle East today, unemployment was one of the root causes of the unrest.

If you look at historical cases of how developing countries have come out of their problems, it’s been through infrastructure development. So one of the first things Oman needs to do is look at building infrastructure, and you start with power.”

With new projects, IWPP ventures and free zone and industrial estate development, plus a focus on increasing manufacturing capabilities, the critical issue is finding the power to supply it all.

With the planned GCC grid only starting to really benefit Oman by 2017 - when the UAE’s nuclear reactor is expected to come online and really create surplus power - Bhargava is convinced it will need to look at renewable sources to cover peaking periods, but that subsidies will be needed to drive it forward.

“At the current rate, I don’t think renewable energy really stands a chance unless it’s really heavily subsidised,” he says.

“The cost of generating electricity using gas would probably be about 3.5 times cheaper than using renewable, which is probably on a par with diesel. There’s a lot of mobilisation and gensets used for backup power – when you’re considering diesel for peaking arrangements, it’s a good time to look at renewables.”

“It makes a lot of business and economic sense,” he adds. “It’s just a matter of some regulations being sorted out, and Oman already has vast experience in IWPPs – they already know how to get private participation in projects, and from that side I see them positively placed.”

He also cites the fact that the transmission companies are segmented away from the generation as a useful structure already in place, avoiding a conflict of interest in the development of renewable and smart energy.

“It’s a model that’s worked in the past – Oman has the policy infrastructure in place to go ahead and implement renewables – it’s
not such a tall task for them,” Bhargava concludes.

From a water perspective, experts from Environmental Practice, South Asia and Middle East at Frost & Sullivan are also expecting current inadequacies to drive investment in the sector.

With just 15 per cent of the population connected to the wastewater network, untreated wastewater is a concern for water quality in the Sultanate, which is currently investing heavily in infrastructure projects to secure a thriving tourist industry in coming years.

Currently, Muscat is embarking on an ambitious mission to construct a water and wastewater infrastructure that would cover 90 per cent of its population, using MBR technology to achieve a higher degree of treatment at a lower footprint.

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