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Sleeping giant

Kuwait's utilities sector may be set for a new wave of development

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The new Az Zour plant will boost Kuwait's desal supplies. (SHUTTERSTOCK)
The new Az Zour plant will boost Kuwait's desal supplies. (SHUTTERSTOCK)

Kuwait’s quiet utilities sector may be set for a wave of new development activities

With the relatively noisy stream of news coming from Saudi, the UAE and elsewhere in the Gulf, Kuwait’s utilities sector can seem comparatively calm and quiet.

Certainly by comparison with its near-neighbours, the sector would seem to be a good deal less busy than others. However, if this has been true of recent times, it seems likely to change in the coming years, with the country’s embarkation on its first IWPP set to signal the start of a wave of developments.

Back in January, the country’s State’s Partnerships Technical Bureau (PTB) awarded a consortium comprising Japan’s Sumitomo Corporation, GDF-SUEZ and Kuwaiti partner Abdullah Hamad Al Sagar & Brothers the Az Zour North contract.

The first Independent Water and Power Project (IWPP) tendered in Kuwait, the project will see the construction and operation of a gas-fired, combined cycle power plant with a power capacity of at least 1,500 MW. The facility will also have an associated water desalination plant with a daily output capacity of 107 Million Gallons per Day (MIGD).

“I think a lot of people are saying that Kuwait is a sleeping giant that has woken up. Because they have an abundant natural resource – crude oil – the Kuwait government does not need to have financing from outside.

However, for other reasons, they need a privatisation process, which is why they have started to announce projects. And this [Az Zour] power and water project is one of them. They also have an airport expansion plan, and water treatment projects for example – so many projects are coming on stream,” said Nobuhiko Masunaga, Sumitomo Corporation general manager in Kuwait.

Masunaga says that Sumitomo Corp. are consequently looking at Kuwait as a future core market for the firm, with the Az Zour project a means to gain a strong foothold in the market.

His firm has considerable experience elsewhere in the GCC – in the UAE it has Shuweihat 1 and 3; in Bahrain a stake in the Hidd Power Company; and in Oman it has recently won a new IWP contract at Al Ghubrah.

“We signed an agreement for [Az Zour] with the Kuwaiti government at the end of last year, and we are now in the process of achieving financial close for that. That’s the current status of the project,” he adds.

Commercial operations are currently scheduled to start in 2015, and Masunaga says that, when complete, the plant will account for 12% of the country’s total power generation capacity, together with 23% of its total desalinated water production.

All output at the site is then set to be purchased by the Ministry of Electricity and Water under a 40-year Energy Conversion and Water Purchase Agreement.

Speaking on what set the successful bid apart, Masunaga added: “One function of Sumitomo is to have very competitive international financing from the Japan Bank for International Cooperation (JBIC) – the Japanese governmental financing institution.”

The other major development in Kuwait’s utilities sector was the announcement last year that the second phase of development at the Sabiya power project had been completed, granting a 2,000 MW boost to the country’s grid.

Utilising GE’s gas turbine generator technology, the facility has been converted to combined cycle operation, and now contributes almost 20% of the country’s power output.

Most impressively, the combined cycle conversion has meant that the increased output has been attained without requiring any additional fuel consumption.

 

A year in Kuwait ...
Major power and water projects have book-ended a relatively quiet past year in Kuwait.

July 2012: Second phase of Sabiya power plant starts commercial operations and now produces over 2GW of electricity.October 2012: Reports of a $250m deal agreed with Bahrain to help support Bahraini grid development.

December 2012: Reports suggest that Ministry of Electricity and Water have struggled to collect outstanding utilities bills totaling $583m.

January 2013: Kuwait names consortium including GDF-SUEZ and Sumitomo Corp for construction of first IWPP.

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