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Oman in Profile

Frost & Sullivan's Abhay Bhargava discusses the Omani utilities market

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Recent power investment has focused on efficiency. (SHUTTERSTOCK)
Recent power investment has focused on efficiency. (SHUTTERSTOCK)

Frost & Sullivan’s Abhay Bhargava talks with UME about current focuses and future prospects in Oman's utilities market

Oman’s utilities sector is one of the quieter sectors amongst the GCC’s power and water industries. A quick look back over the news of the last year or so finds no ‘mega-project’ on the scale of Barakah or Shams, and no loudly announced future plans akin to Qatar or Saudi Arabia. However, whilst there is no particular mammoth scheme gaining attention, spending in Oman has certainly continued.

“There is no singular development in the last 12 months that we can highlight. Oman invested around US $3 billion in 13 new power, water and energy projects in 2012. However, there are a number of initiatives that Omani utilities have been focusing on, such as: diversity and security of fuel sources; taking steps to kick-start renewables adoption as a long-term supply alternative; focusing on conservation, efficiency and demand side management, and regional interconnects and the corresponding agreements,” says Abhay Bhargava, Frost & Sullivan’s head of energy and power systems practice.

Such a spread of project spending has been aided, on the power side, by the Omani Government’s Sector Law 2004, which has focused efforts on optimising the power utilities sector through regulations and moves towards priviatisation.

“These efforts have proven to be successful, considering that private participation in the electricity generation and water sector in Oman is now at approximately 85 percent. In this regard, Oman has proven to be one of the most pioneering countries in the GCC by encouraging private sector participation in the utilities sector and the strong framework that they have set in place is expected to keep yielding benefits in the future as well,” Bhargava explains.

Of course, the sector is not without issues, and Bhargava suggests that peak loads and the network coverage are still “considerable” challenges facing the Omani utilities.

“Many rural and remote areas are still not electrified, while a strong diesel genset industry reflects the gap that exists in power demand and supply,” he says.

“A deal between Oman and Abu Dhabi for power supply and purchase is expected to alleviate some of the issues that Oman is facing on the generation front, especially considering the upcoming additional supply on account of nuclear power in Abu Dhabi,” he adds.

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Investment potential
A challenge facing any international investor in Oman is, Bhargava says, is the required compliance with the Omanisation mandates which set quotas for Omani employment on a sectoral basis.

“The Omanisation drive intensified in 2011 as a result of demonstrations in February, March, and April demanding more jobs for Omanis. The government estimates requirements of 50,000 new jobs per year to absorb new labour force entrants, and companies are encouraged to exceed their Omanisation quotas, turn over management jobs to Omanis and create training programmes for new hires.”

Whilst this may be a hurdle to investment, the potential gains appear large, with Bhargava expecting some impressive performance from the sector as a whole.

“Considering the industrialisation efforts in Oman - partly fuelled by the ‘Made in Oman’ initiative - increasing urbanisation and population growth, the Oman utilities sector is expected to witness strong growth in this decade. This is backed by a commitment from the Ministry of Finance, which has, as part of the 2011-16 Eighth Five Year Plan, earmarked $8.84 billion for the electricity sector.

"While a considerable chunk of money has been spent in the past on ramping up the transmission and interconnection systems, the current decade will witness new investments in distributed solar power systems to electrify the majority of the rural population, partially replacing diesel gensets in the move.”

A year in Oman…
It’s been a slow start to 2013, but there was plenty of activity through 2012 within Oman for both the power and water industries.

April 2012: OPWP launches tender for new power project in Salalah, with a reported planned capacity of 250MW.

May 2012: PAEW announces plans to invest $7.5bn into water infrastructure projects in the next 20 years, focusing on water transmission networks.

November 2012: Sumitomo Corp scores OPWP contract to build Al Ghubrah IWP, together with Malakoff Corp and Cadgua.

December 2012: Oman Gas announces plans to invest $775m to boost gas supply network to different industries and services, with pipeline length increased to 2,500km.

Facts:
Population: 3,090,150 (July 2012 est.)
Land area: 309,500 km2
GDP: $90.66 billion

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