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Oman's power play

A look at Sembcorp's role in building Oman's utilities infrastructure.

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The Salalah IWPP supplies about 75% of the total power demand in Dhofar.
The Salalah IWPP supplies about 75% of the total power demand in Dhofar.

The Middle East’s energy industry is dominated by countries like the Kingdom of Saudi Arabia, Iraq and the UAE; their massive hydrocarbon reserves constantly keep them in the lime-light. But in recent years, the heavily segmented industry has become more accommodating towards the region’s smaller countries, all of which have come to play some very important roles.

Take the Sultanate of Oman for example, a country outside the Strait of Hormuz that has not become a member of OPEC. Oman has emerged as a leading developer of Enhanced Oil Recovery (EOR) technologies due to its abundance of heavy oil in challenging geological formations. Simultaneously, through the Dubai Mercantile Exchange Crude Oil Futures Contract (OQD), the country’s crude oil has emerged as an alternative pricing benchmark for Middle East-Asia crude trading.

In addition to the major developments in the country’s oil and gas production, Oman is developing a special economic zone to facilitate even further economic expansion, which will go hand in hand with its ability to export its hydrocarbons to the international market.

Strategically located along the Gulf of Oman with a long coastline running along the Arabian Sea, Duqm, a small fishing town in central Oman, has been targeted for the development as a major maritime gateway for trade in crude oil from the Gulf, and as an important industrial and commercial hub.

With a land area of 1,777 square kilometres and an 80-kilometre coastline, the Duqm Special Economic Zone will rank as the largest SEZ in the Middle East and North Africa region and one of the largest in the world. It will be administered, regulated and developed by the Duqm Special Economic Zone Authority, a financially and administratively independent government entity.

Encompassing a sea port, city centre, industrial zone, tourism zone, logistics centre and an education and training zone, all supported by a multimodal transport system connecting the SEZ to nearby regions, the development of the SEZ is expected to take place in three phases from now until 2025.

Providing all the utilities for such a project will be no easy task. Development of the Duqm Special Economic Zone is being carried out by Centralised Utilities Company (CUC), a joint venture between Sembcorp Utilities (Oman), which holds a 35% stake, and Takamul Investment Company, a subsidiary of Oman Oil Company, which holds the remaining 65% stake. Under the agreement, CUC, will serve as a one-stop provider of a range of centralised utilities such as power, steam, water, sewerage treatment and on-site logistics on a captive basis to multiple industrial customers in the Duqm SEZ in southern Oman.

“Under this unique model, multiple customers are offered an integrated supply of energy, water and on-site logistics produced by centralised facilities,” says Tan Cheng Guan, executive VP & head, group business development & commercial. “By outsourcing critical utilities to us, this concept of a centralised utilities model – also the first-of-its-kind in Oman – will help companies focus on their core business, save on investment and operating costs, and be assured of reliable solutions that meet stringent environmental standards,” he adds.

CUC’s customers will include anchor customer Oman Oil Company, which is developing a 230,000 barrels per day refinery targeted to begin operations in 2018 as well as a petrochemical complex on the site. CUC will have an initial share capital of approximately $3.2 million, of which Sembcorp’s 35% stake will be funded through internal resources.

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Building on Semborp’s experience in centralised utilities models, the concept will be a first in Oman. Under this model, multiple customers are offered an integrated supply of energy, water and on-site logistics produced by centralised facilities.

“By outsourcing critical utilities to Sembcorp, companies can focus on their core business and save on investment and operating costs,” says Tan. “They can also be assured of reliable solutions which meet stringent environmental standards.”

The signing of the joint venture agreement took place in Muscat yesterday between His Excellency Nasser bin Khamis Al Jashmi, Chairman of Oman Oil Company and the ceremony was witnessed by Singapore’s Minister for Foreign Affairs and Minister for Law, K Shanmugam.

“We are very honoured to be selected by Takamul as their centralised utilities partner for this important new SEZ at Duqm. As the pioneer in one-stop outsourced energy, water and on-site logistics for multiple companies in energy-intensive industrial hubs, Sembcorp is in a good position to support the growth of the Duqm SEZ,” says Tang Kin Fei, Sembcorp’s Group President & CEO. “We look forward to working closely with Takamul in making CUC a success. We also look forward to growing Sembcorp’s business in Oman as well as the Middle East, a target region for future growth for our Group.”

His Excellency Nasser bin Khamis Al Jashmi also adds, “This is a significant step in a very positive direction. The CUC will contribute to His Majesty’s vision of developing Duqm as a major national and international hub supporting the economic development of Oman. We are happy that Takamul and Sembcorp have joined forces and together we are confident of a very successful outcome.”

Besides its centralised utilities facilities in Duqm, Sembcorp also owns and operates the recently opened Salalah Independent Water and Power Plant (IWPP), which is its first project in Oman. In fact, the day before signing into the CUC joint-venture, the company celebrated the official opening of the Salalah Independent Water and power Plant.

“As the largest and most energy-efficient power and water plant in Dhofar, the Salalah IWPP will play a major role in meeting the region’s growing power and water demand. Together with our partners, we look forward to serving the essential power and water needs of the region for many more years to come,” says Tang. The $1 billion Salalah IWPP was completed and commenced full commercial operation in May 2012. The facility consists of a gas-fired power plant with a total gross capacity of 490 megawatts (net capacity of 445 megawatts) and a seawater desalination plant with a total water production capacity of 15 million imperial gallons (69,000 cubic metres) per day.

It will provide power and water under a 15-year power and water purchase agreement with the Oman Power and Water Procurement Company, which is wholly owned by the Government of Oman.

The Salalah IWPP supplies about 75% of the total power demand in Dhofar. The project was secured in 2009, following a competitive bidding process involving global utilities players. Besides the Salalah IWPP, Sembcorp also owns, operates and maintains the Fujairah 1 Independent Water and Power Plant – one of the world’s largest operating hybrid desalination plants – in the UAE since 2006.

Elsewhere in the Middle East, the company also owns and operates the US$1.9 billion Fujairah 1 Independent Water and Power Plant – one of the world’s largest hybrid desalination plants – in the United Arab Emirates. It is currently expanding the seawater desalination capacity of the Fujairah 1 IWPP by another 30 million imperial gallons per day using reverse osmosis, to 130 million imperial gallons per day.

Project in Numbers: Salalah IWPP

Location: Salalah, Oman
Product/Service: Power and Desalinated Water Supply
Gross power capacity: 490 MW gross power
Desalinated water: 15 million imperial gallons per day
Client: Oman Power and Water Procurement Company
Contract: 15-year Power and Water Purchase Agreement
Total project cost: US $1 billion
Phase 1 completion: July 2011 (power only)
Phase 2 power: January 2012
Phase 2 water: March 2012
Phase 3 (power and water): May 2012

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