Gas shortage affects industry in Eastern GCC
Summer peak load deprive industry of power, impacts on bottom line.
Companies in the east of the GCC have seen production suffer from severe shortages in natural gas in the summer months, as demand for electricity diverts the resource to power generation.
A widening gap between supply and demand for the resource have accounted for losses at Ras Al Khaimah Cement Company and Construction Materials Industries & Contracting in Oman.
Ruurd S. Abma, chief operating officer of RAK Gas, said much of the gas goes to the main power plants, creating a seasonal imbalance.
“In the winter there is an oversupply as a lot less power is being used and we can narrow the gap between demand and supply. In the summer there is a shortage. The demand is always higher than the supply. It’s a complicated issue: cement companies are still running on gas though a few are operating on coal.”
He adds: “We’d love to get our hands on more gas. In the winter we may buy in from other companies when they have a surplus, then in the summer we’re on our own, relying on our own supplies.
“For a gas region [of the world] there is very little gas.”
A fall in natural gas supply was one of the reasons cited by RAK Cement in its financial results for the first half of this year, along with a decline in the building market. Mike Richardson, general manager, said this was mainly a summer issue.
“This year it’s been not too bad but we’ve still been affected for the last year which is why we kept that comment [in the company statement]. This summer we expected no gas.”
The company is currently negotiating the price of connection to the electricity grid, he says. He adds that the company always has back-up options, such as using diesel for the turbines. But at the moment he and other companies appear to be in limbo.
“The connection is to the substation and the companies are still trying to negotiate collectively for the price of connection,” he says. He adds that there are finished towers in the emirate that are yet to be connected to an electrical supply.
Some companies have managed to avoid the squeeze through their own resources. RAK Ceramics, the biggest company of its kind in the world, told CW that it has seen no shortage of power as it owns its own plant.
Other emirates are looking at alternatives. The cement factory for the Sharjah Cement & Industrial Development Co. – which produces sulphate-resistant and non-resistant Portland cement – runs on coal.
RAK Gas, the state natural gas utility of Ras al Khaimah, says little can be done to address the shortage except an enhanced ability to gain supply.
Construction Materials Industries & Contracting posted a net loss of OR34,474, compared with a net profits of OR337,935 for the same six months last year - partly, it attributes, to problems with fuel.
The company’s 100-tonne lime kiln stopped production for 75 days for repairs. Then its 200-tonne replacement, designed to run on natural gas, came to a halt due to the “unavailability” of that fuel.
A switch to liquefied natural gas also suffered supply issues, meaning the machine could run on only 60% of its normal production levels, prompting further delays to which the company attributes the sales figures for the period, which decreased by 4.08%.
However, it has taken steps to address the issue, according to notes in its half-year financial statement.
“[Management] has also approached government agencies to ensure uninterrupted supply of gas fuel for the new 200-metric tonne lime kiln installed at Sohar Plant, in order to utilise the full production capacity. This will help us to increase the ability to compete especially in the foreign markets, which will have a positive impact in the long run.”