Wednesday, February 27, 2002
Gulf's hunger for power undented by downturn
REUTERS
DUBAI: Electricity projects worth more than $10 billion in the power-hungry Gulf have escaped almost unscathed from a global economic slowdown after the September 11 attacks on the US.
The officials said there had been no delays in more than 20 planned or ongoing projects to boost capacity in the arid Gulf Arab region, where demand for electricity is among the highest in the world.
"I can tell you that in the first month, two months (after September), we were a little bit worried," said Safwan Hijazi, head of Gulf operations for France's Alstom.
"But officials in the area were quick to reassure us that all the projects will be on time," he added.
Uwe Rokossa, a project manager for Siemens AG said the attacks had briefly cast a shadow over the financing of the giant 1,500 megawatt Shuweihat power plant in the United Arab Emirates.
"After the events the financing of the project became a slight problem. But...the project itself was never in doubt. So it was only a matter of days," Rokossa told Reuters.
Siemens has since signed the contract for the one billion euro ($872 million) project. "At present, demand in the Arab world is higher than anywhere else in the world," Rokossa said.
A regional study conducted in 2000 showed that the six oil-rich Gulf Arab states -- Saudi Arabia, Oman, Qatar, Bahrain Kuwait and the UAE -- need to invest up to $100 billion over 10 years and speed up the privatisation of their power sector to meet rapidly growing demand for electricity.
Industry experts attribute rising demand in the region to high population growth rates, cheap energy resources and economic diversification drives in most Gulf Arab states.
The region, which sits on nearly half of the world's oil reserves, is a major centre for expanding energy-intensive industries like petrochemicals and aluminium. The arid Gulf region also heavily depends on water desalination.
Oman and the UAE have been leading other Gulf Arab states in opening up the sector to private investment, inviting firms to build new projects on a build, operate and transfer basis.
Gulf Arab states also plan to link their electricity grids in a project expected to cost $2.5 billion.
Industry officials say while energy shortages and the global economic slowdown were cutting aluminium production in the United States, Europe and Asia, Bahrain is in the process of expanding its smelter and Oman is planning to revive a $2.5 billion smelter project.
"The extension will be done here as energy is very cheap," Hijazi said.
He said the power industry was likely to get a further boost from a major multi-billion project to channel gas from Qatar -- which owns the world's third largest gas reserves -- to the UAE and from there to other Gulf Arab states.
Industry officials say more than 20 projects to expand existing power stations or to build new ones with a total cost of more than $10 billion are either in the pipeline or are being planned in the six-member Gulf Cooperation Council.
The GCC political and economic alliance groups Saudi Arabia, the UAE, Kuwait, Qatar, Bahrain and Oman.
In January, firms submitted bids for a $420 million, 1,000 MW power plant in Kuwait and bids for two more projects in the UAE are expected this year at an estimated cost of $2.1 billion.
Hijazi said Alstom, with an average turnover of 550 million euros over the past three years from its operations in five Gulf states excluding oil superpower and the region's biggest country -- Saudi Arabia --, sees seven to eight percent annual growth in the industry over the next few years.
"This is a very exciting and active market and the real potential is there," he said. "If I compare it to Europe, there is stagnation and the same situation prevails in America. There is demand in other Middle Eastern countries, but no money."
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