Several natural gas-fired power plants in Oman are expected to reach the completion stage in the next one to three years, which will strengthen the generation capacity in Oman. These projects include Sohar 3 and Ibri, which will have a combined capacity of 3,219 megawatt (MW), and Salalah II, which has a generation capacity of 445 MW.
The Ibri Independent Power Project (IPP) will deliver early power of 940 MW from April 2018, with the full 1,509 MW generation expected from April 2019.
Likewise, Sohar 3 is scheduled to deliver full capacity of 1,710 MW from January 2019. These two projects represent the single largest procurement by the power sector of the Sultanate, with expected installed capacity of 3,219MW accounting for approximately 30 per cent of capacity of the Main Integrated System (MIS).
Similarly, Dhofar Generation Company (DGC) will start generating power from a new natural gas-fired 445-MW plant (Salalah II) in January, 2018. A consortium consisting of Japan’s Mitsui & Co, Saudi Arabia’s Acwa Power and Dhofar International Development and Investment Holding Company had won a contract to build a $630-million power plant in Raysut in 2015.
As part of the deal, the consortium has acquired Dhofar Generating Company, which owns and operates an existing 273 MW gas-fired power plant at the adjacent site, from Electricity Holding Company (Nama Holding). This will take the total power capacity of Dhofar Generating Company to 718 MW once the new plant starts operation.
Extending concession agreements
In another move to maintain the power generation capacity, Oman Power and Water Procurement Company (OPWP) is extending concession agreement with power projects whose contracts are expiring within few years.
For instance, OPWP has reached an agreement with the owners of Al Kamil Power for extending contract from 2017 to December 2021. The total contracted capacity of the plant is 280 megawatt, which is expected to be available for further contract extension after 2021.
Likewise, the OPWP and the owners of Barka 1 are considering extension of power and water purchase agreement to December, 2021.
However, the 264 megawatt-Manah power plant’s (United Power) power purchase agreement will expire in December 2020 and the plant will be transferred to the government. OPWP is considering several options for the continued operation of the plant, including a competitive tender for sale of the asset, backed by a multi-year power purchase agreement with OPWP.
Annual electricity demand
In fact, peak average annual growth in demand for electricity is projected to increase at 6 per cent for another seven years, from 5,920 MW in 2016 to 8,960 MW in 2023 within the main interconnected system. Demand is expected to grow at a lower rate than energy demand due to the introduction of Cost-Reflective Tariffs (CRT) for large commercial, government, and industrial consumers in 2017.
The average electricity demand in the Dhofar region alone is projected to grow by seven per cent per annum for the next seven years, from an average of 348 MW in 2016 to 559 MW in 2023.
However, peak demand is expected to grow at about six per cent per year, from 497 MW in 2016 to 765 MW in 2023, according to a seven-year outlook report released by the Oman Power and Water Procurement Company (OPWP). Demand for power is growing mainly due to population driven residential growth, the overall economic growth, developments in industrial estates, free zones and tourism projects.
Coal based plant
In line with a strategy to reduce use of gas, Oman is also planning an independent coal-fired power plant with a capacity to generate 1,800 megawatt of power. OPWP has already conducted a techno-economic feasibility study for the project and the report has been submitted with higher authorities for approval. As gas is used for mega industries to enhance diversification programmes, the authorities are finding it difficult to commit enough gas for new power projects. Natural gas allocations to consumers such as power plants were typically for long term extending over 15 to 20 year-timeframes that present significant challenges in the face of growing domestic gas demand. The power sector consumes around 20 per cent of the Sultanate’s total natural gas production, according to official data.
Further, two state-owned Chinese power firms – Hebei Electric Power Design and Research and Ningxia Electric Power Design Institute — are planning to build a 300 megawatt capacity coal-based power plant in Duqm free zone. The proposed power venture is for supplying electricity to a range of industries coming up in Oman Chinese Industrial Park. The Chinese firms in April signed a land lease agreement with Oman Wanfang, which is managing 1,172 hectares of land for developing a major China-Oman industrial zone in Duqm.
The capital expenditure of the 300-megawatt project, which will have two power trains each with 150 megawatt capacity, is estimated at $406 million. A feasibility conducted by Hebei Electric Design found that the project will be economical and the plan is to import coal from Indonesia.
There is also a major focus on enhancing solar energy by establishing a large commercial solar project, after freezing the plan for more than three years. The authorities are in the process of selecting a consultant for advising the government on the country’s first large-scale solar project, which will have an envisaged capacity of 200 megawatt and will be on an independent power project (IPP) model. Preliminary environmental studies were conducted in two sites – Manah and Adam.
As wind power is another focused area for strengthening the contribution of renewable energy in energy mix, the work on Dhofar wind power has already been started. Two agreements linked to the development of a planned 50 megawatt-capacity Dhofar wind power project were signed recently by Rural Areas Electricity Company with Oman Power and Water Procurement Company and Oman Electricity Transmission Company.
Abu Dhabi’s renewable energy company, Masdar, earlier signed an engineering, procurement and construction (EPC) contract with a global consortium comprising GE and Spain’s TSK to build the Dhofar Wind Power Project, the first large-scale wind farm in Oman and the GCC.
The national programme for enhancing diversification, called Tanfeedh, has set a target of 10 per cent contribution from renewable energy projects in the total power mix within ten years.
The country’s electricity regulator – Authority for Electricity Regulation – has already announced incentives for those households who build roof-top solar project. Like several other countries, this will encourage use of rooftop-based solar panel for household power generation by housing units. Renewable energy projects in Oman will help the government to save natural gas, which can be diverted to more productive industries.