A Defiant Stance: MENA’s Continued Investment in Oil & Gas

Amidst concerns of superfluity and suppressed prices, approximately USD 294 billion of oil, gas and petrochemical projects are said to be underway across the MENA region

The persistently low oil prices, not helped by the observed conflict in certain parts of the region, has weighed heavily on the economic prospect of the Middle East and North Africa (MENA). The International Monetary Fund forecasts the overall growth of the region for this year and the next to be in the area of a mere 3.2%.

Courtesy www.gineersnow.com

But, amidst the depressing economic projection, concerns of superfluity and stubbornly suppressed prices, approximately USD 294 billion of oil, gas and petrochemical projects are said to still be underway across the MENA region.

Spotlight: Select Regional Developments in the Oil & Gas Sector

Investment in oil & gas operations remains to be a crucial focus of oil producers in the MENA region to meet exponentially rising energy demands and to replace consumed or depleted natural resources.
As a case in point, let us take a close look at major oil & gas developments brewing in the region.

Driven by its objective to expand is gas capacity, the UAE is now looking to develop new sour gas reservoirs. This is said to include major projects in the Bab and Hail fields, as well as the expansion of the Shah gas field.

Courtesy www.gineersnow.com

Saudi Arabia is home to two of the region’s largest oil & gas projects underway: Sabic’s oil-to-chemicals project and Aramco’s integrated refinery and petrochemicals development, both in Yanbu. Additionally, Aramco is said to be planning to pour in USD 334 billion into its oil & gas activities by 2025. The world’s largest oil & gas company is reportedly keen at looking at expanding its gas capacity, which includes the development of non-associated gas fields in the Gulf and expanding shale gas production in the north.

Saudi Arabia is also reportedly planning to list Saudi Aramco in the stock market, with an IPO that values the company at a staggering USD 2 trillion.

For its part, Kuwait is expected to invest USD 115 billion on energy projects over the next several years to help enhance crude production capacity, keeping in mind its target of four million barrels a day by 2020.

A Time of Conviction with Caution

It is clear that oil producers and allied stakeholders in the MENA region remain undaunted by the bleak market outlook and the headwinds blowing against the global oil & gas sector. Looking at the slew of oil & gas projects in the pipeline, it is not difficult to see the region’s conviction to satisfy domestic and international energy demands, achieve energy production objectives, and maintain its role as the world’s premier energy resource provider.

Courtesy www.gineersnow.com

But in these economically trying times, it is essential for oil & gas companies in the MENA region to practice caution by controlling costs while capitalizing on expansion prospects and profitable opportunities. Oil & gas companies in the region, the likes of the UAE’s Emirates National Oil Company (ENOC) and Abu Dhabi National Oil Company (ADNOC), should ensure the efficient utilization of their working capital while the industry is still on its way to recovery.

One area of operation where oil & gas companies can make significant adjustments to their capital expenditure is power generation.

While electricity remains one of the most important components of an oil & gas operation, regional oil producers do not have to confine themselves with devoting a significant portion of their scarce capital to a major expenditure, like a permanent power plant. Instead of building their own power generation facility, oil & gas companies can choose to hire temporary power plants.

Courtesy www.gineersnow.com

By turning to rental power, oil & gas companies can have a consistent, dependable and sufficient supply of electricity throughout the lifecycle of their operations without the need to strap a large portion of their funds to a permanent facility. Temporary power plants can adequately provide for the power needs of various processes of an oil and gas operation, from exploration and extraction, through to development and processing.

Aside from savings in capital expenditure, renting power will also have an impact on the allocation of funds for an oil & gas project. Regional oil majors, such as the Iraq’s North Oil Company and Kuwait Petroleum Corporation, will welcome the fact that payment schedules for the rented power are fixed and regular over a contracted term. This will help them in formulating accurate financial forecasts.

Moreover, a complete rental power service includes all ancillary and spare parts, as well as expert on-site engineers and technicians. This means that oil & gas companies will be shielded from additional costs that come with building a permanent power plant, and that they no longer have to hire, train or re-allocate staff members to manage the power plant.

For more information on rental power for oil & gas operations, visit: http://www.altaaqaglobal.com/industries/oil-gas

Bucking the Trend

In defiance of growth forecasts and of the impacts of global oversupply that prompted a sharp fall in oil prices since 2014, oil producers in the MENA region have been continuously investing in the oil, gas and petrochemical sector. While global oil & gas spend is expected to continue to decline, oil producers in the MENA region are looking to buck the trend and to continue pouring funds into the industry to maintain capacity and fulfill ambitious production targets. But while the oil & gas sector is still regaining its old glory, regional industry stakeholders are expected to restrain their aggression with a bit of caution.

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Sources consulted:

http://timesofoman.com/article/103194/Business/Energy/Middle-East-to-invest-$294b-in-oil-and-gas-projects

https://www.forbes.com/sites/dominicdudley/2016/10/19/middle-east-economic-prospects/#8be515c1d7bb

http://www.investopedia.com/articles/investing/101515/biggest-oil-producers-middle-east.asp

http://oilprice.com/Energy/Energy-General/Middle-East-Oil-Gas-Investment-Surges-To-294-Billion.html

http://altaaqaglobal.blogspot.ae/2017/01/the-latest-mining-industry-trends.html

The Electricity Rat Race (Part 2): Reliable and Cost-Effective Supplemental Power Solutions for the Middle East Electricity Sector

Electricity consumption in the Middle East has been exponentially increasing in recent years, and if this current rate persists, the region will require several hundred billion US Dollars by 2020 to construct the necessary power infrastructure to keep pace with its future demand.

However, the current economic situation in the Middle East is limiting the governments’ capacity to single-handedly pour in the necessary investment towards the power sector. Thus, several countries in the region, including the UAE, Qatar and Saudi Arabia, have endeavored to unbundle their power sectors into separate segments (generation, transmission, and distribution) in an attempt to streamline operations and encourage capital investment from the private sector.

A reliable power support is key

Many of the region’s governments and private sector investors have embarked on developing new cost-effective, reliable and sustainable sources of energy that have the potential to dramatically boost the region’s power generating capacity. For example, solar energy projects are rapidly progressing in the Middle East, most notably in the UAE, Saudi Arabia and Kuwait. In fact, industry insiders report that solar power generation receives up to 90% of all government and private sector funding on renewable energy. It is therefore not surprising that solar power is now approaching grid parity and is experiencing phenomenal growth in the Middle East.

An example of renewable energy initiatives in the region is Dubai Electricity and Water Authority’s (DEWA) concentrated solar power projects in the UAE, which are touted to generate 1,000 MW by 2030. Most celebrated of these projects is the Mohammed bin Rashid Al Maktoum solar park, which is expected to provide a dedicated supply of 100 MW of electricity to the World Expo 2020.

In Saudi Arabia, King Abdullah City for Atomic and Renewable Energy (KACARE) has committed to construct up to 41 GW of solar power plants, and invest in an additional 21 GW of wind and geothermal power in the next two decades.

While in Kuwait, the country is looking to partner with international companies to add a power generating capacity of 2,000 MW of renewable energy by 2030.

But, in a region that is experiencing an unprecedented growth in population and in economic and industrial activities, a single source of alternative electricity may not be enough to secure its future power needs. Renewable energy technologies, like solar and wind, may hold a tremendous potential to provide the region with a reliable supplemental power, but as they are improved and optimized through the years with continuous technological research and development, these alternative power technologies may need the support of other sources of electricity.

In this time of economic challenges amidst a heightened urgency to supply additional power, the governments and the renewable energy investors will real benefits in turning to temporary power technologies. Rental power plants are able to supplement the existing power generated by traditional power plants and renewable sources of energy. They can act as an energy “safety net”, in that they are able to boost or take over the power load from renewable energy sources in times of intermittency, or from conventional power plants in times of power shortage. Rental power generation systems are equipped with state-of-the-art fast-start systems that allow them to supply the needed power at the shortest possible time, in cases of instability or insufficiency of other sources of electricity.

Temporary power plants represent a cost-effective solution to power supply challenges. Countries in the Middle East or private sector funders looking to manage their expenditure within the power sector will be happy to know that renting power do not require a huge initial investment. It can also protect the governments and private investors from unexpected associated expenditure, as temporary power plants come as a complete solution, with ancillaries, operation, and maintenance integrated with the service. This way, the governments and private investors are able to better manage their financial resources.

Along this line, the power sector stakeholders will also welcome the fact that temporary power plants can be easily mobilized, installed and operated anywhere in the world, because they are modular and can be simply connected to the grid, even without a substation. At the end of the contract, they can also be easily demobilized, leaving no permanent facility not utilized or that will require constant maintenance and service.

With rental power plants on board, the limitations of traditional power plants and renewable energy sources can be overcome, and the additional electricity can be reliably supplied as long as it is needed. In this context, temporary power plants find their maximum benefit in being used as supplementary or back-up power while permanent other energy facilities are being constructed or refurbished, and while alternative energy sources are being improved and optimized through the years.

Looking to the future

Industry experts believe that independent power producers (IPP) and private sector investors have been instrumental in keeping the region’s power supply sufficient for its residents, businesses and industries in recent years. At present, IPPs and the private sector are responsible for a significant amount of new capacity, and independent power plants continue to supplement or, to an extent, take the load of old and outdated government power plants not only in the GCC but also in other countries in the Middle East. They, therefore, are expected to continue to play a vital role in the power generation initiatives of governments in the region.


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PRESS INQUIRIES
Altaaqa Global
Tel: +971 56 1749505
rbagatsing@altaaqaglobal.com

Sources consulted:

“GCC Power Market Report 2017”. Ventures Onsite for Middle East Electricity.

The Electricity Rat Race (Part 1): Strategies of the Middle East Power Sector to Keep Pace with the Energy Demand

The Middle East power sector has been striving to satisfactorily match the region’s power demand. And while the requirement is exponentially growing, investment in the sector is observed to remain incremental. Altaaqa Global, a leading global provider of multi-megawatt temporary power solutions, shares its thoughts on the current regional power market and sheds light on some of the region’s strategy to stay in, or even win, the so-called “race”. 


The demand for electricity in the Middle East has been steadily increasing in the past several years. It can be ascribed to several general factors, including constant population growth with the arrival of tourists and new residents, rapid urbanization, a remarkable spike in consumption during peak summer months, low electricity prices and gradual improvements in income levels among households and businesses. As the demand is expected to continue rising in the coming years, the need to expand the region’s current generating capacity is growing ever more urgent.

In order to satisfy the projected power demand from now till 2020, the GCC alone, which represents 47% of 148 GW of the current power generating capacity of the region, needs to ramp up its power capacity by an average of 8% year on year. This will entail an investment of USD 85 billion to add 69 GW of generating capacity, on top of USD 52 billion to construct transmission and distribution facilities.

A close look at the region’s power demand

To better understand the state of the region’s power market and the scale of expansion that needs to be done in the near future, let us throw the spotlight on the current power situations of the major countries that comprise it.

The power consumption the United Arab Emirates has more than doubled in the past 10 years. According to estimates, the UAE’s gross domestic electricity consumption will reach 141 TWh in 2020, up from 103 TWh in 2014. The considerable growth in power consumption in recent years can be largely attributed to the country’s preparations for the World Expo in 2020, during which about 25 million tourists are expected to visit the UAE.

With its current electricity demand, Saudi Arabia needs to invest at least USD 140 billion by 2020 to uplift its generating capacity from 51.5 GW to 71 GW. The persistent rise in power demand in the country is attributed, to a large extent, to its continuous investment in several sectors, including public infrastructure, utilities, healthcare and education, to name a few. Thus, the sustained construction and industrial activity, coupled with an increasing electricity demand from its residents and businesses, cause the country’s power requirements to grow.

Qatar is experiencing a period of heightened construction activity, as the country gears up for the upcoming FIFA World Cup 2022. The related infrastructure development (building of eight new stadiums, renovation of three existing stadiums, and the establishment of Lusail City), expanding transportation network (building of Doha Metro Rail and expressways), surging public and private investments, and booming hospitality sector are driving the growth of the electricity requirement in the country.

According to a recent report released by the Oman Power and Water Procurement Company (OPWP), Oman’s peak average annual growth in power demand for the next seven years will be approximately 8%, rising from 5,565 MW in 2015 to 9,529 MW in 2022. OPWP ascribed the increase in demand for power to continuous residential growth, overall economic expansion, and the rapid development in industrial estates or free zones and tourism projects.

Kuwait’s peak electricity requirement is set to almost double by 2020. From the current demand of around 15,000 MW, Kuwait’s Electricity Ministry estimates that in 2020, the country’s electricity requirement will jump to 17,000 MW. The Ministry attributes this notable growth trend to the country’s harsh weather conditions, particularly during the summer months, and the highly subsidized energy tariffs. With one of the highest rates of energy consumption per capita in the world, meeting electricity demand has become a growing concern for Kuwait.

Amidst population growth and industrial expansion, Bahrain’s electricity demand is continuously increasing. Bahrain’s available generation capacity at the moment is 3,922 MW during peak summer months, with around 600 MW of spare emergency import capacity through GCC’s interconnected grid. For the country to satisfy the projected rise in power demand, its power generation capacity needs to be expanded by an average of 6%.

It is worth noting that electricity demand is also projected in increase in other countries in the region, like Yemen, Iraq and Syria, as they embark on infrastructure rebuilding and rehabilitation, and re-establishment of a reliable power connection. As the governance and the economic climate in these countries become more stable in the coming years, their power consumption is expected to exponentially rise.

The outlook of the region’s power market

Amidst the current economic challenges experienced not only in the GCC but also in the entire region, the governments are looking towards the development of new cost-effective and efficient sources of electricity, and sustainable opportunities and approaches to reduce overall energy consumption.

For instance, countries in the GCC have set an objective that a minimum of 10% of their overall power production by 2020 should come from renewable sources of energy. A vital component of the region’s overall renewable energy mix is solar, with sunshine available across the region for the most part of a year. Industry experts estimate that 85 to 90% of the region’s investment on renewable energy is poured into the development of solar power facilities, with UAE, Saudi Arabia, and Kuwait leading the way.

Alongside the intensive drive to harness renewable energy sources is the push to develop “Smart Cities” – urban projects that capitalize on digital technology and information and communication technologies to improve the quality of life of the citizens and better manage public services, such as power, water, transportation, healthcare and waste management.

In essence, in the face of decreasing revenues from oil, governments are realizing the benefits of partnering with the private sector and independent power producers (IPP) to boost the region’s available electricity capacity. Industry experts estimate that IPPs can contribute as much as 20 GW to the region’s power supply. At present, countries in the region are rolling out various initiatives within the power sector, which aim to allow competition at the power generation level, establish separation in the market to introduce more competition, and liberalize domestic energy prices over the medium-term.

In Part 2 of this feature, we will zero in on the available power generation technologies that respond to the current requirements of the governments in the Middle East. We’ll take a close look at how these innovations can satisfy the region’s demand for reliable power, support its current drive to harness renewable energy and contribute towards the minimization of initial costs and related expenses.


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PRESS INQUIRIES
Altaaqa Global
Tel: +971 56 1749505
rbagatsing@altaaqaglobal.com


Sources consulted:

“GCC Power Market Report 2017”. Ventures Onsite for Middle East Electricity.

“Saudi Arabia’s Unstoppable Utilities Market”. www.utilities-me.com.

“Oman forecasts annual power demand growth at 8% until 2022”. www.timesofoman.com.

“Bahrain’s Power Sector Embarks on a New Era of Development”. www.startupmgzn.com

Altaaqa Global Donates AED 2M to Khalifa Foundation

Altaaqa Global has recently donated AED 2,000,000 (USD 544,551) to The Khalifa bin Zayed Al Nahyan Foundation (Khalifa Foundation) to support the latter's humanitarian initiatives in Yemen.

Mohammed Haji Khouri, Director General of the Khalifa Foundation, received the cheque from Peter den Boogert, CEO of Altaaqa Global, at the foundation's Abu Dhabi offices.

Courtesy Al Etihad Newspaper

This donation is line with Altaaqa Global's commitment towards promoting economic and social progress in various areas around the world. An integral component of this commitment is supporting public welfare institutions, like the Khalifa Foundation, which has a significant and ongoing humanitarian presence in Yemen.

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