After a rampant period of growth from 2006 to 2008 the Middle East power generation sector has a chance to take a breath, with output demand forecasts shrinking, and projects temporarily shelved.
Speaking at Power Gen Middle East 2009 in Manama, Bahrain, industry figures spoke in unison about how, after working at full capacity, all EPC contractors and equipment providers are predicting a period of price normalisation, as an overheated sector cools.
“Up until 2008 we have been entirely focussed on helping Kuwait out of a power emergency situation. Kuwait was completely out of spare capacity due to rapid growth in demand, and the delay in execution of major projects,” explained Fadi Haddad, vice president, Alghanim International.
In a period of just five months the firm installed three emergency power projects.
“On the back of this, 2008 was a record year. But, the industry was certainly over-heated, and a reduction can be healthy,” he said.
These sentiments were echoed by So-Hyung Kim, power plant EPC general manager for Doosan.
“There are two challenges facing the market. One is a lack of financing, and the other is that countries in the Middle East, which were anticipating significant growth, have reviewed that demand down. Some countries are actually expecting a decrease in power demand,” revealed So-Hyung.
“Utility providers across the region expect a big reduction in construction costs, so there is a growing tendency to hold off on these projects with a view to securing a lower overall project cost.
“Construction costs are more responsive to the prevailing climate, so whilst these costs have fallen sharply, installation and product costs have remained stable. I think we need maybe one more year before the product prices drop,” he added.
