Can nuclear power help solve Kuwait’s future energy needs? Utilities Middle East examines the current and future market in the country
The power generation capacity of Kuwait is set to increase by more than 35% compared to the 2007 levels according to a recent report. The 2009 Kuwait Power Report, published in December by Business Monitor International (BMI) predicts a rise in the capacity to 1 512 TWh by 2012 from 1 117 TWh in 2007. The country will then account for 3.84% of MEA power generation adds BMI. With the 2007 figure already showing a 6% rise over the previous year, what is prompting such change and how can utilities firms help meet the country’s rising demands?
Reasons for change
The short answer behind the need for an increased electricity and water capacity in Kuwait is the economic development and growth of the country. As with other Gulf countries, Kuwait has seen a rapid boom over the past few years due largely to the reinvestment of high oil export revenues, the country being the world’s seventh largest oil exporter.
Power shortages in the past have meant the country has suffered from power cuts during the summer periods when demand is highest. Most recently, a series of programmed power and water cuts were made during the summer of 2007, whereby over a two-month period a one hour black-out was made daily as demand outstripped the available supply. A repeat of this procedure was narrowly avoided in 2008 mainly due to the implementation of emergency power projects. With a number of developments planned and underway in the country, including the City of Silk (Madinat Al-Hareer) and Al Hamra Tower, the demand for both power and water is expected to hike further.
A rapid growth in power demand is expected through to 2015, and with this in mind in mid-2008 the government announced plans to launch tenders for power expansion projects worth more than US $2.5 billion. It is expected to spend $27 billion on power and water projects by 2015.
A fast growing population and related plans for housing are the main driving forces behind the investment according to the Ministry of Electricity and Water. BMI predicts the population will grow by almost one million people to 4.3 million between 2007 and 2012. The per capita power consumption is also expected to rise by 7.8% over this period, putting even greater pressure on the existing capacity. The per capita electricity consumption in Kuwait is currently one of the highest in the world. Greatly subsidised rates offered to Kuwaiti nationals also mean that there is little incentive for individuals to reduce their power use.
Future demand
Among the plans announced for the power sector expansion is that for a 2 000 MW combined cycle gas turbine plant in the north of the country. With construction already underway, the first turbine for the Al Shuaiba plant is due to be delivered to site in April 2009, Mitsui and Hyundai Engineering Construction having won the contract for the electricity generation in 2007. When complete, the plant is due to include three 220 MW gas turbines; three steam generation turbines that will recycle thermal energy for use in the desalination plant; and a 220 MW steam turbine manufactured by Japan-based firm Toshiba.
Set to be the first power plant in Kuwait to simultaneously generate electricity and provide desalinated water, it will also include three water desalination units from Italian firm Fisia Italimianti. These are each expected to have a daily capacity of 15 million gallons.
A further tender was expected to be released in 2009 for a 4 700 MW plant in North Al Zour, which is planned to be built in four phases, with completion scheduled for 2011. However the sudden effects of the global economic crisis may play a large part in the plans for expanding the utilities sector.
In early February it was reported that a contract valued at almost US $2.5 billion to build turbines for the 2 000 MW Subiya power plant was to be delayed. The gas-fired combined cycle power plant was due to be built on a design-build-operate (DBO) basis, which included a seven year operation and maintenance period. Several firms have already been linked to this project including Siemens, General Electric and Hyundai Heavy Industries. It is thought that the tender may be relaunched in the summer, however this may be dependent on the resolution of financial backing issues.
Fuel choices
Traditionally, oil and gas have been the predominant fuel sources in the power generation market, in Kuwait and elsewhere in the Gulf. The bulk of electricity is currently provided by thermal power generation, which accounts for more than 85% of the total. BMI predicts that this sector will grow by almost 35% by 2012, but its overall market share will drop during this period.
The utilities industry in Kuwait is owned and operated by the Government’s Ministry of Electricity and Water. At present five plants provide electricity and water to the country. Privatisation of the industry is currently unlikely; however foreign investment is being sought for the construction of new plants, with options of future operational contracts being mooted.
The import of power from neighbouring countries is also expected to be implemented as Kuwait expands its power grid. The Government has accepted a proposed link-up with the mains grids of other Gulf Co-operative Council (GCC) countries that will enable each country to sell any spare capacity to others included in the scheme.
The construction of the resulting GCC power grid is expected to provide investment opportunities in Kuwait’s power sector, as more generating plants must be built, in order for it to provide the additional power needed for the grid. The sale of equipment and services related to the construction of the grid will offer yet more opportunities to foreign firms.
Phase one of the GCC power grid is scheduled for completion by mid-2009 and will connect the mains power grids of Saudi Arabia, Kuwait, Bahrain and Qatar. Several companies have been awarded contracts for the project including ABB, Areva T&D and Nexans. Kuwait has also discussed further co-operation with non-GCC neighbouring countries including Iran, increasing the need for grid linkage equipment and power generation plants.
In addition, Kuwait is expected to increase the import of natural gas from neighbouring countries such as Qatar, thus reducing its reliance on oil as a primary fuel and freeing its resources for export.
Changes in the electrical generation sector are being prompted by various factors including environmental concerns, the fluctuation of oil prices and the speed at which the additional resources are expected to be required. Sources being considered include renewable energy technology, hydro-electric power and nuclear power.
In mid-February it was announced that Kuwait is working with an unnamed French firm to study the feasibility of using nuclear power to meet the country’s electricity and desalination needs. The aim is to reduce fuel wastage in the production of these utilities and the move follows that of the UAE, which has recently signed nuclear co-operation deals with France and
the USA.
Future focus
In addition to the more obvious effects of the changing economic climate, such as the cancellation or postponement of projects, currency issues will play a part in the expansion of the utilities sector in the country. The Kuwaiti Dinar is less tightly tied to the US Dollar than the currencies of its neighbouring Gulf countries, which creates an increased currency risk, hence increased risk to the contractors and those financing new construction projects.
Ensuring financial backing is available is likely to be a major issue in the coming months. However with the overall economy of the country appearing to be strong, the increased demand for power and water will continue. And with this increased demand will be a need for firms to provide the services that can enable the utilities sector to grow.
Kuwait utilities sector in brief
• Kuwait’s power generating capacity is expected to reach more than 1 500 TWh by 2012, a 35% increase on 2007 figures.
• In mid-2008 the Kuwaiti Government announced plans to spend US $2.5 billion on power expansion projects by 2015.
• The demand for electricity in the country has risen by 6-8% annually over the past decade; further growth of 5-6% per annum is expected over the next ten years.
• Kuwait aims to boost its power capacity to around 16 000 MW by 2012.
• In 1965, the production capacity of Kuwait’s power plants was 300 MW, this rose to 1 364 MW in 1975, 5 086 MW in 1985, 6 898 MW in 1995 and 10 198 MW in 2005.
• In 2005, 8 400 MW of electricity was consumed in Kuwait according to Ministry of Electricity and Water figures.
• The production capacity of Kuwait’s desalination plants is 430 million gallons per day; this is expected to be increased to 600 million gallons per day within a few years.
• The per capita electricity consumption is among the world’s highest; highly subsidised rates offered to Kuwaiti nationals mean there is little incentive for individuals to reduce their power use.
• Opportunities within the power and water sector for foreign firms include the supply of plant and construction of the grid expansion and power plants.
