Arab Gulf states need to invest $ 130 bn by 2023 to meet energy demand

Nov 27, 2002 01:00 AM

Arab Gulf states will have to invest in excess of $ 130 bn over the next 20 years to meet expanding residential and industrial demand for electricity, according to an analysis of future regional power generation needs, carried out by the Institute for International Research (IIR).

Saudi Arabia, which has seen an 18-fold increase in energy demand since 1974, will lead the investment league table, followed by the United Arab Emirates (UAE). According to IIR, Saudi Arabia's power sector will require $ 115 bn investment by 2023, taking generation capacity from 23,583 MW, in 2001, to 70,000 MW. Meanwhile, the UAE will need 8,000 MW of additional capacity within 10 years, double the installed capacity in 1999.
"The projections point to more than 2,000 MW of generating capacity being installed every year, in Saudi Arabia alone, to keep pace with increased demand," said Exhibitions Director, Power Division IIR, Sarah Woodbridge. "Elsewhere in the Gulf energy demand is growing at between seven and 10% per annum, compared to the global average of 3 %. With each additional 1,000 MW costing up to $ 1 bn, the region is going to have to face up to huge capital expenditure over the next two decades," said Woodbridge.

Another factor fuelling demand for power is the high consumption of sweet water, driven by the rapid population growth, climate and a steady expansion in non-oil sectors that are depleting ground water resources.
The Gulf Centre for Strategic Studies (GCSS) has warned that the six GCC states are already suffering from a water gap of an estimated 15 bn cmpy, which is covered through water supplies from costly desalination and co-generation plants.

Citing United Nation's figures, the centre predicts the GCC's population will surge from around 28 mm to 40 mm in 2010, an annual growth rate of between three and 4 %, one of the fastest in the world. "Regional water consumption is already the second highest in the world, exceeding 100 gallons per person per day. As the population continues to grow the existing water gap could widen to nearly 31 bn cmpy by 2025," said Woodbridge.
"The huge investment required in both power generation and desalination plants, combined with fluctuating oil prices, will increase the pressure on regional governments to tap the private sector. Abu Dhabi and Oman have already taken this route. Industry experts predict others will have to follow, if future power and water needs are to be met.”

Privatisation of the power, and associated water, sector will be one of the critical issues examined by the forthcoming Middle East Electricity Exhibition and Conference, to be held at the Dubai International Exhibition Centre, from January 19-21.
At the summit experts from the World Energy Council, US, UK and the Middle East will address key questions including: regional investment requirements, energy restructuring and privatisation, deregulation of the energy market, subsidy issues and the development of price driven customer tariffs; co-generation and the potential ofrenewable energy in the region.

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