Coal's comeback

Global energy needs are projected to grow by 55 percent up to 2030 with usage of fossil fuels, dominated by coal, estimated to grow 84 percent.

"Coal-fired plants are a proven technology and there's a ready supply of coal so from an economic point of view it makes sense, it's a cheap energy to keep things running," continues Kiwan.

Rising populations and rapid growth in the real estate, commercial and industrial sectors have been driving up electricity demand much faster than forecast before soaring crude prices resulted in a regional economic boom. With the substantial gas reserves of most oil-producing Gulf states not being developed fast enough to keep up with rising domestic demand, the region has been left facing a serious gas crunch, with insufficient supplies to ease pressure on creaking power grids.

Kiwan says: "Oil prices have prompted the boom so as a result industrial growth has accelerated, exacerbating the gas crunch. Governments are sitting on all these projects thinking about how they are going to fuel them, and as a result they are having to look at other sources which include coal."

Turning to coal to diversify energy sources also makes good economic sense for oil-producing nations, according to Mohammed Shakeel, an analyst at the Economist Intelligence Unit (EIU).

"Suppose in future we had an oil crash and prices drop heavily? When you're a one-resource and one-commodity country, to stake so much of your economic potential on a single resource is a big gamble," he says.

In Oman, the government's advisory council, the Majlis Ash'shura, last week launched a study to investigate all uses of coal as a substitute for energy generation and its cost of production, together with its impact on health and the environment compared to other sources.

Led by Majlis deputy chairman Shaikh Nasser bin Hilal al Ma'awali, the team is expected to enlist the expertise of specialists in the field and examine studies conducted both within and outside the country before submitting its report in December.

The bidding process closed in August for a contract to build a 1000 MW electricity and water desalination plant in Duqm on the east coast of Oman, which is likely to be the Middle East's first coal-fired plant, and could be operational by 2012.

"Despite historically being a pretty important gas producer and exporter, Oman's own reserves and production capabilities have been dwindling. At the moment their own gas production is sufficient enough to provide for domestic consumption, but by their own forecasts demand will exceed supply in the not too distant future so they are having to look at alternatives," continues Shakeel at the EIU.

Another reason why Oman may move to coal energy is to allow the country to inject ever-decreasing gas supplies into its enhanced oil recovery project which aims to step up oil production, says Shakeel.

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