Powering Kuwait

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Kuwait's Ministry of Electricity and Water is responding to growth in housing and population.

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Highly subsidised rates offered to Kuwaiti nationals mean there is little incentive for individuals to reduce their power use.

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.

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