Gulf Arab states link up to foil power crunch

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By linking their power grids, Gulf Arab countries have taken a step towards ensuring that the electricity needs of their increasingly affluent societies are secured for the long term future.

Economic growth has strained the infrastructure of the world's largest oil exporters, and left them struggling to supply enough power to their rapidly growing cities. The downturn might have slowed growth, but power supplies remain tight.

Saudi Arabia, Kuwait, Qatar and Bahrain could start seeing power flow across borders by the end of July. They signed a power trading agreement last week and have been testing grid links for months. Oman and the UAE would be linked up later.

Cross-border trade on the $1.4bn grid project would initially be limited as only Qatar has spare power to sell.

"It's an extremely important milestone for power security," said Johannes Benigni, managing director at Vienna-based consultancy JBC Energy. "Especially when the market is short, this is very powerful."

The grid's biggest immediate impact would be to lower surplus power capacity needed to guarantee supply, Benigni added.

Gulf Arab states have similar consumption patterns, with demand peaking in the summer as air conditioners run hard to counter scorching desert temperatures. But each country's pattern would differ slightly, so while one grid strains another could provide the capacity margin needed to keep working, Benigni said.

"This link is a structure that will allow the sharing of the reserve margin in its first phase," said Ali Saleh Al Barrak, chief executive of Saudi Electricity Co. "Everyone is suffering from shortage of capacity because of the great increase in demand and this includes Saudi Arabia."

The Kingdom is facing costly power outages of up to five hours a day in the industrial zone of the commercial hub of Jeddah. Saudi plans to link its southern and western domestic grids next year, Barrak said, which should help.

Even in Qatar, power supply is tight. The world's largest LNG exporter told Kuwait last week it had no spare capacity to sell this year, although industry sources have said a potential deal between the two fell through over price. That would have been the first deal on the new grid.

Every country in the Gulf except Qatar is also short of gas, the preferred fuel for power generation, even though the region sits on some of the world's largest natural gas reserves.

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