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Thu 25 Sep 2008 04:00 AM

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Regional power problems

Seasonal electricity fears exacerbated by reports of industrial shortfalls throughout the GCC.

Seasonal electricity fears exacerbated by reports of industrial shortfalls throughout the GCC.

Power shortages throughout the Middle East are striking at the heart of the region's industrial sector, a problem that grows in scale during the power-hungry summer months.

Whether it is because of tight supplies of natural gas - the feedstock for most power plants - or a lack of generating capacity, or failings in the distribution infrastructure, a shortage of electricity in the right places could harm industry's oil-fuelled economic boom. And it is a problem not confined to one sector or country.

Aluminium projects intended to produce some of the largest smelters in the world have been canned, in the face of gas shortages that would make generating the necessary power impossible.

Cement manufacturers have been hit too. Second quarter profit shrinkage reported by some of the UAE's largest producers, despite the continuing building boom and rampant demand for their product, pointed to a problem. The companies have been hit by power shortages and energy costs, forcing their margins to bump up against cement price caps.

Arabian Business reported that one company, RAK White Cement, only had one third of its plant running because of power and gas shortages. A number of others are turning to generators to address the problem.

It is a problem, whether of perception or management, which afflicts the entire region. In recent weeks, several areas of Saudi Arabia suffered blackouts, resulting in the loss of 3,400 MW from the network that links the eastern and central regions of the kingdom, some 15% of the total supply of the network.

Saudi Basic Industries Corp (SABIC) also reported that a power outage had temporarily reduced production rates at some of its polyethylene and polypropylene plants in Jubail.

Kuwait, historically one of the most power-vulnerable nations, is trying to address the problem head on, but has made slow progress. Kuwait's Minister of Oil, Electricity and Water, Mohammed Al-Olaim has publicly stated his desire to overcome his nation's power supply problems.

While admitting Kuwait faces power shortages, he said the ministry was on track with billions worth of energy-related improvements. These include the recent inauguration of Al-Zour South Power Stations' new gas turbines and two new projects, which are expected to produce 5,000 MW.

An online poll conducted by ArabianBusiness.com revealed concerns  among the general public: 43 percent of poll respondents thought power plant proposals needed to be speeded up and made the number one priority.

Although the UAE government has announced plans to expand its 10 GW production capacity by more than 50% by 2017, demand may outstrip supply as early as next year. The ministry has publicly rejected suggestions that there would be any power shortages.

Whatever the cause, when power shortages have a direct impact on industry and the ability of regional economies to diversify, power is sure to find its way to the top of government agendas.

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