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Wed 21 Sep 2011 08:16 PM

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Saudi power firm signs deal for 4,000MW plant

State-controlled Saudi Electricity Co inks deal aimed at meeting rising Saudi power demand

Saudi power firm signs deal for 4,000MW plant
Electricity pylon

State-controlled Saudi Electricity Co signed a deal on Wednesday to build a 4,000-megawatt (MW) gas fired power plant aimed at keeping up with rapidly rising Saudi power demand.

The giant gas plant near Khobar will burn 600 million cubic feet a day (mcfd) of natural gas, Amer al-Swaha, head of Independent Power Projects (IPP) at SEC, told Reuters.

The 10.7 billion riyals ($2.85 billion) power plant deal --signed with a consortium led by Saudi Acwa Power Projects and including South Korea's Samsung C&T -- combines two plant project phases.

Al-Qurayyah, south of the eastern city of Khobar, which had been planned in two parts -- IPP1 and IPP2 -- is the third of five now planned (IPP) that will add a total of around 11,000 MW of capacity.

Saudi Arabia is struggling to find enough gas to meet rampant demand for energy in the kingdom, but the huge plant will not increase Saudi's gas burning by 600 mcfd as older plants will be retired.

"The fuel will be natural gas and part of it will come from the old, retired gas-fired power plants which are already more than 35 or 40 years old and will be shut down and the allocated gas will be diverted to this power plant," Ali bin Saleh al-Barrak, CEO of the Saudi Electricity Co, said.

Under the deal, Saudi Electricity will buy all the power produced by the plant for 20 years for 7 halalas per kilowatt hour from the consortium that will run it on a build-own-operate basis.

Crude oil accounts for 40 percent of the fuel Saudi Electricity burns to generate power, while gas contributes 34 percent, diesel 22 percent and fuel oil 4 percent, according to 2010 data from the Saudi Arabia's Electricity and Co-generation Regulatory Authority (ECRA).

The plant, which will be one of the biggest IPP combined cycle gas-fired power plant in the world, is expected to start production before the summer of 2014.

It will have an efficiency rate of around 52 percent.

Germany's Siemens will provide equipment while Samsung C&T will be the engineering, procurement and construction contractor.

The project will be 77 percent-financed by debt, ACWA, the lead developer, said in a statement.

Demand for power in the kingdom is growing 8 percent annually, Saudi minister of water and power, Abdullah al-Hussayen said in a speech at the same event, but it rose more than 12 percent this summer.

Government officials say demand for power could triple to 120 gigawatts by 2030.

Saudi Electricity alone is spending $80 billion in a 10-year investment plan to 2018 to add around 30 GW of capacity to the 51 GW now.

"We need 3.5 gigawatts every year to meet the demand," SEC chief al-Barrak told reporters.

ACWA chairman Mohammed Abunayyan said the massive projects could be financed without problems.

"Financing is there, around 50 percent of the financing will come from Saudi banks and 50 percent from international institutions," he said at the signing ceremony in the Saudi capital.

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