Infrastructure ME February 2014

MIDDLE EAST

ISSUE 001 | FEBRUARY 2014

TRANSPORT

UTILITIES

New connections Why Etihad Rail’s plans for the UAE are good news for the GCC

Cool savings How Saudi Arabia’s construction boom will benefit from district cooling

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OIL & GAS

CONSTRUCTION

Elevated road Discover Kuwait’s most important infrastructure project at Jahra Road

Cheap oil is here But the Middle East has nothing to fear from shale gas

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EXCLUSIVE INTERVIEW

PROGRESSIVE UTILITY DEWA chief HE Saeed Mohamed Ahmad Al Tayer reveals his vision for the future

PLUS FOCUS ON THE REGION’S TOP 10 CLEAN ENERGY PROJECTS

CONTENTS

001 February 2014 20

COVER STORY

REGULARS

Powering the future with DEWA

04 Regional update

Exclusive interview with the MD and CEO of Dubai Electricity & Water Authority HE Saeed Mohamed Ahmad Al Tayer, who explains his company’s future vision and infrastructure plans.

Report by Dania Saadi

16

News summary by country, including UAE trams, engineering chief jailed in Oman and new Makkah Metro contracts.

09 Infrastructure tenders

Top tenders from across the region including contract awards and latest floated tenders.

12 Analysis

Project financing can be the biggest challenge for companies. Private equity offers an often ignored solution.

TOP 10 FEATURE

Clean energy projects Alternative energy is a key part of the Middle East’s future power make up. It boasts some of the most ambitious green generation schemes in the world and IME looks at 10 of the region’s best solar and wind projects.

46 Events

Diary dates for key exhibitions, conferences and seminars. Where they are and what they are about

48 Infrastructure milestone

IME revisits key projects that made a difference. This month: Terminal 3 at Dubai International Airport

INDUSTRY SECTORS UTILITIES

28 District cooling solutions

COUNTRY FOCUS

34 Oman’s $11bn injection

Innovative technologies and a construction boom will drive the district cooling market in the Kingdom of Saudi Arabia, offering huge energy savings.

Oman’s infrastructure spend is attracting more foreign contractors but is the Sultanate over-estimating its tourist numbers?

By Ramesh Kumar of Frost & Sullivan

Report by Gary Wright

TRANSPORT

OIL & GAS

30 Connecting the region

38 Shale gas may benefit GCC

Etihad Rail is moving swiftly with its plans for the UAE, which will make its operation a gateway for the GCC rail network by 2018.

Shale oil and gas production is affecting the world energy market. Prices are falling but Middle East producers could gain within 10 years.

Report by Anoop Menon

Report by Gary Wright

TRANSPORT

CONSTRUCTION

32 Riyadh Metro on track

42 Jahra Road Development

The world’s biggest transport project is an international affair, involving more than 30 companies from 15 countries.

Work is on track to begin next month.

Kuwait’s most important infrastructure project and one of the biggest elevated road developments in the world is 46% complete with a 2015 completion date.

Report by Gary Wright

Report by Gavin Davids

February 2014

INFRASTRUCTURE MIDDLE EAST

01

INTRODUCTION

Welcome elcome to the first issue of Infrastructure Middle East, a new magazine with a new mandate, launched after several months of planning. It is the region’s first dedicated and comprehensive multi-sector magazine covering all infrastructure-related issues. There is no other region in the world that is undergoing so many dramatic changes and an integrated infrastructure is the key to growth.

GCC governments are investing billions of dollars on railways, roads, power plants, ports, airports, telecom and water supplies. Ensuring these are planned and completed on time is a vital part of securing the jobs, stability and future prosperity for this unique region.

Each sector brings its own unique challenges for our governments who are commissioning this new work at an unprecedented rate.

Those challenges continue for the engineers and contractors who take on these huge projects and for those organising the finance.

All of the sectors are intricately connected – as ports and airports are expanded, so the road and railways must be ready alongside the communications networks, healthcare and hotel facilities – and Infrastructure Middle East will examine how the jigsaw of different projects fit into the overall GCC picture.

The magazine aims to offer decisions makers, both in government and the commercial sector, a monthly digest of important news, information and analysis, along with in-depth interviews with key individual in this fast-growing sector and details of new tenders, contracts and awards.

So, we hope you enjoy the magazine, which many of you will be reading at its official launch during the Middle East Rail 2014 exhibition and conference, and we genuinely look forward to hearing your views.

W

GROUP GROUP CHAIRMAN AND FOUNDER DOMINIC DE SOUSA GROUP CEO NADEEM HOOD GROUP COO GINA O’HARA PUBLISHING DIRECTOR RAZ ISLAM raz.islam@cpimediagroup.com +971 4 375 5471 EDITORIAL DIRECTOR VIJAYA CHERIAN vijaya.cherian@cpimediagroup.com +971 4 375 5713 EDITORIAL SENIOR EDITOR GARY WRIGHT gary.wright@cpimediagroup.com +971 4 375 5473 EDITOR ANOOP K MENON anoop.menon@cpimediagroup.com +971 4 375 5714 ADVERTISING COMMERCIAL DIRECTOR JUDE SLANN jude.slann@cpimediagroup.com +971 4 433 2857 SALES DIRECTOR HARRY NORMAN harry.norman@cpimediagroup.com +971 4 375 5474 SENIOR SALES MANAGER JUNAID RAFIQUE junaid.rafique@cpimediagroup.com +971 4 375 5716 MARKETING MARKETING MANAGER LISA JUSTICE lisa.justice@cpimediagroup.com +971 4 375 5498 MARKETING ASSISTANT BARBARA PANKASZ barbara.pankasz@cpimediagroup.com +971 4 375 5499 DESIGN ART DIRECTOR SIMON COBON CIRCULATION AND PRODUCTION CIRCULATION AND DISTRIBUTION MANAGER ROCHELLE ALMEIDA rochelle.almeida@cpimediagroup.com +971 4 368 1670 DATABASE AND CIRCULATION MANAGER RAJEESH M rajeesh.nair@cpimediagroup.com +971 4 440 9147 PRODUCTION MANAGER JAMES P THARIAN james.tharian@cpimediagroup.com +971 4 440 9146 DIGITAL DIGITAL SERVICE MANAGER TRISTAN TROY MAAGMA WEB DEVELOPERS JOEL AZCUNA JANICE FULGENCIO Published by

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REGISTERED AT IMPZ PO BOX 13700, DUBAI, UAE TEL: +971 4 440 9100 FAX: +971 4 447 2409 WWW.CPIMEDIAGROUP.COM Printed by Printwell Printing press LLC © Copyright 2014 CPI. All rights reserved While the publishers have made every effort to ensure the accuracy of all information in this magazine, they will not be held responsible for any errors therein.

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INFRASTRUCTURE MIDDLE EAST

February 2014

REGIONAL UPDATE

UAE: Dubai The RTA has announced how road contracts will be issued for the $544.5 million Dubai Canal project, stretching from Business Bay to the sea.

Mattar Al Tayer, chairman of the board and executive director of the RTA, told our sister publication Big Project that the first and second construction are for the 16-lane bridges over the canal for Sheikh Zayed Road and three lanes on each side of Al Wasl Road and Jumeirah Road.

Crossings will be 8.5 metres above the water to allow boats underneath. A third contract will cover the drilling and landscaping works, as well as the construction of four pedestrian crossings.

Three pedestrian bridges will cross the canal in addition to

Dubai Canal Contracts worth $544.5m will bring 6km of waterfront to the city

footpaths on all the new main bridges. There will also be tracks for jogging and cycling along both sides of the canal and landscaping will include green areas, benches and other facilities and touristoriented projects.

The project will add 6kms to

Dubai’s waterfront and provide an area of more than 80,000m2 dedicated to public places and facilities. It will also encompass new shopping and entertainment centres, more than 450 new restaurants and marinas for yachts, four hotels and residences.

In Dubai learner drivers have a new set of traffic signs added to the test to designate tram routes. The new trams run between Dubai Marina and the Burj Al Arab and the Mall of Emirates, in many sections along the centre of roads.

The tram system – described as 75% complete – is due to open in November this year with trial runs expected over the next month. Phase one has 11 stations across 10.6kms with four additional stations in phase two.

Ahmad Hashem Behroozian, CEO of RTA’s Licensing Agency said: “It is important that we introduce new signs to regulate traffic in areas where trams will operate.”

Abu Dhabi The Middle East’s first ‘green road’ will be built in Abu Dhabi and it is being billed as a template for future highways throughout the country.

Engineering design work is due to begin this month on the 5km road linking the E11 to the new E311 and groundwork scheduled for the first quarter of 2015, according to the Department of Transport (DoT).

The design will incorporate sustainable possible solarpowered lighting as well as recycled concrete, asphalt and rubber from used tyres.

The DOT is collaborating with stakeholders, including the Urban Planning Council (UPC) Estidama Programme Team, the Environment Agency in Abu

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INFRASTRUCTURE MIDDLE EAST

Green build Siemens has officially opened its new HQ at Masdar City

Dhabi and Masdar, to ensure a sustainable design.

The first Leed Platinum certified office building in Abu Dhabi was officially inaugurated on January 22 owned by Siemens.

February 2014

The electrical engineering giant’s new Middle East HQ will accommodate 800 employees at Masdar City adjacent to Masdar Institute.

Architect David Ardill, of Sheppard Robson, won a competition 30 months before to

design the building, which uses 50% less energy than a similar sized conventional building. The distinctive façade is dominated by aluminium shades individually designed to provide 100% shading to 95% of glazed surfaces.

The original design brief has been met to reduce energy demand by 65% and water by 50%.

Herald Waiti, Siemens ME head of SRE, explained that there are ‘practically no internal light switches’ – everything is controlled through movement sensors. The opening ceremony was attended by board members from Siemans AG – including Michael Suess and Roland Busch – Dr Al Jaber and shareholders of Siemens in the UAE and dignitaries from Abu Dhabi.

REGIONAL UPDATE

Oman Repercussions are still being felt across the construction industry in Oman after the jailing of two Galfar Engineering executives – managing director P Mohamed Ali and business development manager Abdullmajeed Nushad – and a government official, Juma Al Hinai at the start of last month.

Al Hiani, head of tenders at Petroleum Development Oman (PDO) was accused of taking recieving cash. Ali and Mushad have been with the company since its formation in 1972 , which is credited with building much of Oman’s infrastructure.

L&T (Oman) LLC, a subsidiary of Indian engineering giant

Galfar MD P Mohamed Ali, ‘one of the richest non-resident Indians in the world’

Larsen & Toubro Ltd, has secured an order worth $72 million from Oman Electricity Transmission Co. “This is an engineering, procurement and construction (EPC) contract,” said Surendra Babu, chief executive of L&T

(Oman). The contract involves the construction of two 132/33kV grid stations in Amerat and Mabella-2, along with the installation of 132kV overhead lines and cables in Muscat governorate. The project will be completed in 20 months.

Oman’s Ras Al Hadd Airport has run into a new set of problems after the country’s Ministry of Transport and Communications cancelled a tender package for selecting a contractor to construct the terminal building.

Contracting firms that purchased the tender document have been informed that it has been cancelled, according to The Times of Oman and there has been no further explanation.

In addition to the cancellation of the Ras Al Hadd tender, there is further concern about Omani organisation when the tender selection date for the terminal building of Sohar Airport was also extended last month for the second time.

REGIONAL UPDATE

Saudi Arabia Contracts will be awarded before the end of next month for the two new metro systems in Makkah, the first phase of which is valued at $6.7 billion and work will begin by the middle of next year.

Saad al Qadi, CEO of Makkah Trains Company, said the first phase would be carried out in three contracts involving civil work, control implementation, signal systems and importing trains and carriages. Most of the first metro line and part of the second will operate through underground tunnels.

The Makkah transport project involves four metro lines spanning 114kms over 88 stations and is expected to improve pilgrim transportation in the city.

Makkah Metro Work is expected to begin next year on two new metros

Saudi Electricity Co is examining bids to build, own and operate a new combined power plant.

The 550MW integrated solar combined cycle plant on the Red Sea Coast will burn natural gas and use solar energy to increase

fuel efficiency but must be capable of burning super light crude as a back up.

Two new exhibitions have been announced in Saudi Arabia to capitalise on the massive infrastructure spending.

With spending on rail projects forecast to reach around $79 billion in the next 10 years the Riyadh Exhibitions Company (REC), announced the launch of Saudi Logitrans 2014 and Saudi Rail 2014. Both events will be held between October 27 and 29 at the Riyadh International Convention and Exhibitions Center, with Logitrans focusing on transport, logistics and freight and Rail looking at all rail sectors and urban transport.

Zeyad Al-Rukban, deputy general manager, REC, said: “The aggressive pace of transportation infrastructure development in KSA offers a conducive environment for service providers to establish and expand their presence here.”

Qatar A new report says Qatar’s cement industry is expected to face a ‘serious shortage’ in the near future unless it addresses production urgently.

Demand between 2013 and 2015 is expected to be 5.5 million tonnes per annum (mtpa) – way above the government estimate of 3.5-4 mtpa. But work on mega projects like Mshereib’s Downtown Doha and the FIFA World Cup 2022 demand is expected to reach 10mtpa.

The report by Global Investment House concluded the problem needed urgent attention: “Given the rapid rise in cement demand, Qatari companies are still not ready to gear up capacity.

We feel Qatar will face a major cement shortage scenario.”

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INFRASTRUCTURE MIDDLE EAST

Cement report Qatari companies must find more supplies to meet demand

In another report by the Kuwait Financial Centre an estimated $100 billion will be spent by Qatar on roads and railways as part of its infrastructural developments for the FIFA World Cup 2022.

The report says rail is seen February 2014

as vital to cut congestion on its roads and the Qatar Railway Development Company (QRDC) is responsible for $41 billion of rail projects. Qatar Integrated Rail Project, comprising Doha Metro, passenger and freight rails, accounts for $37 billion.

Back on the roads, Qatar’s Public Works Authority has announced a $12.3 billion plan to develop seven expressways, improve and develop existing roads and sewage projects, as part of a nation-wide development programme, which is expected to be completed over the next five to seven years.

One project is a highway dedicated to heavy vehicles.

Ultimately, the expressway projects will have 900kms of roads, subways, flyovers and interchanges, which are all part of the road infrastructure scheme that will connect Doha with other parts of the country.

The PWA said that 240 major interchanges will be built.

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MIDDLE EAST INFRASTRUCTURE TENDERS

Infrastructure Tenders Our monthly analysis of new tenders and key projects across the region

POWER TRANSMISSION LINES INSTALLATION BUDGET: $105,000,000

DHUBA 1 INDEPENDENT POWER PLANT (IPP) BUDGET: $600,000,000

MOHAMMED BIN RASHID AL MAKTOUM SOLAR POWER PLANT. PHASE 2 BUDGET: $190,000,000

FUJAIRAH REFINERY PROJECT BUDGET: $3,500,000,000

Project Number: WPR081-K Territory: Kuwait Client: Ministry of Electricity & Water (Kuwait) City: Safat - 13001 Phone: (+965) 2537 1000 Fax: (+965) 2537 1420 / 1421 Email: webadmin@energy.gov.kw Website: www.energy.gov.kw Description: Engineering, Procurement and Construction (EPC) contract for supply and installation of 172 kilometres of 300kV power transmission lines.

Period: 2016 Status: Current Project Main Contractor: Isolux Corsan Tender Categories: Power & Alternative Energy, Tender Products, Electric Power Transmission & Distribution

Project Number: MPP2858-SA Territory: Saudi Arabia Client: Saudi Electricity Company Central Region (Saudi Arabia) City: Riyadh 11416 Phone: (+966-1) 461 9030 Fax: (+966-1) 403 2222 Email: informus@se.com.sa Website: www.se.com.sa Description: Construction of an Independent Power Project (IPP) with capacity of 600 MW. Period: 2017 Status: New Tender Legal Consultant: Law Office of Mohanned bin Saud Al-Rasheed Technical Consultant: Fichtner Consulting Engineers (Saudi Arabia) Tender Categories: Power & Alternative Energy Tender Products: IPP, Solar Energy

Project Number: MPP2860-U Territory: Dubai Client: Dubai Electricity & Water Authority (DEWA) City: Dubai Phone: (+971-4) 601 9999 Fax: (+971-4) 601 9995 Email: customercare@dewa.gov.ae Website: www.dewa.gov.ae Description: Engineering, procurement and construction (EPC) contract to build a solar power plant with capacity of 100 MW as part of Shaikh Mohammed Bin Rashid Al Maktoum Solar Park - Phase 2.

Period: 2016 Status: New Tender Specialist Consultant: ILF Consulting Engineers (Abu Dhabi) Tender Categories: Power & Alternative Energy

Territory: Northern Emirates Client: International Petroleum Investment Company - IPIC City: Abu Dhabi Phone: (+971-2) 633 6555 Fax: (+971-2) 633 0111 Website: www.ipic.ae Description: Engineering, Procurement and Construction (EPC) contract to build a grass-roots refinery in Fujairah with capacity of 200,000 barrels a day (b/d).

Period: 2016 Status: New Tender Specialist Consultant: Wood Mackenzie (Dubai) Project Manager: Shaw Stone & Webster (Abu Dhabi) FEED Consultant: Technip Pre-FEED Consultant: Foster Wheeler International (Abu Dhabi)

February 2014

INFRASTRUCTURE MIDDLE EAST

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MIDDLE EAST INFRASTRUCTURE TENDERS

Top Tenders Saudi Arabia HOSPITAL CONSTRUCTION PROJECT - AL KHOUD Project Number: WPR066-O Territory: KSA Client Name: Shifa Al Jazeera Medical Group (Saudi Arabia) City: Riyadh Phone: (+966-1) 412 4900 Fax: (+966-1) 409 2028 Email: admin@shifaaljazeera.com.sa Website: www.shifaaljazeera.com.sa Description: Construction of a super-specialty hospital comprising (100) beds Period: 2015 Status: New Tender Tender Categories: Construction & Contracting, Medical & Healthcare Tender Products: Hospital Construction sector

JEDDAH METRO PROJECT Budget: $9,300,000,000 Client Name: Jeddah Municipality (Saudi Arabia) Territory: Saudi Arabia Description: Construction of Jeddah Metro light rail transit system spanning 108 kilometres comprising three major lines.

Status: New Tender

90-kilometre-long railway line linking Bahrain and Saudi Arabia.

This new railway line will form part of the $15.5 billion GCC-wide railway network and help alleviate increasing congestion on the existing King Fahd Causeway linking the two countries Status: New Tender

UAE PETROCHEMICALS STORAGE TANK TERMINAL PROJECT Project Number: MPP2843-U Territory: Northern Emirates Client Name: Middle East Tanking Solutions FZC (Fujairah) City: Fujairah Phone: (+971-9) 223 5264 Fax: (+971-9) 223 5265 Email: rpilani@gmail.com Website: www.middleastanks.com Description: Engineering, Procurement and Construction (EPC) contract to build a new petrochemicals storage tank terminal.

Bahrain BAHRAIN – SAUDI ARABIA RAILWAY LINE PROJECT Budget: $5,000,000,000 Client Name: Bahrain Government Territory: Bahrain Description: Construction of a

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INFRASTRUCTURE MIDDLE EAST

February 2014

Status: New Tender FEED Consultant: MUC Oil & Gas Engineering Consultancy (Fujairah) Tender Categories: Industrial & Special Projects Tender Products: Storage

RUWAIS SURGE DRUM PROTECTION & BATTERY LIMIT ESD VALVES PROJECT Project Number: WPR051-U Territory: Abu Dhabi Client Name: Abu Dhabi Gas Industries Limited (GASCO) City: Abu Dhabi Phone: (+971-2) 603 0000 Fax: (+971-2) 603 7414 Email: info@gasco.ae Website: www.gasco.ae Description: Engineering, Procurement and Construction (EPC) contract for surge drum protection and battery limit ESD valves at a refinery Budget: $7,000,000 Period: 15/05/2015 Status: Current Project Tender Categories: Gas Processing & Distribution, Oilfields & Refineries Tender Products: Modification, Repair & Refurbishing Services, Oilfield Supplies & Services, Oilfields Exploration & Development, Valves & Fittings (All Types)

Qatar INDEPENDENT WATER & POWER PROJECT-4 Project Number: MPP2844-Q Territory: Qatar Client Name: Qatar General Electricity & Water Corporation City: Doha Phone: (+974) 4484 5484 Fax: (+974) 4484 5496 Email: contactus@km.com.qa Website: www.km.com.qa Description: Engineering, Procurement and Construction (EPC) contract to build an Independent Water & Power Project (IWPP) with power generation capacity of 2,400 megawatts (MW) and 30 million gallons a day Period: 2016 Status: New Tender Tender Categories: Power & Alternative Energy, Water Works Tender Products: Independent Water & Power Plants (IWPP)

INDEPENDENT WATER PROJECT – RAS LAFFAN INDUSTRIAL CITY Project Number: MPP1487-Q Territory: Qatar

MIDDLE EAST INFRASTRUCTURE TENDERS

BAGHDAD MONORAIL PROJECT

Client Name: Qatar General Electricity & Water Corporation (Kahramaa) City: Doha Phone: (+974) 4484 5484 Fax: (+974) 4484 5496 Email: contactus@km.com.qa Website: www.km.com.qa Description: Construction of an Independent Water Project (IWP) using reverse osmosis (RO) technology, with capacity of 45 million gallons a day (g/d) Status: New Tender Tender Categories: Water Works Tender Products: Independent Water Plants (IWP)

Oman STEEL PRODUCTION PLANT PROJECT – SOHAR INDUSTRIAL ESTATE Project Number: WPR067-O Territory: Oman Client Name: Moon Iron & Steel Company (MISCO) - Oman City: Bahla 612 Phone: (+968) 2541 9595 Email: support@mesteel.com Website: www.mesteel.com Description: Engineering, Procurement and Construction (EPC)

Iraq DUHOK INTERNATIONAL AIRPORT PROJECT PHASE 1 Project Number: ZPR360-IQ Territory: Iraq Client Name: Civil Aviation Authority (Iraq) City: Baghdad Phone: (+964-1) 813 2467 Fax: (+964-1) 543 0689 Email: ops@iraqcaa.com Website: www.iraqcaa.com Description: Construction of an international airport in Duhok with annual capacity of 328,000 passengers - Phase 1 Period: 2015 Status: Current Project Design Consultant: Dar Al Handasah (Shair & Partners) – Iraq Design Consultant 2: Aeroports de Paris - AdP (France) Main Contractor: Makyol Construction Industry Tourism & Trading Company (Turkey) Main Contractor 2: Cengiz Holding (Turkey) Tender Categories: Airport, Construction & Contracting, Roads, Bridges & Infrastructure Tender Products: Airports Development & Management

Project Number: MPP2381-IQ Territory: Iraq Client Name: Baghdad Governorate City: Baghdad Phone: (+964-5) 377 676 Email: admin@baghdad.gov.iq Website: www.baghdad.gov.iq Description: Development of 25-kilometre-long monorail on a viaduct comprising (14) stations in Baghdad Budget: $1,500,000,000 Period: 2018 Status: Current Project

KIRKUK - HADITHA CRUDE OIL PIPELINE PROJECT

Egypt CAIRO AIRPORT CITY DEVELOPMENT PROJECT Budget: $14,000,000,000 Client Name: Egyptian Holding Company for Airports & Air Navigation - EHCAAN (Egypt) Territory: Egypt Description: The Airport City will include a new trade free zone, cargo village, factories belonging to the civil aviation for packaging and food terminals Status: New Tender

PRODUCED IN ASSOCIATION WITH BIG PROJECT MIDDLE EAST AND MIDDLE EAST TENDERS

Budget: $500,000,000 Client Name: North Oil Company (Iraq) Territory: Iraq Description: Construction of a 180-kilometre, 40-inch crude oil pipeline for connecting an oil field to distribution and storage facilities Status: New Tender

February 2014

M MIDDLE EAST

contract to build a steel production plant with capacity to manufacture 1.2 million tonnes per annum of steel billets Period: 2015 Status: Current Project Main Contractor: SMS Meer GmbH (Germany) Main Contractor 2: SMS Concast Italia SpA (Italy) Main Contractor 3: Essar Projects Ltd. (Oman) Tender Categories: Industrial & Special Projects Tender Products: Steel Mills

INFRASTRUCTURE MIDDLE EAST

11

ANALYSIS

PROJECT FINANCE

Why private investors are attracted to big utilities Following a raft of high-profile GCC utility announcements, project financing remains the biggest challenge for independent water and power project (IWPP) companies. Private equity offers an often ignored solution. By Anoop Menon ccording to leading industry experts, even as utilities’ providers explore the most competitive options to secure funding for their projects, the role of private capital was still not completely understood or is often viewed with scepticism.

“The GCC’s utilities sector is trying to keep pace with the region’s demand for power and water, but with the high number of projects being announced by governments in the region, private equity can help the developers

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INFRASTRUCTURE MIDDLE EAST

to complete their projects on time and at less risk to governments,” said Nick Carter, Director General, Regulation and Supervision Bureau, the independent regulatory body for the water, wastewater and electricity sectors of Abu Dhabi.

Conservative estimates by regional utilities leaders show that approximately 80,000 MW of additional power capacity and 290 million gallons of water per day will be required

by GCC countries by end-2015 based on an average of 7% annual growth as the region struggles to meet the high demand caused by low tariffs, increasing population and

February 2014

investment in new investment projects.

Most IWPPs fund their project costs through a combination of debt and equity.

The debt is arranged on a non-recourse project financing basis. The successful bidder is responsible for arranging the required financing and for negotiating financing agreements with the lenders.

Over the last 14 years, Abu Dhabi has built $25 billion (AED91.5bn) worth of generation and desalination assets with equity injections, mainly through loans financed through banks, $2bn (AED7.32bn) in from minor shareholders and around $3bn (AED10.98bn)

ANALYSIS

from the government through Special Purpose Vehicles (SPV). In other words, the Emirate has reaped the benefits of eight IWPPs and one power purchase company for just $3bn.

“You can release your equity as a government and do something with it rather than spending it all on infrastructure,” said Carter. “RSB is highly supportive of public private partnerships (PPP), and our role is look at the structure and financing of these companies, the levellised electricity cost (which is normally over a 20-25 year period and is competitively bid) and the equity shareholding of these companies.”

RSB has found that some of the most reliable operators in the power and water sector are the PPPs. “They bring in debt with a rigour not necessarily present in government organisations because lenders insist that the project company build to time and cost,” said Carter. RSB also plays an enabling role in this area by issuing letters of undertaking to lenders that declare that if the project company they have lend money to is in material breach of its license, the regulatory body will communicate the same both the lenders and project company directly.

The debt to equity ratio used to be as high as 80:20 before the financial crisis of 2008 but recently has been closer to 75:25, in effect raising the cost of financing. The debt may be raised in international, regional, Islamic or local debt or capital markets.

In August last year, the Ruwais Power Company in the Western area of Abu Dhabi raised more than $800m (AED2.9bn) for refinancing through the issue of a company bond, one of very first power plants in the Middle East financed through bonds. This was the largest offering in almost a decade, according to Carter, whose organisation was required to approve the re-financing.

“This is an excellent example of confidence in a maturing sector for a long-term bond with an average life of 21 years, mainly from American investors,” he added. “This is also great example of bond markets in the region now opening up IWPPs.” “The availability of project capital also depends on local market conditions and the specifics of the project,” said Daniel Zywietz, managing director, Ambata Capital Middle East and CEO of Enerwhere, a Dubai-based provider of solar off-grid and temporary power solutions that are structured as Independent Power Projects (IPPs).

“Financing a government-backed IWPP in Oman or Saudi Arabia is relatively easy, as local banks in these countries have a lot of liquidity and investors trust their track record of successful IWPPs. Achieving the same in jurisdictions with a shorter track record, less stable government finances or without explicit government backing is much harder and more expensive, as investors and banks demand a higher risk premium,” he added.

Zywietz believes that it is not impossible to finance such projects. “In times of single digit interest rates, many investors are actually

looking for the higher yields that projects in less established markets can offer, and consequently we are seeing a lot of interest in our solar IPP structures in both the Middle East and Africa,” he said.

In recent times, sukuk or Islamic equivalent of bonds are also being considered as viable alternatives to financing energy projects. “For sukuk, as for any bond like structure, the key issue is volume,” said Zywietz. The critical limitation in the region’s bond markets for power have not been so much that the structures can’t take it; rather, there hasn’t been enough potential volumes to bring bond sizes to a level where they are cost effective. But this could change if re-financings coming up in the near future use bond structures. Ultimately, sukuks have, in terms of issuance criteria, similar characteristics to bonds so that once an appropriate volume is reached, they could become a viable structure.

Moreover, where financing renewable energy projects is concerned, their key attributes clean energy and a positive impact on society and environment - easily fulfil the social dimension of some of sukuk’s criteria.

Carter added that bonds tend to be difficult instruments, in term of structuring, selling and even pricing compared to loans. In the case of Shuweihat S2, the coupon value went down from 6.25% to 6% because of the large

“FINANCING A GOVERNMENTBACKED IWPP IN OMAN OR SAUDI ARABIA IS RELATIVELY EASY, AS LOCAL BANKS IN THESE COUNTRIES HAVE A LOT OF LIQUIDITY AND INVESTORS TRUST THEIR TRACK RECORD.”

February 2014

INFRASTRUCTURE MIDDLE EAST

13

ANALYSIS

Two-year demand Estimates from utilities leaders show approximately 80,000 MW of additional power capacity and 290 million gallons of water by end of 2015

demand on the bond issue. “The size of the project has to be quite large for bonds or sukuk to replace loans,” said Carter. “With S2, as an example, the risk is mitigated once the plant starts commercial operations... it is attractive to bond holders because they get a decent return for 20 years.”

In the US, the solar power industry has grown sufficiently large to support bonds with the first solar bond being launched last year.

These were securitised pools of distributed solar assets where structures on individual homes were pooled into one note and sold at very attractive prices, the coupon rate for the yield being 4.8%. But the GCC’s solar industry has a lot of ground to cover before it can reach the scale that accommodates this point of securitisation.

Zywietz notes that given the high power demand growth rate in the Middle East, countries here should not rely only on conventional fossil fuels for producing power and water. “These resources are limited and in the short term, they are getting

more expensive,” he said. “The fact that the Northern Emirates are not benefitting from fossil fuel subsidies that many countries in the region, including the UAE, are still paying implies that renewable energy makes sense from an environmental and cost basis. Abu Dhabi took a major step in the region with its 100 MW Shams 1 CSP Plant last year.”

However, most of the solar capacity in Gulf has been built by governments directly using the Engineering, Procurement, Construction (EPC) approach, which Zywietz believes, actually makes it difficult to get to the most optimal power or water cost. Most of the time, government or government organisations are not the fastest adopters of new technology.

A rapidly changing technology environment means they find it difficult to keep up with the latest technological advances and make sure these are used in the most efficient manner.

“In the renewables sector, the IWP and IWPP structures can help optimise the efficiency of new technologies and thereby lower prices to a level they are cheaper and

more economically competitive than existing fossil fuels,” said Zywietz. “The critical hurdle is not the technology, rather, it is the investment.

“By having the right structures that sell kw/h rather than sell a piece of equipment, you can bring in private sector investment which will help optimise the cost, the efficiency, the reliability of those plants.”

With the arrival of large scale nuclear power projects in the region, the size of conventional power and water projects could experience some changes. Nuclear power plants are expected to shoulder the role of base load power, but nuclear power is not associated with water production which means there may more Reverse Osmosis (RO) plants in the Arabian Gulf.

“In the near term – next 10 to 12 years – not a great deal of difference will be noticed in power production. It will be predominantly gas rather than anything else in Abu Dhabi and nuclear as primary fuels with small amounts of renewable energy,” said Carter.

“PRIVATE EQUITY CAN HELP THE DEVELOPERS TO COMPLETE THEIR PROJECTS ON TIME AND AT LESS RISK TO GOVERNMENTS” 14

INFRASTRUCTURE MIDDLE EAST

February 2014

TEN CLEAN ENERGY PROJECTS

CLEAN ENERGY PROJECTS Alternative energy is a key part of the Middle East’s future power make up and here is Infrastructure ME’s top 10 planned solar and wind projects 16

INFRASTRUCTURE MIDDLE EAST

February 2014

NOOR 1 PHOTOVOLTAIC SOLAR POWER PLANT Engineering, procurement and construction contract with a capacity of 100 MW Country: Abu Dhabi, United Arab Emirates Budget: $600,000,000 Client: Abu Dhabi Future Energy Company (MASDAR) Contractors: Not Applicable Consultants: Lahmeyer International has been appointed technical consultant Noor 1 project will be located to the east of Al Ain city in Al-Aflaj. Unlike concentrated solar power technology (used in Shams 1) which generates electricity from the heat of the sun, the Noor 1 project will use the photovoltaic (PV) solar technology which can directly convert the sunlight into electricity. rest equally. scheme. Project completion is expected in 2014.

TEN CLEAN ENERGY PROJECTS

AL-SHAQAYA WIND POWER PLANT PROJECT 10 MW wind power plant, which is the blueprint for other Kuwati wind projects

AL DHAID SHARJAH SOLAR FARM PROJECT Construction of a 5MW photovoltaic solar farm in Al Dhaid, Sharjah

LCEC WIND FARM PROJECT-7 Construction of a wind farm with 50 MW-100 MW power generation capacity

Country: Kuwait Budget: Not Available Client: Kuwait Institute for Scientific Research Contractors: Not Applicable Consultants: Not Applicable

Country: Sharjah, United Arab Emirates Budget: Not Available Client: Proventus Renewables, UK Contractors: Not Applicable Consultants: Not Applicable

Registered and approved companies applied for the contract. The experimental project carried out by The Ministry of Electricity and Water and the Kuwait Institution for Scientific Research was the culmination of uses renewable energy to produce at least 60 megawatts every day. It is part of Kuwait’s plans to find safer ways to produce energy aside from fossil fuel. The plant is being built in Al-Shaqaya (near Abdali in the north), and could be duplicated at other locations.

The project will be built in Al Dhaid in Sharjah. The client has signed a memorandum of understanding with Dubai-based ABC Facilities Management to work jointly on building the project. Proventus Renewables director Samrat Deep Bhandari said the partnership marked the first step in the Middle East region for the Ireland-based renewable energy company. Proventus Energy’s main investments, to date, have been in wind and solar farms in Bulgaria.

Country: Lebanon Budget: Not Available Client: Lebanese Centre for Energy Conservation (LCEC) Contractors: Not Applicable Consultants: Not Applicable Four companies have submitted bids for the main contract. They are Arabian Construction Company, Caporal & Moretti, El Sewedy Cables Company and Ghaddar Machinery Company. Evaluation of bids is currently underway. This project is to promote nonhydro renewable projects and to have a minimum of 60 to 100 MW to be powered by wind by the private sector by 2014 and to have 12% from renewable energy by 2020.

February 2014

INFRASTRUCTURE MIDDLE EAST

17

TEN CLEAN ENERGY PROJECTS

PHOTOVOLTAIC FARM CONSTRUCTION PROJECT A 10MW PV farm at Beirut River Solar Snake (BRSS) – Phase 4

GULF OF ZEIT WIND FARM PROJECT – STAGE 2 Fgyptian wind farm with capacity of 220 MW in Gulf of Zeit district – Stage 2

PHOTOVOLTAIC SOLAR POWER PLANT PROJECT Supply, installation of a 1MW rooftop PV solar power plant at Al Assimah

Country: Lebanon Budget: Not Available Client: Lebanese Centre for Energy Conservation (LCEC) Contractors: Not Applicable Consultants: Not Applicable

Country: Egypt Budget: $460,000,000 Client: New & Renewable Energy Authority Contractors: Not Applicable Consultants: Lahmeyer International GmbH (Egypt) is project manager; Japan International Cooperation Agency (Egypt) is specialist consultant.

Country: Kuwait Budget: $3,100, 000 Client: Ministry of Electricity & Water (MEW) Contractors: Not Applicable Consultants: Not Applicable

The plant will generate a combined capacity of 9MW to reach 10MW as a final capacity solar panels will cover 6.5 kilometres. The project will be financed through a special financing mechanism (to be developed) with seed money coming from the cost of produced electricity being paid by Electricite du Liban (EDL) to a special account managed by the client.

The project is currently under planning. A schedule is yet to be announced.

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INFRASTRUCTURE MIDDLE EAST

Located on the Red Sea coast, the project is part of second stage of wind energy development in Egypt. Short listing of prequalified companies is still under progress.

RFP for the construction contract is due.

Project completion is expected by 2016. The feasibility study was carried out by Japan International Cooperation Agency (JICA).

February 2014

A Kuwati company Bader-Al Mullah & Brothers is expected to secure the main contract for this scheme utilising exisiting rooftops. Its orginal bid was $4.6m to complete the project. The decision to make the formal award is with Kuwait’s Tender Board. The solar PV panels are to be installed in the rooftops of the MEW building and the adjacent Ministry of Public Works building with a combined rooftop area of 8,400 m2.

TEN CLEAN ENERGY PROJECTS

WASTE-TO-ENERGY (WTE) PROJECTS Waste-to-Energy (WTE) projects to meet regulations for renewable energy

MAAN WIND POWER PROJECT EPC contract to build a wind farm in the area of Maan with capacity of 65-75 MW

AZRAQ PHOTOVOLTAIC SOLAR PLANT Construction of a Grid Connected Photovoltaic Solar Plant at Azraq

Country: Jordan Budget: Not Available Client: Ministry of Energy and Mineral Resources (MEMR) Contractors: Not Applicable Consultants: Not Applicable

Country: Jordan Budget: Not Available Client: Ministry of Energy & Mineral Resources (Jordan) Contractors: Not Applicable Consultants: Not Applicable

Country: Jordan Budget: Not Available Client: Ministry of Energy and Mineral Resources (MEMR) Contractors: Not Applicable Consultants: Not Applicable

Only domestic wastes generated in Jordan shall be treated at the new WTE plant. The interested applicant needs to provide evidence of its technical and financial capabilities to manage the design, engineering, construction, financing, operation and maintenance of waste-to-energy projects of similar conditions and type. The Jordanian government has set a target to generate 50MW through WTE technology by 2020.

Located in the southern part of Jordan.

Request for proposals for the EPC contract is expected to be issued soon. An award is expected imminenetly with construction beginning this quarter. The scope of the EPC contract will cover engineering and design, procurement, supply and transportation, construction and installation as well as commissioning of the wind turbines including LV/MV transformers and control systems.

The Ministry of Energy and Mineral Resources (MEMR) has funds from the Bilateral Spanish-Jordan Debt Swap Mechanism towards the cost of establishing a Solar PV grid connected plant at Azraq, located about 100 kilometres east of Jordan’s capital, Amman. Jordan’s Renewable Energy law calls for renewable resources to account for 10% of the country’s energy mix by 2020.

EPC bids have been invited for the project.

February 2014

INFRASTRUCTURE MIDDLE EAST

19

INTERVIEW HE SAEED MOHAMED AHMAD AL TAYER

POWER FOR THE FUTURE The UAE’s power demand grows at 5% a year. In this exclusive interview HE Saeed Mohamed Ahmad Al Tayer, the Managing Director and Chief Executive Officer of Dubai Electricity & Water Authority, tells Infrastructure ME about future plans

By Dania Saadi

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INFRASTRUCTURE MIDDLE EAST

February 2014

INTERVIEW HE SAEED MOHAMED AHMAD AL TAYER

February 2014

INFRASTRUCTURE MIDDLE EAST

21

INTERVIEW HE SAEED MOHAMED AHMAD AL TAYER

Since 2002 power capacity across the Gulf region increased 9% per annum 2002: 53 gigawatts 2011: 113 gigawatts Ventures Middle East predicts it will contine at 8% pa The current heart of DEWA’s power and water supply is the M Station at Jebel Ali. Capacity there is set to increase by 600MW to 2,660MW

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February 2014

INTERVIEW HE SAEED MOHAMED AHMAD AL TAYER

ubai has the capacity to meet its electricity and water demands for the coming 12 months but the chief of Dubai Electricity and Water Authority (DEWA) has revealed a raft of plans to meet the emirate’s future requirements.

HE Saeed Mohamed Ahmad Al Tayer has been at the helm of DEWA for a decade and it is clear that he is determined to see his company not only meet increased demand, but to do so in a sustainable way that sets a standard for the region.

DEWA is expanding the UAE’s biggest power plant at Jebel Ali, Dubai, it is planning a clean coal power station and its solar projects play an increasing role as it diversifies its energy mix as part of plans to meet surging power demand in the emirate, said Al Tayer. ``The growth in peak power demand in 2014 is expected to be around 5%,’’ said Al Tayer. “The power generation capacity is 9,656 MW and represents a healthy reserve margin over expected peak demand in 2014 and several years thereafter.’’

The UAE as a whole is undertaking multibillion generation projects as part of plans to meet power demand.

Alongside its electrical capacity, DEWA has a desalination capacity of 470 million imperial gallons per day (MIGD) – 174 MIGD more than presently needed, says Al Tayer.

DEWA is planning to expand its M station, already the largest in the country with a capacity of about 2,060 MW, by another 600 MW, comprising two gas turbines (GT), two heat recovery steam generators (HRSG), and

D

one back pressure steam turbine (BPST).

The M station at Jebel Ali, with its distinctive red and white chimneys, is one of the largest combined cycle power generation and desalination facilities in the Middle East. ``The GTs are scheduled to be commissioned before summer 2017 and to be followed by commissioning of HRSGs and BPST before summer 2018,’’ said Al Tayer.

Currently, DEWA’s installed power capacity is divided into 7,720 MW of combined cycle plants, 1,926 MW of simple cycle gas turbines plants, and a 13 MW solar photovoltaic plant.

Its desalination capacity is split between multi-stage flash desalination with a capacity of 445 MIGD and reverse osmosis desalination at 25 MIGD. But with a firm eye on the future, Al Tayer explained that the UAE is diversifying its energy mix and DEWA will build its own clean coal power plant in Dubai, just down the road from the M plant.

Al Tayer said: “With the objective to diversify from the present gas and oil fired electricity and water production it was decided to study the infrastructure development requirements by using coal as a potential feedstock at Hassyan site for cleancoal based electricity power generation.’’ ``The clean coal phase 1 plant, 1200 MW, on the IPP (independent power producer) basis is expected to be commissioned before summer 2020-2021,’’ he said.

DEWA will have a 51% stake in the IPP plant, with the remainder coming from the private sector.

DEWA awarded a consultancy advisory services contract in January this year to an international consortium, he added.

“DEWA IS IN THE PROCESS OF APPOINTING THE CONSULTANTS FOR … THE 100 MW SOLAR PV PROJECT AND TO GO TO THE MARKET DURING THE SECOND QUARTER OF THIS YEAR.” February 2014

INFRASTRUCTURE MIDDLE EAST

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INTERVIEW HE SAEED MOHAMED AHMAD AL TAYER

“TO DIVERSIFY FROM THE PRESENT GAS AND OIL FIRED ELECTRICITY AND WATER PRODUCTION, IT WAS DECIDED TO STUDY THE INFRASTRUCTURE DEVELOPMENT REQUIREMENTS

BY USING COAL AS A POTENTIAL FEEDSTOCK AT HASSYAN.”

SOLAR POWER To achieve its target of 5% solar power generation by 2030, Dubai is setting up the Mohammed bin Rashid Al Maktoum Solar Park project, which will have an installed solar power capacity of 1,000 MW by 2030.

Last year, the emirate inaugurated the first phase, a 13 MW solar photovoltaic (PV) plant.

The next project is a 100 MW solar PV plant, which is expected to be commissioned before the summer of 2017. ``DEWA is in the process of appointing the consultants for advisory services to respectively develop the RFP(request for proposal) for the 100 MW solar PV project and to go to the market during the second quarter of this year,’’ he said.

Currently all electricity plants run on gas but by 2030 the Dubai Integrated Energy Strategy has envisioned introducing solar energy to comprise 5%, coal 12%, nuclear 12% and the remaining will be from fuel gas.

Dubai is expected to buy nuclear energy from Abu Dhabi, which is building nuclear plants in the Western region, the first emirate in the Gulf to adopt nuclear power

DEWA is currently able to supply 60% more water than required thanks to its expansion during 2005-08

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as part of meeting rising power demand and diversifying its energy mix.

Dubai currently gets its gas from Abu Dhabi and from Qatar through the Dolphin Energy project, which also pipes gas to Abu Dhabi. Dubai also imports liquefied natural gas (LNG) from international markets. ``Dubai Integrated Gas Strategy was launched during 2012 with strategies for sourcing of gas supplies and to develop strategic gas storage for 90 days period,’’ said Al Tayer. ``LNG supplies required during peak summer months to make up for any potential shortfall in piped gas supplies is arranged by Dubai Supply Authority (DUSUP), the gas suppliers to Dubai.’’

DEWA is also undertaking a series of initiatives to cut power consumption across the emirate and will spend $1.9bn (AED 7bn) on a smart grid between 2013 and 2035. ``DEWA has invited competent consulting firms to submit proposals for the implementation of a smart gird strategy to improve the effective utilisation of electricity by optimising power generation,

Across the Gulf, investments in the power sector are estimated at $63bn over the next five years, and the region’s installed capacity is expected to reach 170 GW by 2019.

February 2014

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INTERVIEW HE SAEED MOHAMED AHMAD AL TAYER

DEWA peak electricity load in 2013: 6,857MW – reserve capacity 2,800MW. DEWA peak demand reached 296 MIGD in 2013 – reserve margin 174 MIGD.

DEWA’s HQ opened in February 2013. It is the largest government building in the world to secure a LEED Platinum energy rating

“THE GROWTH IN PEAK POWER DEMAND IN 2014 IS EXPECTED TO BE AROUND 5%. THE POWER GENERATION CAPACITY IS 9,656 MW AND REPRESENTS A HEALTHY RESERVE MARGIN OVER EXPECTED PEAK DEMAND IN 2014 AND SEVERAL YEARS THEREAFTER.” transmission, distribution, operations and maintenance,’’ said Al Tayer.

He explained that DEWA’s smart grid programne will distribute “renewable energy technologies, tools and techniques to realise effectively demand shift and savings, energy efficiency and operational improvement”.

These tools and techniques will help reduce greenhouse gases and make DEWA more efficient and sustainable, says Al Tayer.

DEWA plans a huge energy saving programme using Etihad Energy Services, which was set up in June of last year. Under the plans set by the Dubai Supreme Council of Energy, DEWA through Etihad ESCO will retrofit 30,000 buildings.

Al Tayer said: ``Etihad Energy Services Co. has already started with the DEWA building as well as signed up with a few clients to help them retrofit their buildings, the most

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significant one being the agreement with Economic Zone World for retrofitting the buildings of the Jebel Ali Free Zone that was announced in December 2013.’ ``Etihad ESCO is currently assessing the buildings of its clients and preparing a first project that will be tendered out on the market to Energy Services Companies (ESCO) in the first quarter of 2014.

“It is then anticipated that the selected ESCO will start the work of retrofitting the buildings in the course of 2014. The objective of Etihad ESCO is to run many parallel projects so that it creates a dynamic market with ESCOs and the building owners. ’’ To finance all these projects, DEWA has set its 2014 budget at AED20.56bn ($5.6bn), a 49% increase from the AED13.8bn ($3.77bn) budget of 2013.

Expenditure on projects and purchases

February 2014

will reach AED7.06bn ($1.92). Projects include the clean coal power plant, the solar energy project and the expansion of the M-Station for power generation and water desalination at Jebel Ali. But Al Tayer said there is no intention to go to the fixed income market to finance its 2014 budget.

He said: ``DEWA is in a position to finance all 2014 operations, including working capital, Capex and other financial commitments from internal accruals.”

So, DEWA enters 2014 in fine shape financially, it has enough capacity to meet power and water demands in the medium term – including the Expo 2020 commitments – and it offers a firm vision for the future, which will move the emirate away from its reliance on gas and heralds a more sustainable future.

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UTILITIES

POWER & WATER

District Cooling: Poised for strong growth in Saudi Innovative technologies and a construction boom will drive the district cooling market in the Kingdom of Saudi Arabia, says Ramesh Kumar of Frost & Sullivan lobally, the movement of countries towards sustainability and green technologies is picking up pace. The Middle East has is part of this movement and is trying to “go green� in all possible ways.

An extremely high temperature prevalent in the region makes air conditioning a necessity and has a major share of the total electrical consumption over other electrical needs. District cooling technology is handy, as it effectively offers central cooling for multiple buildings, while saving about 25% on electrical costs.

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INTRODUCTION District cooling is a system where chilled water from a central location is distributed to buildings through a set of insulated pipes. The water, then, circulates through refrigeration coils or, by the use of absorption technology, enters the air conditioning system. The district cooling solution efficiently controls the internal temperature in buildings, produces less noise, is easy to maintain and, most important, consumes less power, when compared to other cooling technologies. With the use of eco-friendly refrigerants, carbon emissions in the environment can also be minimised.

THE DISTRICT COOLING MARKET IN THE KINGDOM OF SAUDI ARABIA Air conditioning is a necessity in the country.

During summer, air conditioning accounts for about 70% of total electricity consumption.

Therefore, identifying a cost-effective comfort-cooling solution is an important part of urban planning in Saudi. Consumers have realised that district cooling offers the best cooling services at a relatively lower price, as compared to other cooling methods.

The global economic slowdown inversely impacted the UAE construction industry.

However, the subsequent boom in the construction industry in Saudi Arabia led to its emergence as one of the most lucrative construction markets in the Middle East, with projects worth $600 billion currently in progress. Mega construction projects, currently in the planning stage or in progress in the Kingdom, have thrown the market open for district cooling applications. The district cooling market in Saudi Arabia earned about $400 million in 2012, which is about 26% of the total GCC DC revenues.

The commercial and retail segments together contribute a major share of the revenues.

However, this scenario is likely to change, as new application areas and end-user segments, like residential, hospitality and infrastructure are likely to adopt district cooling for comfort-cooling applications.

District cooling revenues are expected to increase from $400 million in 2012 to about $870 million in 2016, at a Compound Annual Growth Rate (CAGR) of about 21% over 2012-2016. It is expected that the Kingdom will account for about 35% of the overall GCC district coolin revenues by 2016. Thus, the prospects for district cooling applications in the Saudi Arabia look bright.

Companies leading the district cooling services in Saudi Arabia are Saudi Tabreed, City Cool and Arabian District Cooling.

KEY DRIVERS OF GROWTH Growing population, increasing commercial and residential developments, hot climatic conditions Due to its climate, high population growth, and increasing investment in commercial and residential development, the demand for air conditioning will continue to as the country continues its expansion programme across all sectors of the contruction sector.

Energy efficiency, lower carbon footprint, reduced power usage With the pressure on the electricity grid increasing and the cost of electricity rising, demand will increase for an efficient cooling solution, which will consume less power and is environment-friendly. This will drive the market for district cooling services

DISTRICT COOLING TECHNOLOGY IS HANDY, AS IT EFFECTIVELY OFFERS CENTRAL COOLING FOR MULTIPLE BUILDINGS, WHILE SAVING ABOUT 25% ON ELECTRICAL COSTS 28

INFRASTRUCTURE MIDDLE EAST

February 2014

UTILITIES

City and Jeddah Airport, Bay La Sun Village and the residential development of King Abdullah Economic City have planned to use seawater extracted through beach wells in their district cooling plants. However, treating seawater for use in district cooling would lead to incurring additional costs for companies and, thus, might increase the price for end-users.

Labour shortages The current crackdown on illegal immigrants by the government of Saudi Arabia to implement Saudiisation has impacted the construction and contracting industries, as they were largely reliant on daily-wage workers. Thus, the availability of a semiskilled and unskilled workforce will fall, and service providers will have to hire local workforce or people with legal immigration status. This will adversely affect labour costs and have a direct impact on the bottom-line of the district cooling service providers.

District Cooling KSA may need regulation to ensure environmentally friendly solutions, says the author

Government regulation and legislation The district cooling market calls for greater regulations to be enforced by government authorities in Saudi Arabia (similar to those in place in the United Arab Emirates), so as to promote the use of energy-efficient, environmentally friendly and economical cooling solutions.

MAJOR CHALLENGES Financing, uncertain construction costs, and non-guaranteed cash flows Against the backdrop of the global credit crunch, the high capital cost required for district cooling poses a major challenge, especially to the small- and medium-scale district cooling service providers. To overcome this, many developers and service providers are now using the alternative Public Private Partnership (PPP) and Built-Own-OperateTransfer (BOOT) models.

Non-transparent billing system, inappropriate and non-standard accounting system The market also faces the issue of losing customer confidence owing to nontransparent and higher charges due to inconsistencies in the billing system.

Educating customers about the tariff structure and installing smart meters at customer premises will measure the exact usage and ensure transparency in billing.

Lack of fresh water Due to limited availability, fresh water is considered a precious resource in Saudi Arabia; this poses a risk for district cooling applications. However, with advancement of technology, treated sewage water or seawater is being used in pilot projects for district cooling applications. With its success in such projects at Jubail Industrial

CONCLUSION Rising electricity demand, increasing costs and the announcements of mega infrastructure projects will drive the growth of the district cooling market in the Kingdom.

The demand will come from important cities like Riyadh, Jeddah, Dammam and Makkah. In Makkah, with rising construction activity and growing awareness about sustainability, the penetration of district cooling applications will improve. With the implementation of innovative technologies like plant control to monitor and supervise central plant operations, smart metering and seawater sourcing to achieve increased plant efficiency, the district cooling market in Saudi Arabia is poised for growth.

Also, with the efforts by the government to move towards sustainability and curb energy consumption, district cooling will become a preferred choice for cooling needs.

Companies with strong technical acumen, good relationship development skills, and innovative solutions for Saudi Arabia’s complex resource issues will benefit in the long run.

Ramesh Kumar is Industry Manager, Environment & Building Technologies Practice (Middle East, North Africa and South Asia) at Frost & Sullivan.

February 2014

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TRANSPORT

RAIL

Connecting the region Etihad Rail is moving swiftly with its plans for the UAE, which will make its operation a gateway for the GCC’s network by 2018.

Anoop Menon examines the progress so far ith over $22.4 billion allocated to rail investment in the country, the government of the UAE is committed to using railway infrastructure as a tool for reducing reliance on highway transport for freight and increasing the quality of life in urban areas by moving citizens from road to rail. This will also result in a reduction of accidents on the road and an improvement in environmental conditions due to the decrease in carbon emissions.

Last year marked a historic moment for the federal railway transport network in the UAE, when the first stage of the development of railway network measuring 200km was finalised. Another two stages of development will be completed in 2018 when 1,200km of double track will be operational, connecting the UAE with KSA and Oman.

“The federal railway network is built using state-of-the-art solutions and allowing to operate freight trains with a maximum speed of 120 km/h and passenger trains with a maximum speed of 200 km/h,” says HE Dr Abdulla Mohamed Al Nuaimi, Minister of Public Works and Chairman of the National Transport Authority.

“The construction of the entire federal railway network is managed by the Etihad Rail which will start to operate daily freight transport services beginning from 2014. Heavy trains of about 10,000 tonnes will be operated by using modern rolling stock and latest technologies.”

Etihad Rail network will also connect with the GCC network and this — once fully established — will cover the six GCC countries

Stage 1 Stage 2 Stage 3

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2018

2017 2013

2014

Etihad Rail’s rail network timetable for the UAE

Stage 1

Stage 2

Route: From Shah and Habshan to Ruwais Total distance: 264 km Construction commenced, sleeper factory operational, Habshan-Ruwais link to be completed towards the end of 2013, Shah-Habshan track in 2014. Once stage 1 is completed, two 100-wagon freight trains will run every day, transporting over 10,000 tonnes of sulphur per train for ADNOC. Each wagon replaces three trucks; so Stage 1 will remove 600 trucks off the highway reducing congestion and improving safety.

Route: From Ruwais to Ghweifat connecting to the Saudi border & from Tarif to Dubai & Al Ain connecting to the Oman border Total distance: 628 km Status: Tendering process underway, line due to be operational by the end of 2017 Stage II is currently being tendered. It comprises of Phase A 137km line from Ruwais to Ghuwaifat; Phase B 190-km line from Liwa Junction to Al Ain; Phase C - 186km line from Al Ain to Jebel Ali, also includes a branch to Khalifa Port and

February 2014

Phase F - 78km line from Industrial City Abu Dhabi to Mussafah. Phases D and E are sub-contracts for railway integration and systems.

Stage 2 is important because it extends the network to Saudi Arabia and Oman borders. Stage 2 contracts are expected to be awarded in the first quarter of 2014.

Stage 3 Route: From Dubai to the Fujairah and Ras Al Khaimah Total distance: 279 km Status: All three stages are due for completion by 2018

TRANSPORT

including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. Etihad Rail will connect to the GCC Mainline which parallels the Gulf coastline from Muscat to Kuwait City Speaking at MEED’s The Abu Dhabi Conference in December last year, John Lesniewski, Acting Executive Director - Commercial and Operations, Etihad Rail pointed out the federal rail network incorporates the best of European and North American standards, the former mainly for train control (“they have more trains in a smaller network”) while the latter’s experience in terms of operating heavier freights over longer distances has been incorporated in the network. Diesel-powered locomotives will be used during the start-up stage with option to electrify the network later.

He also outlined the key markets for the rail network. The main heavy freight

opportunities afforded by the network include: Granulated sulphur from sour gas fields at Habshan and Shah to Ruwais Port (ADNOC/ER) Intermodal traffic in the UAE will be mainly with Jebel Ali and Khalifa Ports connected to border crossing with Saudi Arabia.

According to a study by Etihad Rail, nearly 1.5 million containers are expectedc to pass through these gateways each year for both domestic and regional markets once its network is connected to the GCC network.

Aggregates and construction materials from the Northern Emirates are the majority of the rail bulk volumes.

Steel and aluminium factories along the coast are major generators of bulk traffic.

Cement factories - inbound for limestone and outbound for cement powder/clinker.

Waste materials from urban areas to

landfills in desert forecast to create major daily tonnage.

Etihad Rail’s conservative estimates put railway’s share of bulk traffic by 2020 at 100% for sulphur, 27% for aggregates, 44% for metals and 8% for intermodal. However, Lesniewski noted that railway’s share of intermodal traffic will be much higher as ports and terminals become more developed. “We believe that 11% of all bulk tonnage shipped should be converted from truck to rail by 2020,” he said.

“This is again a conservative estimate because typically, about 15-16% of all the goods are shipped by rail so we have room to grow.”

The Etihad Rail official also said that federal rail network is projected to handle 70.6 million tonnes of bulk commodities by 2020 with aggregates accounting for the biggest share at 45%, followed by metals at 20.4%.

“ETIHAD RAIL WILL START TO OPERATE DAILY FREIGHT TRANSPORT SERVICES BEGINNING FROM 2014. HEAVY TRAINS OF ABOUT 10,000 TONNES WILL BE OPERATED BY USING MODERN ROLLING STOCK AND LATEST TECHNOLOGIES.”

Freight delivery The UAE rail network is projected to handle 70.6m tonnes of bulk commodities by 2020: 45% is expected to be aggregates, around 20% metals

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RAIL

Riyadh Metro remains on track for spring start At $23.5 billion, the world’s biggest transport project is an international affair, which has attracted more than 30 companies from 15 countries. Work is on track to begin next month and Gary Wright looks at the progress to date ork is expected to begin next month on the 176km Riyadh Metro just 22 months after tenders were invited for the mega project, according to authorities in Saudi Arabia.

The $23.5 billion scheme is expected to employ more than 45,000 people and the target date for opening remains 2019.

Ibrahim Al-Sultan, president of ADA and member of the High Commission for the Development of Arriyadh ( HCDA ) has instructed work to begin in the first quarter of 2014 and all indications are that it will.

“The ,etro build will be a major driver of employment and economic development. It will also help to reduce traffic congestion and improve air quality,” he said.

The ambitious project is broken into three parts contracted to three different consortia and Riyadh Governor Prince Khaled bin Bander announced at the end of last year that expressed no doubt that work will begin in the city as originally scheduled. He told an Arabic newspaper: “Everyone will see the work on this project within a few months.”

The Riyadh Metro is the world’s largest

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Future Vision Zaha Hadid Architects design for the King Abdullah Financial District metro station

transport project under development – now officially known as the King Abdulaziz Public Transportation Project — and the three consortia have made a flurry of announcements since they were confirmed the winners at the end of July last year.

It has been reported that tenders are being

prepared by US-based Aecom for a range of subcontract work on Package 1, the BACS consortium, led by Bechtel, for lines 1 & 2, which includes 42 of the 85 stations and two of the main hubs at Olaya and King Abdullah Financial District.

German engineering giant Siemens has

“THE RPTP WILL BE A MAJOR DRIVER OF EMPLOYMENT AND ECONOMIC DEVELOPMENT. IT WILL ALSO HELP TO REDUCE TRAFFIC CONGESTION AND IMPROVE AIR QUALITY” 32

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February 2014

TRANSPORT

announced that it has landed a $2bn order to supply driverless trains, rolling stock, signalling technology and electrification on Package 1. Siemens will build 74 of its Inspro-type aluminium-bodied trains and be responsible for system integration across 63 km making up the lines.

The signalling and WLAN-based train control system will be designed to support unattended driverless operation with 90 second headways, giving a capacity of 21,000 passengers an hour. Siemens will supply 31 interlockings, fit out the operations control centre and train the future staff.

The electrification system will include regenerative braking and diesel generators to provide emergency power.

On Package 3, the FAST consortia’s lines 4, 5 and 6, Atkins consultancy, in a joint venture with Typsa, has secured a $120.6 million contract to handle the design on the $8.05 billion package.

Atkins has confirmed it will deploy a ‘multidisciplinary team’ of around 200 staff on Package 3, which includes 25 stations as well as two depots alongside seven park and ride facilities.

Samsung has reported that it has gained extra $250 million of the Riyadh Metro contract, claiming that its share of the $8.05 billion package of the project is likely to be bigger than it initially envisaged.

The metro system will have 85 stations in total, including the main stations, four transfer stations and five park-and-ride stations. Trains on the six lines will run at 40 km/h. All stations and carriages will be airconditioned.

Atkins CEO Prof Dr Uwe Krueger said: ‘Riyadh Metro is a landmark project which will raise standards of living and support long-term sustainable development throughout the city, acting as a catalyst for further investment in all aspects of the public realm and built environment.

“We are one of the few organisations in the world with the breadth and depth of technical expertise and regional market experience to deliver a project of such scale and complexity.

“Our track record on other major metro programmes in the region, as well as our work on projects such as King Abdulaziz International Airport in Jeddah and the London 2012 Olympic and Paralympic Games, was a key factor in our appointment.”

How the work is divided between the three consortia

Package 1 Lines 1 & 2

Package 2 Line 3

Package 3 Lines 4, 5 & 6

BACS consortium Value $9.5bn Total distance 63.3km Led by US firm Bechtel with Almabani General Contractors and Consolidated Contractors Co, and the Arriyadah Development Authority.

It includes rolling stock, signalling and electrification.

It has 42 of the 85 stations and two of the main hubs.

Line 1 runs north south along Olaya and Batha streets from Prine Salaman Bin Abdul Aziz Street to Dar Al Badia. It is 38km with 22 stations and interchanges to all lines.

Line 2 is 25km east-west from King Saud University to then Eastern Sub-Centre along the median strip of a new freeway. Interchanges with lines 1, 5 and 6.

SIG-AnsaldoConsortium Value $5.2bn Total distance 40km The Salini Impregilo Group leads international consortium which includes Ansaldo STS (Italy), Bombardier (Canada), Larsen & Toubro (India) and the local Saudi company Nesma, for the longest line of the project with 20 stations.

Bombardier Transportation’s share of the contract is approxiamately $383m including 47 two-car driverless Metro 300 trains.

Salini Impreglio is lead engineer. $4.9m is civil works.

Line 3 runs east-west from the National Guard Camp at Kasham El Aan along AlMadinah Al Muwwarah and Prince Saad Bin Abdulrahman Al Awal Roads across to the Jeddah Expressway.

FAST consortium Value $8.05bn Total distance 74.6km Spanish firm FCC leads the consortium, Samsung C&T, Alstom, Strukton, Freyssinet, Typsa and Setec.

Line 4 is 29.6km and links King Khalid International Airport with the financial district a mix of elevated and at-grade alignment. Eight stations, three on line 6.

Line 5 is 12.9km with 10 stations, runs through a bored tunnel along King Abdulaziz Street between the historical centre and Riyadh Airbase onto King Abdullah Road. Stations to lines 1 & 2, Line 6 is a mostly elevated half-ring with eight stations over 29.9km starting in the financial district and ending at Sheikh Hasan Bin Hussein Bin Ali Street.

Riyadh Metro Architects’ drawings show a spectacular vision of the main stations for the new system

February 2014

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COUNTRY FOCUS

Oman’s $11 billion infrastructure injection Last year a change in the tendering process increased the attraction of Oman for foreign contractors looking for a slice of its spending programme. It is a country on the rise but there are doubts over predicted visitor numbers in the tourist sector. Report by Gary Wright

man is undergoing one of the most exciting transformations in the GCC with billions of dollars of its oil wealth being pumped into infrastructure projects.

The Sultanate has a population of 3.2 million of whom 1.3m are foreigners and a key focus for the government’s huge investment — and for any company wishing to succeed there — is the employment of Omani nationals.

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The country is midway through its eighth five-year plan, launched with an $11bn budget in 2011 in the wake of the Arab Spring, with investment in airport and seaport expansion, hospitals, roads and a new rail network.

In a move of clear intent, last year the government simplified its tender process in an effort to support the construction industry, which is widely regarded as the country’s most important growth sector.

But the leadership remains hampered by delays and it is no unusual for tenders to be cancelled and re-issued.

February 2014

Urban migration over the past 40 years has seen hundreds of thousands of people move out of the countryside and now almost 90% live in Oman’s cities and towns.

Oman is the world’s 84th largest country by area at 212,460 km2 — it’s almost as big as the United Kingdom and three times larger than the United Arab Emirates — but it is 75% is desert with mountains in the north and south. As residential areas grow, land for agriculture decreases.

In January Oman’s Council of Ministers appointed a consultancy to evaluate the

TRANSPORT

country’s property industry “in terms of organsational, legislative and commercial aspects”. It is charged with producing recommendations for a regulatory framework following the huge growth of the country’s construction industry with the aim of increasing the size of the sector.

Current government investment in infrastructure has seen an explosion in multimillion rials projects across the country including a 288-km fence and wall along the border with Yemen worth $300 million which is expected to go to an Indian contractor.

RAILWAYS Rail investment is coming too with a target date for operation of 2018, the design stage is expected to be completed by 2014 and the first stage due to begin by the third quarter of that year.

In February last year more than a dozen companies had collected tender documents to grab a slice of the $15.6bn project, according to the Oman Daily Observer. The mainly dual track phase one is 1,061km with nine tunnels, extending to six kilometres and 130 flyovers, 17km of viaducts, 20kms of bridges and 15km of wadi bridges.

It will be partially funded by a GCC grant of $10bn and as well as linking the main industrial centres in of Sohar, Duqm and Salalah, the new railway will link with the wider GCC network.

Oman hosts one of the biggest infrastructure exhibitions in the region and last year’s event attracted 3,600 visitors, many of them newcomers looking to grab a slice of the $11bn spend.

The three-day event at the beginning of October saw 200 exhibitors across two halls. It won praise, especially from foreign companies looking to secure business and be part of the sultanate’s future.

Infra Oman, organised with the full support of the Ministry of Transport and Communications and the Ministry of Commerce & Industry, included country pavilions from Egypt, Germany, Iran, Italy, Turkey, UAE, Japan and UK and the show organisers said visitors came from across the MENA region.

“The overall air transportation plan suspiciously seems based on an exaggerated prediction about passenger numbers.

Official statistics show that about 7.5 million passengers flew in and out of Oman in 2012, a growth of 16.5% over the previous year. When completed, the Muscat airport will be able to process 12 million passengers per year.”

And there was additional concern in December when Oman’s Ministry of Transport and Communications cancelled a tender package for selecting a contractor to construct the terminal building at Ras Al Hadd Airport.

The contracting firms that bought the tender document were informed that it had been cancelled, a report by The Times of Oman said.

The ministry, which is overseeing the development of three green-field regional airports and the massive expansion of two international airports, did not give any reasons for cancelling the already delayed tender.

In addition to the cancellation of the Ras Al Hadd construction tender, the opening date for the selection of the terminal building of Sohar Airport was extended for the second time. Sohar Airport will be an alternative to Muscat International to support increased cargo, courier and passenger traffic across north Oman.

AIRPORTS Muscat’s airport was built in 1973 and the new International Airport where work began in 2009, is the biggest single construction project in the Sultanate.

The Omanis’ ‘think big’ vision has been questioned by The Times of Oman, which asked “Can Oman airports projects justify spiralling costs?’ in an article in October last year when it examined the $4.29bn spend over five years on airports.

The newspaper said: “Oman is upgrading two airports and building four new ones though such projects have already proved to be very expensive but the question remains whether such ambitious plans can justify the spiralling costs.

OMAN IS THE 84TH LARGEST COUNTRY BY AREA IN THE WORLD AT 212,460 KM2 MAKING IT ALMOST AS BIG AS THE UK AND THREE TIMES LARGER THAN THE UAE

HOSPITALS A $1bn Medical City is set to be built just east of Salalh developed by The Apex Medical Group. The International Medical City will

February 2014

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TRANSPORT

be the country’s first major hospital build in more than 20 years.

Apex president Dr Abdullah Al Joaib said: “Building on the rising trend of medical and health tourism, the International Medical City will be developed in a serene setting on the coast.” The 530-bed multi-speciality hospital will include a transplant and dialysis centre along with rehabilitation and diagnostic care facilities.

PORTS AND ROADS Seaports are also receiving a $1.3bn spend, $1.17bn on water and $1.16bn for housing projects.And in a country where personal transport still relies heavily on the car, there is $3.2bn set aside for roads.

As well as focusing on job creation, foreign trade is another area the government is keen to encourage. A short drive from the new Muscat International Airport is the $1bn Oman Convention Centre, which was due to open this year but is now delayed until 2016.

TOURISM The capital city Muscat is a main focus of investment as the government seeks to alleviate pressure on its port and airport moving heavy industry out and encouraging tourism. Some of the world’s biggest hotel chains have turned their attantion to Oman.

Tourism is a major focus and the government is aiming for an optimistic 12 million visitors a year within a decade

boosting its current 3% of GDP for the sector.

In 2012 1.6m visited the country and Tourism Minister Ahmed Bin Nasser Al Mehrzi called in an international agency in 2013 to formulate a long-term strategy and defy the World Travel & Tourism Council’s forecast of 2.83m by 2022.

At the time he said “weakness in basic infrastructure” was holding back both domestic and international tourism. The sector has spent more than $260m in the “past few years” but returns had not lived up to expectations. Al Mehrzi admitted: “There was no clear vision for the sector, so the government began evaluating it to find out why it did not reach its goals and decided to on a strategy for the next 30 years.”

“OMAN IS UPGRADING TWO AIRPORTS AND BUILDING FOUR NEW ONES … THE QUESTION REMAINS WHETHER SUCH AMBITIOUS PLANS CAN JUSTIFY THE SPIRALLING COSTS.”

Muscat International Work began in 2009 on the country’s new airport but there is still widespread doubt that Oman will attract 12 million visitors a year

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February 2014

OIL & GAS

SHALE GAS

Shale gas boom could benefit GCC producers The growth of shale oil and gas production is already affecting the world energy market. In the short term, prices are falling but three different reports predict a positive outcome for Middle East producers. By Gary Wright new report from a leading Saudi investment bank has predicted the USA’s success with shale gas may actually lower production volumes as prices fall and is unlikely to have a long-term effect on the kingdom’s positioning.

Jadwa Investment, the diversified Islamic investment bank headquartered in Riyadh, released its report Outlook for Unconventional Oil & Gas last month and it offered some comfort for the Saudi oil & gas sector over the medium term.

The report, which was compiled using a number of technical studies, research papers, industry reports and press articles, examines the potential impact of the tight oil and shale gas boom on the global energy industry in general and on Saudi Arabia.

Technological advancements in recent years have helped the US exploit its significant unconventional reserves of oil and gas, making it one of the world’s leading producers of hydrocarbons and helping reduce its imports.

But the Jadwa report concludes that production from these sources may not grow as fast and as much as most commentators suggest. This is due to the limited productivity of oil wells in tight rock formations, the very steep decline rates of tight oil and shale gas wells, and the now uneconomic nature of some shale wells due to depressed US natural gas prices, which

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Price fall Natural gas in theUSA trades at a third of import prices to Europe and one-fifth of those to Japan

February 2014

OIL & GAS

themselves resulted from rapid supply increases.

Dr Fahad Al Turki, Head of Research at Jadwa Investment, said: “Understanding the impact of the US tight oil and shale gas boom requires us to look at the overall demand-supply dynamic for oil and gas, both today and in the future. Jadwa Investment’s research team considered the factors which will drive the evolution of oil and gas markets, the innovations which made the ‘revolution’ in tight oil and shale gas possible, and how this revolution will affect global oil and gas demand in the next quarter of a century.”

According to the US Energy Information Administration, US domestic oil production in November climbed above an average of 8 million barrels per day for the first time in almost 25 years. The Organisation of Petroleum Exporting Countries (OPEC) has stated that in 2014 the demand for its members’ crude oil production should average 29.57 million barrels of oil per day (bpd), some 300,000bpd less than in 2013. .

“As a result of increased production in the US from tight oil and shale gas formations, we see the main impact on Saudi Arabia through the reduction of price differentials between light and heavy crudes on one hand, which could change how oil is refined in places like Europe, and a more significant impact on the petrochemicals industry on the other hand, due to the large output of cheap yet valuable natural gas liquids (NGLs) which are used as feedstock in this industry,” said Dr Al Turki.

In effect, petrochemical industries in Saudi Arabia could find their comparative

“THE KEY LONGTERM CHALLENGE FACING SAUDI ARABIA’S OIL AND GAS INDUSTRY REMAINS THE HIGH AND GROWING DOMESTIC DEMAND FOR HYDROCARBONS.”

Fracking The process of forcing pressurised water into rock, cracking it to release retained oil and gas

Light tight oil does not diminish Middle East’s significance Technology and high prices are opening up new oil resources – but the Middle East will be the key source of oil growth within a decade.

That’s according to the International Energy Agency’s (IEA) 2013 edition of the World Energy Outlook.

Although rising oil output from North America and Brazil reduces the role of OPEC countries in quenching the world’s thirst for oil in the immediate future, the Middle East will be back in its role as a key source of oil supply growth from the mid-2020s.

The annual report presents a central scenario in which global energy demand rises by one-third in the period to 2035. The shift in global energy demand to Asia gathers speed, but China moves towards a back seat in the 2020s as India and countries in Southeast Asia take the lead in driving consumption higher. The

Middle East becomes the world’s second-largest gas consumer by 2020 and thirdlargest oil consumer by 2030.

Brazil, maintains one of the least carbon-intensive energy sectors in the world, despite experiencing an 80% increase in energy use by 2035 and moving into the top ranks of global oil producers. Energy demand in OECD countries barely rises and by 2035 is less than half that of non-OECD countries.

Low-carbon energy sources meet around 40% of the growth in global energy demand. In some regions, rapid expansion of wind and solar PV raises fundamental questions about the design of power markets and their ability to ensure adequate investment and real longterm reliability.

“Major changes are emerging in the energy world in response to shifts in economic growth, February 2014

efforts at decarbonisation and technological breakthroughs,” said IEA Executive Director Maria van der Hoeven. “We have the tools to deal with such profound market change.

Those that anticipate global energy developments successfully can derive an advantage, while those that do not risk taking poor policy and investment decisions.”

The availability and affordability of energy is a critical element of economic well-being and, in many countries, also of industrial competitiveness. Natural gas in the US currently trades at one-third of import prices to Europe and one-fifth of those to Japan.

Average Japanese or European industrial consumers pay more than twice as much for electricity as their counterparts in the US, and even China’s industry pays almost double the US

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“UNDERSTANDING THE IMPACT OF THE US TIGHT OIL AND SHALE GAS BOOM REQUIRES US TO LOOK AT THE OVERALL DEMAND-SUPPLY DYNAMIC FOR OIL AND GAS, BOTH TODAY AND IN THE FUTURE.” profitability reduced by the cheap NGLs. This, in turn, could even encourage some Saudi petrochemical firms to expand their capacity in the US in order to benefit from the abundance of cheap feedstock.

He concluded, “The key long-term challenge facing Saudi Arabia’s oil and gas industry remains the high and growing domestic demand for hydrocarbons. This is exacerbated by low prices locally, which will distort internal economic decisions and reduce the available income from the Kingdom’s oil exports.”

The report also examined the role of other unconventional sources of oil and gas, including deep-water fields, oil sands and extra-heavy oil, noting that they will become economically viable as conventional sources are depleted, technology develops and oil prices increase.

Founded in 2006, Jadwa Investment is a leading Islamic investment bank headquartered in Riyadh and fully licensed by the Capital Market Authority (“CMA”).

Jadwa’s business activities include private equity investments, investment banking advisory, brokerage, and asset management for high net worth and institutional investors.

Today, Jadwa has over $3bn in assets under management through 16 investment funds and several discretionary portfolios, which have consistently ranked first in performance over a span of several years.

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Shale Impact in 2013 The effects on oil and gas producers in Gulf Cooperation Council (GCC) countries of surging shale oil and gas production in North America are minimal at present, says a Credit FAQ report by Standard & Poor’s Ratings Services.

Nevertheless, the report, titled What Is the Significance of the Shale Phenomenon for Gulf Oil and Gas Producers? points out that the shale boom could impact the oil price in an extreme mediumto long-term extreme scenario. Under this scenario, shale oil supplies increase substantially from the US and sufficient infrastructure would be in place to render shale oil exports competitive with GCC oil exports.

In an extreme scenario, the GCC hydrocarbon-exporting sovereigns could withstand a 15%-20% fall in global oil prices due to the significant

production of shale oil.

Indeed, oil prices would have to drop to below $80 per barrel (Brent) before the likes of Qatar and Saudi Arabia would record any financial deficits.

Most US shale oil production is light, sweet oil, meaning it has low density and low sulphur, and is easier to refine. Consequently, the immediate effects of US shale production, in S&P’s view, centre on GCC-based natural gas producers.

The report concludes: “In our view, Saudi Arabia is at the forefront of shale gas development in the Gulf.

The government recently invited overseas companies to express their interest in a front-end engineering and design contract for shale gas that, according to MEED, was to be released in the third quarter of 2013.”

Additionally, Saudi Arabia

is preparing to be among the first countries outside North America to use shale gas for power generation and thereby save more of its crude oil for export.

Separately, Saudi Aramco announced recently that it was looking to commit shale gas for the development of a 1,000MW power plant that will feed its phosphate mining and manufacturing sector.

Saudi Arabia has also taken the lead among GCC countries in creating downstream energy clusters (in Jubail and Yanbu) with the aim of generating an “internal use” of oil that is, to an extent, insensitive to the market price. This not only guarantees a usage value for the oil at a time of potentially depressed prices, but also generates jobs and leads to greater end product diversification.

Easy processing Most US shale oil production is light, sweet oil: low density, low sulphur and easier to refine

February 2014

CONSTRUCTION

SITE VISIT

Halfway there Kuwait’s most important infrastructure project and one of the biggest elevated road developments in the world is 46% complete with a 2015 completion date.

Report by Gavin Davids hree years ago, the Kuwait Ministry of Public Works announced that it had reached all the agreements necessary to launch of one of Kuwait’s largest ever infrastructure projects.

The Al Jahra Road Development Project is not just another run of the mill road expansion project, the likes of which we’ve seen all over the GCC. Far from it in fact.

It is currently ranked as one of the largest elevated road projects in the world and given its significance to Kuwait, it could be one of the most important projects ever undertaken by country.

The project began construction in September 2010, says Engineer Yasser Boudastour, the project engineer appointed by the Ministry of Public Works to supervise the project.

Work on the $936 million road project started after an agreement was reached with the firms Louis Berger and the Pan Arab Consulting Engineers (PACE) to be the project design and supervision consultants.

The Arab Contractors Company (Othman Ahmed Othman & Co) was appointed contractor.

Boudastour said: “Most of the old roads in Kuwait are simple three lane roads. The Ministry of Public Works intends to develop these roads. The Al Jahra Road project will be one of many projects that will transform these roads into a grand unified highway for 21 kilometres, which will extend from Jahra Gate Roundabout to United Nations Roundabout.

“The project will include building,

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construction and maintenance of roads an elevated motorways. It will comprise of five phases of improvement, which will include the major utilities works such as sewage systems, overpasses, telecommunications, electrical systems and storm water drainage, amongst other things.”

The Al Jahra Road Development project will connect with Kuwait’s other highways in a huge network that will ultimately improve traffic safety and security.

Boudastour said: “It is considered to be a solution for traffic jams and will address the growing road congestion crisis.”

With an estimated 2.25 cars per person in Kuwait, the need for a modern road network that can handle heavy volumes of

“THIS PROJECT WILL RAISE THE STATE OF INFRASTRUCTURE IN KUWAIT AND IT WILL BE THE FIRST STEP TOWARDS NEW MODERN ROADS IN KUWAIT”

New roads The Al Jahra Road project is a 21-km highway a step to replacing Kuwait’s three-lane roads

February 2014

CONSTRUCTION

Project details Project Name: Al Jahra Road Development Project Project Value: $936 million Project Developer: Kuwait Ministry of Public Work Contractor: Arab Contractors Company – Othman Ahmad Othman Project design and supervision consultants: Louis Berger and Pan Arab Consulting Engineers Five-year plan Work began in September 2010 on what is considered the most important infrastructure project in Kuwait

traffic is crucial if the country is to achieve the aims set out by its government. In 2004, it was estimated that 85% of Kuwait’s roads were paved, so clearly the task ahead for the government remains huge.

As a result, the number of stakeholders involved in the project are high, with not just the Ministry of Public Works involved, but also bodies like the Ministry of Electricity and the Ministry of Interior. So, complications can arise over the course of the project, said Engineer Yasser Boudastour.

“For any major project, there are always challenges you’re going to face, and we face them every day,” he said.

“Especially when it comes to the coordination needed for any detour in traffic. This project is also related to many ministries, which means a lot of coordination and official letters that need to be signed before taking any steps forward.”

“Thankfully, we are now all in coordination to solve these problems and we’re trying to manage the traffic.”

With a scheduled completion date of 2015,

the massive project is currently slightly behind schedule, but Boudastour is confident of making up the shortfall.

“The expected timeframe for the project is five years. Right now we’ve reached 45% to 47% of work done. We’re a little bit behind schedule, but we’re trying to mitigate it and try and follow the schedule in the coming months,” he said.

“We’re behind schedule by about 6%, which is not that big a percentage. But as you know, we’re dealing with so many services and ministries. Also, sometimes, especially when you’re working underground, you cannot see what’s there.

“So when you’re doing excavations and all, you can sometimes find utilities. So we needed to divert them and for that, we needed to contact all the ministries to get permission. That creates a delay. So far, we’ve done all these things and we just have to have a recovery plan for this percentage, so as to meet the deadline at the end of the project.”

Keeping this in mind, the project overseers have stepped up their efforts to

complete their work on schedule. At present the workforce consists of 2,600 men on site, working in three shifts.

The project has achieved eight million and five hundred thousand safety hours without injuries, he adds, claiming that this is a result of the team’s commitment to secure all necessary equipment, such as safety helmets, footwear and belts for workers to protect them from injuries.

In addition, workers attend weekly presentations and lectures to educate them about the ways to prevent accidents and how to stay safe and protected.

At present, 80% of the pilings, 15% of diaphrams, 45% of abutments, 61% of pile cap, 51% of piers are completed, in addition to erecting 590 segments that were fabricated in the precast yard, Boudastour says during the interview, with a partial handover of the project scheduled for September 2014, when Phase II is completed.

Jahra Road will be carried on new precast pre-stressed segmental viaducts. The precast segments are short concrete sections

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CONSTRUCTION

Jahra Road Development Jahra Road Development is one of the largest elevated road projects in the world in which The Ministry of Public Works (MPW) in Kuwait plans to invest $936 million in the Jahra Road Development Project, and an expected time frame of five years to full completion, in other words it will be completed by September 2016.

The project’s mainline length is 11.4 kilometres comprising three lanes with link roads in each direction and one lane for emergency. The total length of ramps is 7.2 kilometres and the total length of service roads is of 17.3 kilometres. it also contains one 57-metre long section of depressed roads having two roundabout bridges.

“THE AL JAHRA ROAD DEVELOPMENT PROJECT WILL BE ONE OF MANY PROJECTS THAT WILL TRANSFORM THESE ROADS INTO A GRAND UNIFIED HIGHWAY FOR 21 KILOMETRES” connected together to form the carriageways of the bridges.

These segments are fabricated in precast yard, which is a large plant fully utilized with moulding machines and worker’s offices for the production of the precast segments.

The yard is set up on remote land located near the Camp Doha areas, with a total surface area that covers 150,000m2. It accommodates large-scale pre-casting facilities such as mould production frames, different cranes, water tanks, storage and curing chambers.

By employing the system of segmental precasting provided both production speed and a bigger work space in a congested environment.

This ensured the production of the highest quality of segments, while maintaining colour consistency, meeting strength requirements and establishing a bridge that requires little maintenance.

The project engineer explains that the installation of bridges segments are erected using a launching gantry that was design especially for this project.

The gantry weighs 560 tons and a length of 140 meters and is capable of carrying a segment bridge that weighs 85 tons and is filed over the bridge. Two gantries are working and the third will be installed as we go to press.

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Meanwhile, the cutting bridges are divided into four categories, with each one manufactured to be installed in the work area; these segments are formed from four types - each is erected according to the specific location, and their weight ranges between 58 to 85 tonnes, Boudastour adds.

He’s quick to point out that the complexity of the project was alleviated by the full preplanning undertaken by all the stakeholders.

This in turn has made their job much easier,

Jahra Road Utilises new pre-cast segmental viaducts

February 2014

though not without complications he says.

“Actually, before the tender, during the design stage, we got all the ministries and utilities together,” said Boudastour.

“The project was then designed on their given materials (information). But, even so, when you’re at the site, it’s different.

Sometimes the dimensions aren’t clear enough or something is different, so it can happen (that there are delays and changes).”

“But right now, we’re underway in all phases and we’re going to have a partial handover of the project if we reach the completion of Phase II by September 2014,” Boudastour promises.

“It’s going to be going on according to schedule, and we’ll open other phases in that time,” he insists. “This project will raise the state of infrastructure in Kuwait and it will be the first step towards modern roads in Kuwait.

“The government is expecting it to reduce traffic jams, especially as it’s located in a central part of Kuwait.”

The road is at a key intersection between a number of hospitals and Kuwait University and Kuwait Port.

“All parties involved in the project are excited to see the future of the project and see it achieve the goals that are planned.”

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Under the Patronage of His Royal Highness Prince Mansour bin Mutaib bin Abdulaziz Al Saud, Minister of Municipal and Rural Affairs.

THE LARGEST CONSTRUCTION EVENT IN SAUDI ARABIA

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9 – 12 March 2014 ‫ﻫ‬1435 ‫ ﺟﻤﺎدى ا ول‬11 - 8

Jeddah Centre for Forums & Events

Register for FREE entry at: www.thebig5saudi.com/ime1 Under the Patronage of:

Supporting Organisations:

Host Venue:

Diamond Sponsor:

Organised by:

Co-organised by:

DIARY

Also coming soon…

February

HAPPENING THIS MONTH…

MIDDLE EAST ELECTRICITY 11-13 February, Dubai Taking place from 11-13 February 2014 at the Dubai International Convention and Exhibition Centre, Middle East Electricity focuses on the power, lighting, renewable and nuclear sectors, featuring over 1,200 exhibitors from 100 countries.

The three-day event is strategically located in Dubai, a hub of regional economic activity, providing exhibitors the ideal platform to showcase their latest energy related products and services to more than 18,000 decision makers from around the world.

“One of the key drivers of the surging power demand in the MENA region is due to rapid population growth,” said Anita Mathews, Director of Informa Energy Group, organisers of Middle East Electricity. “Others include increasing urbanisation and lifestyle improvements that come with growing economic prosperity, further enhanced by the resurgent construction boom that has now returned to the region. The growth of regional power demand is also reflected in the increasing popularity of Middle East Electricity.”

Held under the patronage of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Deputy Ruler

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of Dubai, Middle East Electricity is co-located with Solar Middle East, the region’s most comprehensive gathering of solar technology suppliers.

The combined events feature two dedicated oneday industry conferences: the Green Energy Middle East conference on February 11 and the Solar Middle East Conference on February 12. Also returning in 2014 are the popular Middle East Electricity Awards on February 11, celebrating the outstanding achievements of individuals, departments, teams or organisation that have contributed to the growth and development of the region’s energy industry.

Middle East Electricity 2014 is supported by Abu Dhabi Water and Electricity Authority (ADWEA), Dubai Municipality, Emirates Green Building Council, Society of Engineers – UAE, Environmental Centre for Arab Towns, Clean Energy Business Council and Energy Institute Middle East.

Contact: Team Middle East Electricity Tel: +971 4 336 5161 E-mail: meelectricity@iirme.com www.middleeastelectricity.com

CONSTRUCTION MACHINERY SHOW 2014 16-20 February Dammam, KSA The largest heavy construction machinery event in the region, showcasing products ranging from heavy equipment to machinery, from lighting to generators.

The Construction Machinery Show 2014 will be held at Dhahran International Exhibitions Center.

Contact: Siobhan Jensen Event Manager Tel: +971 4 375 5685 E-mail: siobhan.jensen@ cpimediagroup.com www.constructionmachinery show.com

April WETEX 2014 14-16 April Dubai, UAE The 16th Water, Energy, Technology, and Environment Exhibition (WETEX) 2014 will take place at the Dubai International Convention and Exhibition Centre (DICEC).

Last year’s edition saw more than 1,360 exhibitors from 32 countries participating and showcasing their latest technologies and equipment Co-located with WETEX and now in its fourth year, SmarTech will feature the latest products, technologies, and solutions related to energy and water efficiency, as well as residential and commercial green building solutions.

Contact: WETEX 2014 Tel: +971 4 515 1460 Email: sales_general@wetex.ae www.wetex.ae

INFRASTRUCTURE MILESTONES

#001 Terminal 3 at DXB Terminal 3 at Dubai International Airport was one of the major infrastructure decisions in the last decade. And the benefits continue to be felt in the UAE ubai International Airport is the main transport hub for the Middle East and today ranks as the second busiest airport in the world with 145 airlines serving more than 260 destinations.

It is an infrastructure success story and the associated metro and road construction has fuelled the dramatic growth of Dubai, and the UAE. Terminal 2 had been open just over three years when Dubai’s Department of Civil Aviation (DCA) instigated phase two of DXB’s expansion programme. It was a bold and ambitious statement of intent for the country. In June 2002 DCA revealed the $2.5billion scheme to build Terminal 3 along with two new concourses for aircraft, a new VIP pavilion for the Dubai Royal ‘Wing’, a car park and a new giant terminal.

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Terminal 3 was designed by French architect Paul Andreu with vast arrivals and departures halls in the kilometre-long cylindrical building.

Excavation work was completed within a year and by mid-2004 construction was well underway for terminal 3 and concourses 2 and 3. It involved the moving of 10 million m2 of earth with 1,500 piles drilled and poured as deep as 50m.

Terminal 3 became operational on October 14, 2008, with the arrival of Emirates flight EK2926 from Jeddah, KSA. It linked to the new Dubai Metro with two stations at Terminals 1 and 3 and trains began running on September 9, 2009 (09.09.09, as pledged by the ruler).

In 2007 the airport had a capacity of 33 million passengers a year Terminal 3 took that to 60m a figure, which increased to 75m on completion of the A380-dedicated $3.2bn airside facility last year.

February 2014

Fast facts Construction started: 2004 Completed: 2008 Cost: $4.5bn Height: Concourse A, 40m Concourse B, 50m Technical details: Steel frame roof with glass facades Floor count: Concourse A, 11 floors Concourse B, 10 floors Floor area: 1,713,000 m2

DXB is the second busiest airport in the world, set to overtake London Heathrow within two years. Passenger traffic in November totalled 5,337,544, up 9.5% compared the previous year and the total for 2013 topped 65m.

Dubai International Airport is still being developed and Concourse D will bring capacity of the airport to over 90m passengers in 2016.

Just 50km is DXB’s biggest future competitor: Al Maktoum International at Dubai World Central (DWC). Cargo operations began in June 2010 and passenger service began on October 27, 2013 with three budget airlines.

Operator Dubai Airports says that although its Dubai International is set to become the busiest in the world by 2015, it won’t remain so: “DWC will eventually become the world’s largest airport with a capacity of 160 million passengers and 12 million tonnes of cargo per year.”

Merkur® German Technology Hybrid Power Container

Full power wherever you want Off grid - on grid mobile hybrid power production in one container: New high quality power station designed and produced in Germany.

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Middle East Electricity Lack of on-grid power supply is a reality and a menace in vast areas of our todays world.

In many developing countries, most importantly in Africa, Asia, Near- and Middle East huge areas do not have access to grid power or they are suffering from regular power outages. Predominantly for these countries and for projects which do not or temporarily not have access to grid power but need continuous power supply, MERKUR German Technology is marketing the Hybrid Power Container Made by Johannes Hübner GmbH in Germany.

Since 2010 Hybrid Power Containers containing complete mobile hybrid power generating systems are being designed in Giessen Germany. Applications are many: Mobile surgical hospitals, usage in areas hit by natural disaster to substitute demaged infrastructure, construction sites, camps, villages can be supplied reliably and independently by the Mobile Hybrid Power Container systems.

The core element of the container is 52 (kWh) kilowatt hour battery rated at 1200 (Ah) ampere hours having a rated life time of about 12 years. The battery is being charged by means of a 5 (kW) kilowatt rated wind turbine, a 7,8 (kW) kilowatt rated

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solar (PV) photovoltaic panel array and a 16 (kW) kilowatt diesel genset. The peak power of the Mobile Hybrid Power Container is 24 KVA. It is possible to couple up to four containers in one installation to reach maximum rated peak power at 96 KVA or almost 86 kW. The plant is a mobile containerized system. For transportation all components, including a 1000 l Diesel tank fit into the container which can easily be trucked to any other site for reerection of the system.

Presently the second generation of the Mobile Hybrid Power Container is under production. This version is permanently insulated and allows proper climatisation of the container by means of an air conditioning system. This feature makes the system fit for usage in hot and cold climates alike.

Level 41, Emirates Towers

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Several containers of the first version are being used by the German Federal Agency for Technicl Relief THW (Technisches Hilfswerk). Meanwhile the second generation is having a stable market and the first installation is underway for a camp of an international company out in the north african desert.

Presently planning and research and development is going on for the implementation of the third generation of the Mobile Hybrid Energy Container. It will be configured without a fossil fuel generator. Instead of the Diesel genset used up to date the third generation will feature a regenerative fuel cell. This system will represent an environmentally fully sustainable system without any need for fossil fuels.

P.O. Box: 31 303

Dubai - U.A.E.

S +971 - 43 13 28 92

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