Infrastructure Middle East January 2015 by Infrastructure ME

ISSUE 011 | JANUARY 2015

IN FoCUS

oIL & GAS

Smart strategy Making a success of smart city projects

Low expectations Energy investments in MENA to decline

p14

p36

ANALySIS

SPECIAL REPoRt

Shale against prices Can the US shale oil revolution continue?

5G future The next generation of mobile technology

p22

p44

EXCLUSIVE INtERVIEW

BANkABLE SoLAR

Under CTO Raffi Garabedian, First Solar firmly leverages its R&D to drive business growth

PLUS toP 10 oMAN INFRAStRUCtURE PRojECtS

INTRODUCTION

Nexus outlook 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 EDITOR ANOOP K MENON anoop.menon@cpimediagroup.com +971 4 375 5473 CONTRIBUTING EDITOR ASHISH SARAF ashish.saraf@cpimediagroup.com +971 4 375 5495 SUB EDITOR AELRED DOYLE ADVERTISING COMMERCIAL DIRECTOR JUDE SLANN jude.slann@cpimediagroup.com +971 4 433 2857 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 DESIGN ART DIRECTOR SIMON COBON JUNIOR DESIGNER PERCIVAL MANALAYSAY CIRCULATION AND PRODUCTION DATABASE AND CIRCULATION MANAGER RAJEESH M rajeesh.nair@cpimediagroup.com +971 4 440 9147 PRODUCTION MANAGER VIPIN V. VIJAY vipin.vijay@cpimediagroup.com +971 4 375 5713

conomic growth and human development cannot take place without energy and water security. But increasingly, water and energy cannot be approached independently of each other. It is not possible to address water security without considering the energy needed to withdraw, treat and transport it. In the same way, one cannot address energy security without considering the water needed to extract, generate and produce it. According to the International Energy Agency (IEA), energy production accounts for 15% of the world’s total water withdrawal, which comes to 580 billion cubic metres of freshwater every year. Producing freshwater also uses energy – in the GCC, seawater desalination accounts for 25% of the region’s overall energy consumption. Interdependency between water and energy is even more crucial in the GCC, which accounts for 30% of global oil production and over 50% of desalination capacity. In the past few years, the debate around this interdependence has veered round to adopting an integrated strategy to address water and energy security issues. In the UAE, for example, both federal and local authorities have pushed through tariff changes and regulations intended to curb wastage and encourage more responsible consumption of energy and water. In parallel, they are also taking steps to improve energy efficiency and develop alternative approaches, like wastewater reuse and rooftop solar, to reduce the stress on existing resources. In the long run, water-energy interdependency is best addressed by making conservation a way of life, investing in technologies that enable efficient use of energy and water and, most importantly, keeping costs affordable. On the energy front, renewables are expected to grow their share to account for nearly half of the global increase in power generation to 2040, but it remains to be seen how much of that growth will come from the GCC. An integrated strategy that relies entirely on fossil fuels for energy security will not work. But the proverbial elephant in the room is Saudi Arabia, which is sending a senior delegation to the World Future Energy Summit (WFES) in Abu Dhabi for the first time. How the world’s largest oil producer plans to transition into a clean energy leader could have a significant influence on the clean energy industry’s future, and its role in assuring energy security.

DIGITAL DIGITAL SERVICE MANAGER TRISTAN TROY MAAGMA Published by

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

Anoop K Menon Editor Infrastructure Middle East anoop.menon@cpimediagroup.com

© Copyright 2015 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.

January 2015

INFRASTRUCTURE MIDDLE EAST

At the 2014 Construction Machinery Show we sold 70 units and 100 more units are under discussion. We have delivered a positive message to our existing clients, our competitors, and grabbed new clients. I think gaining such an appreciation from all members in the construction equipment sector is a great honour and will encourage us to work very hard to keep the same level of style, image, and standards.”

This year the CM Show team delivered an exhibition Saudi deserves. For years, we have seen a vision in this Show and this year the vision was achieved. We wanted quality traffic and we saw equipment and company owners; and we were able to offer some promotions to entice sales. I saw an increase in our sales immediately. Our principles, Doosan and Everdigm, really enjoyed themselves. We anticipate the upcoming years to be even better.”

The Construction Machinery Show was perfect from an awareness point of view. We explained Roots Group Arabia’s capability of covering the construction industry with all of its needs and requirements. The attendance was good especially during weekdays and towards the end of the exhibition. See you next year.”

Al-Qahtani & Sons Khaled El Shatoury, Managing Director

Saudi Diesel Equipment Ahmed Alkooheji, Marketing Manager

Roots Group Arabia Abdulaziz Felemban, Brand Manager

Co-located with

Raz Islam Publishing Director raz.islam@cpimediagroup.com Mobile: +971 50 451 8213

Michael Stansfield Commercial Director michael.stansfield@cpimediagroup.com Mobile: +971 55 150 3849

CONTENTS

011 January 2015 32

COVER STORy

REGULARS

Bankable solar

06 Regional update

Under CTO Raffi Garabedian, First Solar firmly leverages its R&D strategy to drive business growth Report by Anoop K Menon

Oman extends railway bid deadline

TOP 10 FEATURE

Abu Dhabi focuses on non-oil industries; ALSO: BizBriefs

11 Global update OPEC revenues to decline by 46% in 2015; Schneider Electric completes Invensys integration

12 In focus

Oman infrastructure projects

Providing context; Learning to

Despite the decline in global oil prices, Oman isn’t planning to cut spending on infrastructure projects, especially on those seen as vital to economic diversification

redux; Efficiency paybacks

predict; Strategy for smart cities; Expansive growth; Smart grid

25 Infrastructure tenders 47 Events 48 Infrastructure milestones This month: Sheikh Rashid Tower

INDUSTRy SECTORS ANALySIS

CONSTRUCTION

22 Shale against prices

40 The high road

OIL & GAS

SPECIAL REPORT

36 Low expectations

44 5G future

APICORP’s latest five-year Arab Energy Investment Outlook predicts a dip in energy sector investments in the MENA region

New GSMA study explores technical requirements, use cases and implications for 5G ecosystem

OIL & GAS

EXECUTIVE INSIGHT

38 Innovation radar

46 Innovating to stay ahead

Global research from Lloyd’s Register Energy takes the pulse of technical innovation trends and challenges in the oil and gas sector. Report by Anoop K Menon

Mohamed Al-Mady, vice chairman and CEO, SABIC, presents his take on the strategic direction of the GCC chemical industry

Can the US shale oil revolution continue or are we set to see some unravelling as margins evaporate?

INFRASTRUCTURE MIDDLE EAST

January 2015

What challenges will the GCC encounter in constructing bridges for its rail projects?

regional UPDaTe

Tayer, MD & CEO of DEWA.

UAE Abu Dhabi’s Industrial Development Bureau (IDB) is pressing ahead with its efforts to promote non-oil industries, IDB director general Ayman Al Makkawy told the MEED Abu Dhabi Conference. “The Emirate of Abu Dhabi grew its non-oil industrial manufacturing sector by 9% last year, more than double the average GDP growth in Abu Dhabi and over three times more than global growth indices,” Al Makkawy said. Based on MEED projects, the value of planned and un-awarded projects in Abu Dhabi totals close to $100bn. The largest sector going forward is construction, followed by oil and gas and power. The Dubai Electricity and

Abu Dhabi skyline Construction is set to emerge as the largest sector in the emirate

Water Authority (DEWA) has completed a $67m water reservoir at Al Lusaily. With a storage capacity of 120m gallons of desalinated water, the reservoir is set to increase Dubai total water reserves to 790m gallons, compared to the current capacity of 670m gallons. DEWA has completed all civil construction works and 50% of the

mechanical works at the reservoir. “The project includes building two reservoirs with a storage capacity of 120m gallons of desalinated water. The first reservoir is expected to be completed in December 2014, at a capacity of 60m gallons, and the second in January 2015 at the same capacity,” said Saeed Mohammed Al

for deployment in urban areas outside the capital region, as part of a nationwide rollout expected to run through to 2030.

Oman Oman Rail has extended the deadline for the submission of commercial bids for Segment 1 of its national railway project to March 2015, the Oman Daily Observer reported. The deadline for submission of technical offers remains at January 18, 2015. According to the report, bidders seek more time to price their offers amid the ongoing economic turmoil in world markets unleashed by sliding international oil prices. Eight consortia and joint ventures have been prequalified by Oman Rail to compete for this segment, which covers a 207km stretch from Sohar Port to Buraimi. Segment 1 is being given priority, as it is Oman’s link to the pan-GCC rail network.

INFRASTRUCTURE MIDDLE EAST

The Gulf region’s first nuclear power project, in Abu Dhabi, is on schedule, with the first of its four reactors expected to meet the commissioning deadline of 2017. Emirates Nuclear Energy Corporation (ENEC) CEO Mohamed Al-Hammadi told MEED Abu Dhabi Conference attendees that construction work on the first unit was 61% complete. ENEC is planning for one reactor to come online every year from 2017, with the fourth and final reactor scheduled for commissioning in 2020. Work is already underway on the second reactor. Over 1,000 local companies are involved in the $20bn nuclear programme, which is designed to have total capacity of 5,600MW and will meet nearly 25% of the UAE’s electricity needs.

Rail extension Commercial bids for Phase 1 will be accepted till March 2015

Government-owned wastewater utility Haya Water has allocated $304m to setting up a fibre optic cable network aligned with its extensive water reuse network in the Muscat Governorate. Engineer Hussain AbdulHussain, CEO, Haya Water, said the initiative will support the broadband infrastructure development plans of Oman January 2014

Broadband Company (OBC), the state-owned entity tasked by the government with boosting high-speed internet penetration and affordable access across the sultanate. OBC, which was set up in April 2014 by the Council of Ministers, says it plans to build on Haya Water’s fibre optic network to cover 90% of Muscat by 2021. Fibre optics are also planned

Oman has raised the price of natural gas sold to industries located within various industrial estates. The Financial Affairs Council has decided to raise the sale price of natural gas to $3.01/ mBtu with effect from January 1, 2015. The previous price was $1.505/mBtu. In addition to the immediate doubling of the price, a 3% annual rise is to be introduced for industries. According to the Economist Intelligence Unit (EIU), the current price rises have been announced as the authorities grapple with setting the 2015 budget against a backdrop of rapidly falling oil prices. The hike is expected to impact energy-intensive industries.

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regional UPDaTe

with the current fall in oil prices,” he said, adding that Production from Lower Fars and the Ratqa field “will open the door for development of other heavy oil fields in Kuwait”. In OPEC, Kuwait is ranked third for output.

Kuwait A Fitch Ratings report has affirmed Kuwait’s longterm foreign and local currency Issuer Default Ratings (IDR) as AA. According to the report, very high per capita oil exports have consistently generated large fiscal and current account surpluses; in fact, Kuwait posted the second largest current account surplus of any Fitch-rated sovereign in 2013, at 39.7% of GDP, the third consecutive year that the surplus exceeded 30% of GDP. Fitch estimates that the FY14 fiscal breakeven oil price is $48/ barrel and the 2014 external breakeven is $40/barrel. These are among the lowest of all rated sovereigns. The non-oil economy is gaining momentum

High exports Fitch estimates Kuwait’s FY14 fiscal breakeven oil price at $48/barrel

under a more pro-government parliament, reflected in the award of projects in recent months and private sector credit growth at around a five-year high. Despite falling oil prices, Kuwait plans to spend about $7bn to develop heavy oil fields, said a Bloomberg report. The report quoted Hashem

Hashem, CEO of Kuwait Oil Company (KOC), as saying that the first phase of the Lower Fars heavy oil project will cost $4.2bn. KOC, which plans to drill 900 wells and pump 60,000bpd by 2018 in the project’s first phase, targets output of 180,000bpd by 2025 and 270,000bpd by 2030. “Developing heavy oil projects in Kuwait is economical even

Saudi government plans to open about 150 new hospitals over the next four years or so, at a rate of about 10 every three months.

Saudi Arabia Saudi Arabia is prepared to raise output if new customers emerge for its oil, its energy minister has said, in the latest indication that the world’s largest producer is not prepared to cut production. Ali Al Nuaimi told the Al Hayat newspaper that the kingdom would maintain its 9.7m barrels a day of output “unless a new client comes along, and then we may increase it”. Amid growing supply from the US, sustained output from OPEC and a slowdown in global demand, Naimi said it was unlikely the market would witness $100/barrel oil again. Earlier, Finance Minister Ibrahim Al-Assaf was quoted as saying that the country will continue its massive public

INFRASTRUCTURE MIDDLE EAST

Kuwait has extended the deadline for bids for a $1.2bn project to build the fifth gas pipeline to its Mina Al Ahmadi refinery to Jan 25, 2015. “The central tenders committee now expects the contract to be awarded in March or April 2015,” Arabic-language daily Al Rai said, adding that nine companies have been prequalified to bid for the contract: Técnicas Reunidas of Spain, Abu Dhabi-based Petrofac Emirates, Saipem of Italy, South Korea’s SK Group, Samsung Engineering, Daelim, GS, Hyundai Engineering and Hyundai Heavy Industries.

Oil minister Ali al-Naimi Saudi Arabia has ruled out any cut in its oil production

spending despite the near halving of the price of oil, which provides the bulk of its revenue. The appointment of a new health minister last month has raised doubts about the kingdom’s privatisation of healthcare sector. According to a report in The National, incoming health minister Mohammed Al Hayazaa January 2014

has made no public statements on the topic of privatisation. His predecessor, acting health minister Adel Fakieh, passed a ministerial decree permitting foreigners to own and run private healthcare centres and facilities in the kingdom, after receiving approvals from the Saudi Arabian General Investment Authority and the Ministry of Health. The

Saudi Arabia’s Minister of Water and Electricity, HE Abdullah bin Abdulrahman Al Hussein, will lead a delegation of senior energy ministers and officials from Saudi Aramco and the King Abdullah City for Atomic and Renewable Energy (KACARE) at WFES, January 19-22, in Abu Dhabi. Saudi Arabia’s participation in the region’s largest sustainable energy event comes as the country is accelerating the implementation of domestic renewable energy projects. Earlier this year, KACARE announced plans to build solar power plants in five regions across the country by the end of 2015, as it works to diversify the Kingdom’s domestic energy supplies.

REgIoNAL UPDATE

Qatar Nearly 35% of the QR 27bn New Port Project (NPP) has already been completed, a senior official has said. A report in the Gulf Times quoting the project’s executive director Nabeel Mohamed alBuenain said the first phase is on schedule for launch in 2016, with a capacity of 2m TEUs and 1.5m tonnes of general cargo. “The current priority is to complete the first phase, and we will assess the remaining phases as needed,” al-Buenain said. NPP is part of the Qatar National Vision 2030, and is crucial to the smooth import of containers and materials in the lead-up to the 2022 World Cup. Qatar’s key liquefied natural

2022 Logistics The new port under construction will ease world cup logistics

gas (LNG) sector is likely to see less volatility in 2015 than the oil sector, as most of the country’s LNG is sold on long-term contracts. Qatar, the world’s largest LNG producer, has an output capacity of 77mn tonnes annually, said Standard Chartered Bank in its country report, adding that it expects the country to

be among the best-insulated among the GCC countries from further declines in oil prices and potential output cuts. The outlook for oil markets is likely to affect Qatar’s hydrocarbon sector only moderately, largely through oil. This will see Qatar taking smaller cuts than some of the larger oil producers later in 2015.

Qatar’s Ministry of Labour and Social Affairs will ask private companies to cut the recruitment of foreign workers by 2% over the next three years, said the Peninsula. The idea is to help increase the percentage of nationals (in private jobs) during the period, the ministry was quoted as saying by Qatar News Agency (QNA). In a report for 2013-14 on its achievements and plans, issued before National Day, the Ministry said it would raise the rate of job nationalisation by 4% over three years. “We have already managed to enhance participation of Qatari youth in the economy and reduce their joblessness by 5%.” Between April 2013 and March 2014, the manpower department placed 3,672 Qataris in jobs. Of that, 1,994 were absorbed in non-government sectors.

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REGIONAL UPDATE

Biz Briefs Ducab Aluminium Company broke ground at its new aluminium rod and conductor facility at Kizad last month. With a total investment of $60m, the facility will be built on a 50,732sqm plot of land near Kizad anchor tenant Emirate’s Aluminium (EMAL). When complete, the new plant will manufacture electrical conductive (EC) grade aluminium alloy rods, wires and bare overhead conductors. The Ducab production plant in Kizad will be the company’s sixth in the UAE, alongside three facilities in Musaffah and two in Dubai. Natural and built asset design and consultancy firm ARCADIS has been awarded a contract to develop a water, wastewater, treated sewage effluent and asset management master plan for the region of Makkah. “The city of Makkah is a focal point of Muslim pilgrims, often swelling the population above its base of two million inhabitants to over six million during religious festivals, placing significant demands on basic services,” said Philip Bourne, Water Sector director – Middle East at ARCADIS. “The water service coverage in Makkah is low, around 65% of the populated area, and the wastewater service coverage is less. There is currently not sufficient capacity in the treatment plants to treat the additional flow and load.” ARCADIS will work closely with National Water Company (NWC) over a period of 18 months to execute the contract. Etihad Rail has entered into a strategic partnership with Stevin Rock, one of the world’s largest quarrying companies,

010

INFRASTRUCTURE MIDDLE EAST

Ground breaking in KIZAD Ducab Aluminium’s new plant will open in Q4 2015

to offer it logistics services. Under the terms of the partnership, Stevin Rock will use Etihad’s 1,200km UAE rail network to distribute bulk commodities from its three quarries in Kadra (Shawkah), Al Ghail and Khor Khuwair to Etihad Rail distribution terminals across the country. Stevin Rock, which has been operating in Ras Al Khaimah since 1975, produces and sells more than 46m tonnes of highgrade limestone, gabbro rock, concrete and asphalt aggregates for the construction industry.

(EIU) in conjunction with Falcon and Associates. The EIU predicts China will be the largest export market for the GCC by 2020. Between 2010 and 2013, GCC-China trade grew faster than with any other significant trade partner. Hongbin Cong, managing director of Invest Dubai, Falcon and Associates, said: “In 2013, China was Dubai’s second largest trading partner and is on course to overtake India after $21.9bn of trade was recorded in the first six months of this year.”

Developing countries in Asia – particularly China and India – are rapidly becoming the biggest trading partners of GCC countries, ahead of other regions, according to a new report released by the Economist Intelligence Unit

Drake & Scull Engineering (DSE), the engineering subsidiary of Drake & Scull International (DSI), recently won an $22.46m healthcare project in Abu Dhabi. The project win boosted DSI’s total project awards in 2014 to

Bulk MoU Etihad Rail has entered into a strategic partnership with Stevin Rock

January 2015

$1.5bn, and the total project backlog to an all-time high of $4.17bn across MENA, Europe and Asia. Ahmad Al Naser, managing director of DSE, said: “We are keen to play a vital role in the development of the regional healthcare industry by offering world-class engineering solutions.” The company has participated in iconic healthcare projects in the UAE such as Rashid Hospital, Latifa Hospital and the American Hospital expansion. GE Lighting has completed the installation of energyefficient LED street lighting in Al Ain Municipality. The new lighting solution, with greater longevity, is expected to enable a reduction in carbon dioxide emissions of 234,431kg per year and enhance road safety through reduced glare and improved light control. GE Lighting installed its ERS-2 557 94 W Lamps as part of the original design of the street lighting system in Al Ain, balancing the technical needs of a sophisticated LED system with the functional demands of an outdoor fixture that faces extreme weather conditions. Pumping systems major Grundfos Gulf Distribution recently inaugurated its new branch office for the Emirate of Abu Dhabi in Masdar City. The office was formally opened by HE Poul O G Hoiness, Danish Ambassador to the UAE, together with Grundfos’ Carlo Prola and Masdar City’s Christopher Sorensen. Henning Sandager, managing director, Grundfos Middle East & Turkey, said: “MASDAR is well-known for renewable energy and energy conservation projects in the Middle East. We [Grundfos] also work towards the same goal of energy-saving through our pumping systems.”

global UPDaTE

Round Up The US Energy Information Administration (EIA) has estimated that members of the Organisation of Petroleum Exporting Countries (OPEC), excluding Iran, will earn about $700bn in revenue from net oil exports in 2014. This represents a 14% decrease from 2013 earnings and the lowest earnings for the group since 2010. According to EIA’s analysis, OPEC earnings declined in 2014 largely for two reasons: decreases in the amount of OPEC oil exports and lower oil prices, with the 2014 average for Brent crude oil projected to be 8% below the average 2013 price. For similar reasons, revenues for OPEC (excluding Iran) in 2015 are expected to fall further, to $446bn, 46% below the 2013 level. The Board of Directors of ABB has unanimously nominated former Royal Dutch Shell CEO Peter Voser to succeed Hubertus von Grünberg as Chairman. “I am delighted that Peter Voser has accepted to stand for election as Chairman of ABB,” said outgoing Chairman Hubertus von Grünberg. “Peter Voser brings intimate knowledge of ABB and its key markets as well as an excellent track record as a leader in large, global organisations.” From 2009 to 2013, Voser served as the CEO of Royal Dutch Shell, one of the world’s largest energy companies. Between 2002 and October 2004, he was also the CFO of ABB, leading the successful turnaround and repositioning of the company for long-term profitable growth. Wärtsilä is all set to deliver its first liquefied natural gas

New ABB chairman Peter Voser had served as ABB’s CFO from 2002 to 2004

(LNG) project after getting full notice to proceed from Manga LNG for the supply of a LNG import terminal in Tornio, Northern Finland. The turnkey delivery of the import terminal supplied by Wärtsilä includes complete unloading, storing and regasification equipment for LNG. The terminal can also be used for LNG bunkering as well as to supply fuel for LNG-powered ships. “The world is switching to natural gas, and we make it available in new places. With our unique turnkey offering, we are ready take a leading role in end-to-end LNG systems,” says Tore Björkman, Vice President, LNG and Nuclear, Wärtsilä Power Plants. Schneider Electric has

completed the integration of Invensys, which was acquired by the former in January 2014. The merger allows the combined entity to provide expertise and knowledge in automation, software and energy management across the industrial and infrastructure target markets. Benoit Dubarle, Country President, UAE, Oman & Pakistan, Schneider Electric said: “Together, we are set to change the game for software as our combined portfolio provides a unified framework and a suite of function rich applications that deliver tangible value and optimised business processes across specific vertical solutions.” Schneider Electric has claimed with the integration of Invenys, customers will get seamless access to the world’s largest automation software suite.

Coal power China will determine the fate of the global coal market, says IEA

January 2014

Global demand for coal over the next five years will continue marching higher, breaking the 9bn-tonne level by 2019, the International Energy Agency (IEA) said in its annual Medium-Term Coal Market Report. The report notes that despite China’s efforts to moderate its coal consumption, it will still account for three-fifths of demand growth during the outlook period. Moreover, China will be joined by India, ASEAN countries and other countries in Asia as the main engines of growth in coal consumption, offsetting declines in Europe and the US. “New plants are being built, in an arc running from South Africa to Southeast Asia, but too many of these are based on decades-old technology,” said IEA Executive Director Maria van der Hoeven. “Regrettably, they will be burning coal inefficiently for many years to come.” Abengoa’s Ain Beni Mathar Hybrid Solar-Gas Plant in Morocco has been awarded the third prize for excellence by the African Development Bank. The award recognises excellence in projects that contribute to sustainable development in Africa. Ain Beni Mathar, inaugurated on May 12, 2010, is the first solar thermal plant in Africa. It is also the world´s first power plant in commercial operation using Integrated Solar Combine Cycle (ISCC) technology. The plant, which combines solar energy, natural gas and steam, has a capacity of 472MW. Abengoa was responsible for developing the plant, which generates 10% of the electricity consumed by Morocco. Since its opening and to date, Abengoa is responsible for the plant’s operation and maintenance.

INFRASTRUCTURE MIDDLE EAST 011

IN FOCUS

ASSET LIFECYCLE

Providing context Thanks to its APM software, Bentley customers can now walk an inspection prior to going to the asset n July last year, Bentley Systems launched an enhanced version of its asset performance management (APM) software. According to the company’s senior vice president, server products Alan Kiraly, getting into asset management was a natural progression of Bentley’s goal of straddling the asset lifecycle, from design and construction all the way to operation and decommissioning. APM was developed to help Bentley’s clients efficiently operate and maintain their infrastructure assets using information that was generated during its design and construction phases. Kiraly continued: “If you look at the information we have, it’s essentially about what the asset is designed to do and how it is supposed to perform. That data can be used in conjunction with real-time data about the asset’s current performance in order to operate it better. Thanks to the technologies we have acquired and merged over the years, we are able to help our users decide how to maintain and when to maintain their assets.” The asset performance solution works in conjunction with existing Enterprise Asset Management (EAM) or Computerised Maintenance Management System (CMMS) software that customers have installed. “In fact, our solution will not work unless you have these scheduling systems in place,” said Kiraly. “APM can help customers ensure that they are scheduling the right work.” APM can also help companies implement advanced maintenance-based methodologies like reliability-centred maintenance (RCM) and Risk-Based Inspections (RBI) for certain classes of assets. “We can plug into systems that are already out there collecting data, add the engineering element of looking at the condition, make predictions and send that information to existing EAM or CMMS to schedule the

INFRASTRUCTURE MIDDLE EAST

January 2015

“Users can get immersed in the 3D models we are going to overlay to understand the difference between the asset’s current performance versus how it is supposed to be” ALAN KIRALY, SENIoR vICE PRESIDENT, SERvER PRoDUCTS, BENTLEY SYSTEMS work,” explained Kiraly. “Combined with analysis, one can predict an issue based on engineering simulation or recommend new operating parameters. In that sense, APM helps increase the value of what’s already there.” The enhanced version, AssetWise APM V7.2, incorporates Bentley’s geospatial technologies that enable users to look at the conditions of their assets on a map. The new version connects asset health data to 3D models – developed by the client or generated through point clouds – to

present this information as a 3D dashboard, which is very effective way of looking at the data. Future developments in APM will focus mainly on the operations side. “For example, reliability engineers are always trying to get their assets operate at the highest efficiency. However, maximum efficiency was set by the people who put the asset together, and who may have decided, because of schedule and cost, to do something outside the original design. We see this data, so we can bring it forward to get reliability insight into the construction phase and get design information for performance parameters to be there as well.” The use of original simulations in operations will increasingly become common, noted Kiraly. He continued: “If we take the example of a refinery end-user, without using P&ID drawings, users can immerse in the 3D models we are going to overlay to understand the difference between the asset’s current performance versus how it is supposed to be.” He drew parallels with the augmented reality trend in the retail industry, where smart phone applications enable consumers to get information on dining or shopping outlets on a particular street, sometimes by merely pointing their phones at it. Kiraly said: “We can provide an equivalent experience at the plant level to show you what you should be seeing of that asset or its operating parameters by applying existing engineering data to our application. You can walk an inspection prior to going to the asset and make better decisions faster.” APM can also help address the growing demand from asset owners for guaranteed performance. “The EPC contractor would be able to start monitoring the assets as they go into place and pass ready-to-monitor over to the owners,” said Kiraly. “For example, with power plant projects, the generators may turn up a year before they are turned on but they have to be maintained during that period as well.”

www.wspgroup.com

IN FOCUS

HOLISTIC VIEW

Strategy for smart cities Schneider Electric is keen to bring its smart city learnings to the region n Schneider Electric’s value proposition for the smart city, the cloud has a central role, says Benoit Dubarle, Country President, UAE, Oman & Pakistan. Almost all smart city implementations propose capture of data from each and every hardware asset used to manage a city, in order to monitor and optimise the city’s functioning, from energy consumption to traffic management. However, it is faster and more cost effective to transition that data through the cloud instead of building a network between each and every data acquisition point. Schneider Electric, notes Dubarle, can supply the information technology (IT) and the operational technology (OT) needed to ensure successful implementations. “We can manage every aspect of the city with hardware, process the data captured by the hardware through data centres and the cloud, and integrate that on a global platform with the right software to monitor the city.” In fact, Schneider Electric has been elected as one of the three top companies worldwide in the smart cities business alongside Cisco and IBM. “Our systems, platform and hardware are fully open,” says Dubarle. “People know that even if they procure parts of the smart city from Schneider Electric, they will still be able to integrate our systems with those from other suppliers. To date, we have helped 250 cities to become smart.” The Schneider chief points out that from a strategy standpoint, it is important to have a holistic vision, in terms of data captured and integrated locally, and integrated as a second layer, so that it can be managed centrally at the city level. At the same time, execution needs to be done at specific domain levels, like traffic management or smart buildings. “We need to think top down but

INFRASTRUCTURE MIDDLE EAST

January 2015

execute bottoms up,” says Dubarle. “With a top down only approach, it will take a long time to see the results on the ground and reap the benefits.” He believes that an incremental approach works best, initially focussing on parts that bring immediate value to the city and comfort to its residents, with

“Dubai is pretty advanced on the smart city front because there is a strong drive on the part of the emirate’s leadership” BENOIT DUBARLE, COUNTRy PRESIDENT, UAE, OMAN & PAkISTAN, SCHNEIDER ELECTRIC

the savings then rolled into other parts. In the UAE, Schneider Electric is working with the Dubai Electricity and Water Authority (DEWA) on the smart grid, and with the Roads and Transport Authority (RTA) on traffic monitoring for a part of the city. “We are involved in several smart city projects in the UAE at advanced and concept demonstration levels,” says Dubarle. “Dubai is pretty advanced on the smart city front because there is a strong drive on the part of the emirate’s leadership.” For example, demand side management (DSM) is a significant element of a smart city strategy. In Dubai, DEWA has set up Etihad ESCO to promote energy management contracting for buildings. “Earlier, there was little concern about energy consumption in buildings. Building envelopes weren’t designed keeping energy efficiency in mind while systems like Building Management Systems (BMS) and HVAC controls remained underutilised. We are now working with Etihad ESCO to audit public buildings, identify system improvements and implement them with a certain Return on Investment (RoI) acceptable to the customer.” So what makes for a good smart city implementation? “Strong leadership from the top is fundamental to the success of any smart city project,” says Dubarle. “It is a big transformation, and in Dubai, HH Sheikh Mohammed is clearly leading from the front. In fact, government entities like DEWA and RTA have very strict deadlines to achieve their transformation. ” Having a holistic strategy towards smart city implementation is also important. Dubarle explains: “All departments will have their targets but they need to work with tangible initiatives. For example, smart grid is about improving the city’s power transmission and distribution system. At some point, all these initiatives will have to be integrated, and this will be difficult without a holistic strategy in place.”

IN FOCUS

ENERGY BUSINESS

Learning to predict According to Booz Allen Hamilton, an integrated, predictive approach is crucial to the resiliency of Middle East and North Africa (MENA) energy business he global transformation underway in the energy sector is being driven by key forces that could impact organisations’ ability for strong, longterm performance, says a new Booz Allen Hamilton study. These forces are creating demands that require increasingly greater attention from oil and gas and utility companies. True competitive advantage depends on an organisation’s ability to predict and identify these changes before, and as they occur, as well as finding the right balance to manage them efficiently and effectively. “Ensuring energy security and efficiency in the Middle East and North Africa (MENA) will continue to become more complex with surging demand, more difficult and costly resource exploitation, competitive and regulatory pressures and new risk,” says Dr Walid Fayad, executive vice president, Booz Allen, who leads the firm’s work in the MENA energy and environment market. To help energy companies in the MENA region thrive in 2015, Booz Allen has assembled a list of likely sector business trends for the year and beyond, many of them focused on the need to predict what’s coming. • The energy sector is the greatest target for cyber threats. The attack on Saudi Aramco was a wake-up call to the MENA energy industry. Energy companies must move beyond simply putting up electronic barriers to protect their IP, supply chain, operations and networks, and instead build the capability for proactive advanced threat detection across a now multi-dimensional threat surface. Coupled with this challenge is the weighty task of assessing the security of third-party vendors and protecting critical business assets from those who should not have access. Business continuity and crisis management plans must include cyber incident response plans because nations,

Understanding trends Energy companies should develop the ability to cope with and foresee changes

customers and the industry cannot risk a digital disruption that results in major physical, economic or reputational damage. • The regulatory balancing act is more difficult. Complex and changing global and local regulations, including environmental requirements, will continue to force energy companies to balance risk, cost and operational efficiencies to stay compliant. The industry must navigate an alphabet soup of regulations that demand investment in a unified compliance framework to implement a sustainable institutionalised compliance culture, especially when firms are operating in multiple geographies. • Planning increases in complexity. The market for NOCs and utilities in MENA is changing. NOCs are increasingly involved in unconventional oil and gas plays and expanding into downstream manufacturing and utility markets. Power utilities are facing growth in distributed energy resources and demand-side management projects that will have an impact on grid operations and revenues, and force new utility business

models. The energy sector will have to adopt more advanced decision-support techniques to assess the long-term social and business trade-offs of new initiatives, and their implications on other sectors of the economy. • Health, safety and environment (HSE) gets predictive. The focus on managing and minimising HSE incidents will shift from a pure training and process approach to one that integrates predictive and preventative models. When firms apply advanced analytics techniques to historical data, they can develop predictive models that identify potential incidents before they occur. • Capital investments will get predictive too. As capital investments become increasingly complex, shareholders and investors are paying closer attention to the risk pay-out. To prevent excessive risk-taking, cost overruns, regulations slowing the pace of progress or capital dilution, energy companies will need to employ advanced risk analytics to analyse and quantify capital spend to effectively plan for future needs, to predict potential issues and execute successfully. January 2015

INFRASTRUCTURE MIDDLE EAST

IN FOCUS

MENA PLANS

Expansive growth Louis Berger commits to a long haul in the Middle East by investing in offices and people owards the end of 2014, infrastructure consultancy Louis Berger opened two new offices in Doha and Dubai in quick succession, taking its total number of GCC offices to five, the other three being Abu Dhabi, Saudi Arabia and Kuwait. Tom Topolski, executive vice president and managing director – Middle East and North Africa (MENA), Louis Berger, attributes the on-the-ground investment to a genuine desire on management’s part to grow roots in the region and better service clients. He says: “As we start to sell different services like planning, economic feasibility studies, engineering, operations and maintenance, programme management and construction management, we wanted space to bring in our best people from global operations to serve this market, which is a real engine for the overall growth of the company.” The new Doha office, which opened in November 2014, will allow Louis Berger to manage the delivery of over $10bn in construction works with a headcount of approximately 340, including support and project employees. A regional network of offices, according to the Louis Berger executive, will also enable the company to move resources around the region while providing employees with career progression opportunities. The company currently has 1,000 people on its rolls in the MENA region. However, investment in the new offices comes at a time when weakening oil prices have put a question mark on the region’s ambitious infrastructure plans. Topolski, who has spent 18 years in the Middle East, is still confident that infrastructure will remain a bright spot as GCC governments build for their growing populations and pursue economic diversification into non-oil sectors. He continues: “There is always activity here because of population growth and

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January 2015

“We wanted space to bring in our best people from global operations to serve this market, which is a real engine for the overall growth of the company” ToM ToPoLSkI, ExECUTIvE vICE PRESIDENT AND MANAgINg DIRECToRMENA, LoUIS BERgER need for infrastructure. Apart from the GCC, we are also working on projects in Algeria, Morocco, Tunisia and Jordan.” DESIGN ELEMENT

Unlike many of its peers in the programme and construction management arena, Louis Berger also carries out design work. “We have always felt that to be able to manage design, you need to know how to do the design or perform the design,” says Topolski. “Today, we have 45 design engineers in our Dubai office, working on transportation projects.”

Though the company’s major reference cases in the region are in the transportation sector, efforts are clearly on to diversify into other areas. In the immediate term, the focus is on growing the transportation business – highways, bridges, railways, transit, ports and marine; water and wastewater and buildings. “Diversification is good, because focusing only on one area or service could be disastrous,” says Topolski. “Another sector on our radar is alternative energy, especially wind and solar. And not many people know that we have a temporary power business based out of Jebel Ali that can deliver 75-100MW in a week to ten days.” Another distinguishing feature of the company is its high-speed rail expertise, acquired via APIA XXI, a Spanish firm bought out in early 2013. Spain has the longest high-speed network in Europe, which puts the country at the forefront of this technology globally. Globally, Louis Berger employs 7,000 people, made up of engineers, economists, scientists, managers and planners. In all its markets, the company relies on a mix of in-house talent and local hires to get the job done. “Instead of coming in and raiding from the market and moving pieces around, we have a blend of people from the US, Europe and India and local hires,” explained Topolski. “On the one hand, we bring additional capacity into the market while on the other, clients appreciate the fact that we understand their expectations because we have people who have been here for a long time.” With the consulting industry going through a consolidation phase, Louis Berger remains one of the few partnership companies remaining in the industry. “I think it is important that you have a size which allows you to maintain a personal touch,” says Topolski. “Clients want consistency in terms of the people they are seeing and the confidence that these people can deliver. The fact that we are a partnership makes us all the more committed where delivery is concerned, because as a partner, it is my money on the line as well.”

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IN FOCUS

ROI CHECK

Smart grid redux Smart grid implementations haven’t fully overcome the challenge of viable business models ave smart grids become smarter? With innumerable pilots and implementations since 2000, when the concept went mainstream, have Returns on Investment (RoI) materialised as expected? According to Michel Augonnet, senior vice president – Commercial Solutions, Alstom Grid, while smart grid technologies have become better and smarter with time, viable business models have become a stumbling block. He elaborates: “The technology building blocks of the smart grid, I think, are basically available today. Software is able to manage information in real time to facilitate optimisation decisions. The only issue where technology is concerned is standardisation, as some customers don’t want to be locked into a single supplier. Hence the drive towards common standards for exchange of information, which is a work in progress.” Augonnet admits that the jury is still out when it comes to who pays for smart grid implementations, because more often than not, the people who get the benefit aren’t the people making the investment. “In my opinion, the business model, which often requires significant political will, is really what is preventing real development of smart grid,” he notes. “If you want to have a smart grid, you have to basically optimise at the level of the cities in terms of how buildings are managed, how infrastructure is managed. A single utility in charge of electricity and water, with the authority and the ability to invest in smart grid schemes, is best placed to reap the benefits. In cities where there is segmentation of utilities and authority, large scale deployment can be very difficult.” He points out that the main issue hindering smart grid is not technology but regulation and what goes with it – the business model. “The business model aspect - who is going to pay, who is going to get the return, who gets access to the information falls – gets buried under endless arguments and legal challenges.

“The business model aspect – who is going to pay, who is going to get the return, who gets access to the information falls – gets buried under endless arguments and legal challenges.”

INFRASTRUCTURE MIDDLE EAST

January 2015

MICHEL AUgONNET, SENIOR VICE PRESIDENT - COMMERCIAL SOLUTIONS, ALSTOM gRID At the same time, when it comes to applications like network efficiency or stability or security, business model is not the sole driver.” managing renewables

In Europe smart grid technologies have helped integrate renewable energy into the grid, and the same lessons are applicable here. Referring to the rapid growth of rooftop solar in the EU, Augonnet points out that some countries are witnessing situations where at some point in the day or parts of the year, way too much solar power is generated but there is nobody to consume it. “Like water pressure in a pipe, the voltage just wants to go up. You have to either consume it or take the house off the grid. But how can you switch a house off because it is solar power going to network. With renewable energy management becoming crucial to the safety of in nUmbers

$60.8bn Size of the smart grid market in 2020

the network, smart grid action is now moving down to the distribution level. There is a lot of focus on developing control schemes that can manage flow of electricity from the house to the high voltage network, and on models that can predict the loads by analysing the patterns of the consumers and the sun.” Augonnet claims that the biggest impact of smart grid is seen in demand response programmes. PJM Interconnection, North America’s largest wholesale energy market, has been able to save 10,000MW of new generation capacity equivalent by using Alstom Grid’s systems to manage its demand response programmes and resources. “The most spectacular savings from demand response programmes come from not having to invest in new power generation resources,” says Augonnet. “In Denmark, our system manages a network which has 100% power coming from wind, helping shed excess power and even forecasting the way the wind is going to blow. We have systems in the US that monitor the way power lines are sagging and the wind speed in order to optimise and use the lines closer to their limit. These are examples of applications where the RoI comes quickly.”

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IN FOCUS

MOTOR MODE

Efficiency paybacks WEG Middle East wants to be a key part of the region’s energy efficiency programmes he facts are compelling – of all electrical energy used globally, 40% is associated with electrical motors. While industry accounts for 30% of global electricity consumption, within industry, electrical motors account for 65% of the consumption. “As a manufacturer, we would like to be involved in driving the efficiency standard in the Middle East,” says Colin Cox, managing director, WEG Middle East. “Lack of legislation and minimum acceptance standards means a lot of products of questionable quality find their way into the market. We are interested in being a party to any discussion on development of efficiency standards.” In the past 12 months, WEG has been involved in helping set Minimum Energy Performance Standards (MEPS) in Saudi Arabia. Cox believes the Saudi market will be a key driver in the regional energy efficiency programme, where WEWG hopes to play a key role. “The UAE and Saudi are at IE2 level, and the trend towards energy efficiency will move ahead for sure,” he says. WEG manufactures all types of motors, from washing machine motors single phase, to pool pump motors, to multi-megawatt gas compressor pump motors. The company also manufacturers variable speed drives (VSDs) that complement its motors. “Power levels that manufacturers like WEG are able to reach with VSDs are increasing,” says Cox. “As we focus more on efficiency, VSDs will become the standard rather than the exception.” WEG Middle East was established in 2008 with Cox in charge to focus the company’s activity and grow its business in the region. Currently, the company has a staff of 21 which includes contract management, finance, administration, applications, sales engineers and service engineers. “We are growing at 22% year-on-year,” claims Cox. “In 2013 our turnover was

INFRASTRUCTURE MIDDLE EAST

January 2015

“The UAE and Saudi are at IE2 level, and the trend towards energy efficiency will move ahead for sure” COLIN COx, MANAgINg DIRECTOR, WEg MIDDLE EAST $27m, whereas in 2008, when we started out, it was only $1.5m, so you can see the growth potential in the region is huge.” He sees the next level of growth coming from service and solutions. “We have a lot of end-user clients, and given the arduous environments they operate in and the fact they use the products on a daily basis, means they will need support in maintaining the product. It is our IN NUMBERS

2.5%

Gross turnover percentage which is invested in R&D annually

intention as part of our ongoing investment for the region to basically have our own service infrastructure at some point in the near future.” He also sees solution selling, as opposed to product pushing, as a major growth driver for the region. “We are selling engineering expertise and complete packages to the client. A major benefit from selling solutions is the ability to retrofit.” Solution selling is also expected to help WEG Middle East capitalise on the synergies between WEG’s business units: LV motors, large machines, drives and automation, transformers and distribution products. “A solution selling approach, in my opinion, is key to continuous growth,” says Cox. “If a customer has a requirement to replace a motor or starter or change to VSD, we can do the complete solution including the installation. We have a family of products and services which is a completely integrated solution from a single supplier.” In terms of key markets, WEG Middle East focuses on water, HVAC/district cooling, cement, oil and gas, and petrochemicals. While IEC and NEMA are the two major standards covering electric motors, Cox sees the gradual ascendance of IEC, especially with regard to energy efficiency standards. With manufacturing facilities in the Americas, Europe, China and India, WEG is well placed to cater to demand for products adhering to the two standards. He continues: “As IE2 is mandatory in Europe, our products in-stock in the region comply with the standard. We are trying to move people towards thinking about energy conservation when they are buying new products. The challenge is to change the mentality of the end user from capital cost to focusing on lifetime cost. But until the time power is sold at a realistic cost per kWh, I don’t see end users becoming serious about energy efficiency.” As a company, which is vertically integrated and globalised but at the same time local, WEG has the expertise and products to support all industry segments – we want to be at the forefront of energy efficiency in the region.”

IN FOCUS

CLEAN SHIPPING

Alternatives to acid Eflochem has created a new line of acid replacement products for the marine sector ecent environment regulations have called for the replacement of acids like hydrochloric and sulphuric acids in cleaning marine vehicles and their sections. To address this demand, Eflochem, part of the Concorde – Corodex Group (CCG), has created EC-Eco Acids, a new line of products with acid replacement technology. EC-Eco Acids products, such as EC-Acid, EC-Rust, EC-Sewage and ECMetals take the place of hazardous chemicals. “Products based on hydrochloric acid, phosphoric acid or nitric acid aren’t biodegradable,” says Jason Georgiou, Marine and Export Division manager, Corodex. “Of course, you can still use them and they are very effective, but you cannot dump them. You have to neutralise them or use other methods.” In many countries, regulations regarding the use of acids for cleaning marine equipment are becoming stricter. In the US, for example, replacement of acids with environmentfriendly products is already underway. In Europe it is mandatory in many countries, while in the Far East it is becoming more and more so, with Singapore leading the way. “At Eflochem, we are dedicated on working towards new technology to replace all hazardous chemicals still in use today,” says Georgiou. “Our new acid replacement technology is 100% biodegradable and equally effective. You don’t need to take any safety precautions other than protecting your eyes. You can easily transport them because they aren’t classified as dangerous or hazardous. Being a triple zero product, you can even move the product by air.” The company hopes to substitute and replace all the solvent products or hazardous products bought by its customers with the new line of eco-friendly acid replacement chemicals. “Sometimes, clients feel it is more effective to use a solvent product than a water-based product, as they feel they have to use more of the latter. But if you really care for the environment, you have

something that is already in the market,” explains Georgiou, pointing out that large companies like Vela do care about the environment, while smaller companies are driven by regulation and price. Eflochem supplies its marine sector products to nearly 46 countries and claims a 10% global market share. “In the end, decision-making is guided by a combination of what is good for the environment and what is good for the company, because you have to make money,” notes Georgiou. “Today, we sell both lines of products, so if a client wants hydrochloric acid, we can offer them that. But we also inform them that it won’t be around for long and we already have a replacement.”

“At Eflochem we are dedicated on working towards new technology to replace all hazardous chemicals still in use today” JASoN GEoRGIoU, MARINE AND ExPoRT DIvISIoN MANAGER, CoRoDEx

Marine sector demand is expected to pick up in the Gulf, with nearly all member countries investing in marine infrastructure, including ports, dry docks and storage infrastructure. For example, Oman and the UAE are investing in ports infrastructure. Last year, Eflochem launched its acid replacement products at the Seatrade Middle East Maritime (SMEM) summit and exhibition in Dubai. Eflochem also released its new Prime Lab Photometer, a water treatment testing solution that tests and analyses boiler water, cooling water, sewage and potable water on vessels. It also alerts users of any changes needed, such as chemicals that need to be added to the system, and simultaneously reports to headquarters, saving time and money. “Our new testing technologies can save time involved in testing water or on board vessels,” says Georgiou. He is confident that it is only a matter of time before demand for his company’s new acid replacement products picks up, starting with the UAE. “It’s important to note that these products are equally effective in cleaning as the old technology, and have now become available at a more reasonable price.”

January 2015

INFRASTRUCTURE MIDDLE EAST

AnAlysis

OIL & GAS

Shale against prices Can the US shale oil revolution continue or are we set to see some unravelling as margins evaporate? By John Kingston This time, it’s different.” That’s an old phrase, one that can be dragged out in all sorts of situations. It’s also wrong... a lot. So the question, as 2014 comes to a close, is whether the recent precipitous decline in the price of oil and oil products is just short-term, soon to be reversed as the world bounces back to a more solid $100/b future, or whether this is the end of a commodity super cycle that – with a few up and down aberrations – lifted the price of oil from an inflation adjusted all-time low in early 1999 to that $100-plus level in the first half of this year, with an even bigger spike a few years ago. It was at a meeting of the US chapter of the International Association for Energy Economics in 1999, a few months after oil had started to climb, that I first heard the declarations: we are at the start of a “super cycle” in oil markets, and maybe broader commodity markets, and it may run for 15 years. Do the maths: the 15 years is up.

“

Break points

So let’s assume that cycle is over. If so, it’s been a wild ride. In early 1999, the price of oil hit its lowest inflation-adjusted level ever and the Economist published a cover story in March that proclaimed the world was “Drowning in Oil”. Little did the magazine know the bottom had already been reached a month earlier. It climbed steadily to its all-time high in July 2008, and plummeted on the back of the Great Recession. But by February 2009 the

INFRASTRUCTURE MIDDLE EAST

January 2015

rise had resumed, peaking earlier this year. Precisely when the cycle ended – if it did – is not necessarily easy to determine. In a speech given at Platts’ Benposium conference in June, Peter Tertzakian of Arc Financial walked through his view of the way these cycles work. What are key are “break points”, which he said come about only once every few generations. Tertzakian saw a break point in that July 2008 peak, because it accelerated a trend toward lower demand. That’s not enough to reverse all the trends contributing to the busting of a 15-year cycle. There are other break points needed – or more specifically, what Tertzakian called “magic bullets” – and the biggest one is obvious: the boom in unconventional drilling. But it isn’t enough to simply declare that it’s all related to soaring US and Canadian production, and that’s that. The type of trends that Tertzakian talks about – “the industry does not roll over, it innovates,” he said at Benposium – can be seen in the Baker Hughes rig count. According to Baker Hughes’ worldwide rig count, rigs operating in the US in October 2011 stood at a little over 2,000. Three years later, it was a bit more than 1,900, and production of natural gas and all petroleum liquids – crude, LPG and condensate – had surged. The break point was not just the unconventional drilling methods, but the endless innovation that the industry kept bringing to the sector, getting more production out of a smaller number of rigs. It wasn’t easy. As Tertzakian noted, “It took a five-fold increase in the price of oil to make this change.” Actually, when we look back on the 1999-2014 oil super cycle, we see a much bigger

rise than that. Platts’ Dated Brent assessment bottomed out at $9.62-$9.66 on February 9, 1999. When it hit its 2008 peak on July 3, 2008, it stood at $144.21-$144.23, and had risen by a factor of almost 15. Even if you throw out the craziness leading up to the July 2008 peak and its subsequent breathtaking fall, and instead look at a more sustained rise, Brent peaked in May 2014 at about $115, around 12 times the 1999 low. new super cycle

Ed Morse and his team at Citi have talked often about the end of the commodity super cycle, declaring it over in 2013. The scenario its analysts lay out as to the causes of these types of swings is similar to those expressed by Tertzakian. The price of a commodity (or multiple commodities) rises as demand increases due to economic growth; the growth in demand outstrips the world’s ability to supply the commodity, and the price increases; demand is slowed by the higher prices while capital flows into expanding the supply of the commodity; and eventually, supply and demand are brought back into equilibrium, or maybe a new disequilibrium, with supply now exceeding demand. Prices plummet, investment dries up, demand is spurred by those new lower prices and the ground is set for a new super cycle. When does the current low price cycle end, then? Tertzakian is holding to his 15year time frame. And even though prices did rebound strongly after their financial crisisinspired collapse, he still sees the current weaker cycle as starting in 2008. So that puts the end of the current cycle at 2023. That view isn’t unanimous. Earlier this year, a

AnAlysis

much talked-about story in Bloomberg Markets about Phibro chief Andy Hall noted that his fund within Phibro, Astenbeck Capital Management, had bet heavily on an eventual increase in prices, with significant positions taken as far out on the curve as 2019 (and at levels believed to be higher than the $80 prevailing in early November for 2019 prices). Going long that far out in a market others are speaking of as being in the early days of a 15-year down cycle is a gutsy call. But the group’s belief appears to be that the payoff will come down the road... way down the road. Astenbeck / Hall’s views on the sustainability of the shale boom that has led to current imbalances is shared by others. Steve Kopits, who runs his own advisory firm, Princeton Energy Advisors, has spent extensive time studying the cost of oil services and the ability of companies drilling for oil to handle those rising levels. His conclusion? They can’t. “Unless capital efficiency improves dramatically, conventional non-OPEC oil production is likely to take a substantial hit, on the order of 1m b/d (in 2014),” he wrote in a piece for Platts’ blog, The Barrel. “Nor will the unwind end in 2014.” Kopits has identified the factors in a priceconstrained squeeze to work something like this: the world’s economy can’t sustain a Brent price significantly above $110/b, but capital expenditure costs have been rising at about 10% per year, a figure he gets from what he calls Barclays’ “indispensable” E&P surveys. Inevitably, there’s a squeeze on production. But some recent comments in a UBS research report on Halliburton show that the question of high costs vs. slower drilling can’t be answered nicely and neatly. In the report, analyst Angie Sedita said Halliburton had been trying to get through price increases for fracking jobs in the US despite the slide in commodity prices, and “no customer has pushed back” on the increases “nor come back for any relief”. “Halliburton remarked that the customers are well aware that the frack price increases are for rapidly increasing logistical costs,” she wrote. Not only that, but UBS said Halliburton had

“built into its recent round of price increases the recovery of two more quarters of cost escalations”. And yet despite this weak upstream landscape, Halliburton executives had told UBS that if WTI oil prices stayed near their current level of about $80/barrel, the reaction in cutbacks wouldn’t be immediate. “They would begin to cut back activity in the [second half of 2015].” So if this overview is correct, which side is right? The Ed Morse / Citi / Tertzakian argument is that technological improvements are proceeding at such a pace that even with higher oil services costs, and with relatively weak commodity prices, drilling will continue for now and supply will continue to rise. (Citi’s view is that a lower price will only cut the rate of growth in US production, but total output will increase.) The Kopits / Hall outlook would probably say that a rising level of production cannot, for any sustained period of time, coincide with lower commodity prices and rising oil service costs. Put all that together and an end to the surge in US output is inevitable. touGH tiMe

The idea that both schools could be right – we’re headed for a nasty price decline, followed by a shakeout that tightens world supplies – can be seen in a statement by energy economist Philip Verleger in his September monthly report. The much-discussed price war of recent months, symbolised best by Saudi moves to not cut supplies and concurrently cut its own prices relative to international benchmarks,

the break point was not just the unconventional drilling methods, but the endless innovation that the industry kept bringing to the sector, getting more production out of a smaller number of rigs

could lead to a bevy of consequences that tighten supplies in the long run, Verleger wrote. “Shale field developers in the United States may reduce capital expenditures... developers of high-cost oil sands projects in Canada might cut expansion and slow operations... oil production in Venezuela might collapse as the country’s economic problems spread to the oil industry.” And so on. Those sorts of actions might very well lead to a successful bet by going long down the price curve into 2019. But it could be a tough time for investors in the meantime. One thing that the Kopits / Hall school of thought often points to is cash flow. As the US Energy Information Administration (EIA) pointed out in a study released last summer, for the year ending March 31: “Cash from operations for 127 major oil and natural gas companies totalled $568bn, and major uses of cash totalled $677bn.” The gap was filled with borrowing and asset sales. A net increase in borrowing, in particular, “has made up at least 20% of cash since 2012”. Those sorts of numbers from a presumably neutral observer like the EIA echo more passionate statements like those of Arthur Berman, a long-time shale sceptic. In an interview earlier this year with the website ZeroHedge, Berman laid out his arguments. “Investors are starting to ask questions, such as where are the earnings and the free cash flow? Shale companies are spending a lot more than they are earning, and that has not changed. They are claiming all sorts of efficiency gains on the drilling side that has distracted inquiring investors for a while. I was looking through some investor presentations from 2007 and 2008 and the same companies were making the same efficiency claims then as they are now. The problem is that these impressive gains never show up in the balance sheets.” This is a battle that will play out over several years; maybe 15. But simply looking into next year, (2015) the numbers clearly favour the short-term bearish perspective of Citi. (The author is global director of news, Platts Energy)

January 2015

INFRASTRUCTURE MIDDLE EAST

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BUDgET: $800,000,000

Territory: GCC Client Name: GCC Secretariat Description: Construction of 2,170km-long railway transportation system to connect the Gulf Cooperation Council (GCC) countries Period: 2018 Status: New Tender

Territory: UAE Client Name: Chemaweyaat) Description: EPC contract for a petrochemicals complex comprising olefin, aromatics and fertiliser production facilities. Period: 2020 Status: New Tender

Territory: Kuwait Client Name: KNPC Description: EPC contract for a new gas train with capacity to process 805m cu.ft /day of gas and 106,000 barrels/day of condensates. Period: 2018 Status: New Tender

Territory: Qatar Client Name: QEWC Description: Construction of a power and desalination plant with a capacity of 2,400MW of power and 130MIGD of desalinated water. Period: 2015 Status: New Tender

January 2015

INFRASTRUCTURE MIDDLE EAST

MIDDLE EAST INFRASTRUCTURE TENDERS

Top Tenders UAE DUBAI TRADE CENTRE jEBEL ALI PRojECT Project Number: MPP906-U Client Name: Dubai World Trade Centre Address: Shaikh Zayed Road, Dubai Phone: (+971-4) 332 1000 Fax: (+971-4) 331 8299 Website: www.dwtc.com Description: The project involves the development of Dubai Trade Centre Jebel Ali, which includes Expo 2020 site. The 4.4 sq km site comprises a 1.68 sq km ticketed area, 700,000sqm of pavilions, large arenas for cultural events and 500,000sqm of permanent structures, including apartments, malls, hotels and warehousing for Expo 2020. A team of Mace International and CH2M Hill International has been appointed as programme managers for the project. The role also involves coordinating with other developments in the Jebel Ali area as well as other projects in Dubai associated with the Expo. Status: New Tender Tender Categories: Construction & Contracting

CARBoN DIoxIDE RECovERy & ACID gAS ENRICHMENT PLANT PRojECT Project Number: MPP2956-U Client Name: Abu Dhabi Gas Industries (GASCO) Address: Tower H, Corniche, Near Al Ain Palace Hotel, Abu Dhabi Phone: (+971-2) 603 0000 Fax: (+971-2) 603 7414 Website: www.gasco.ae Description: EPC contract to build a carbon dioxide (CO2) recovery and

INFRASTRUCTURE MIDDLE EAST

acid gas enrichment plant. Tebodin has been awarded the contract to study the various technologies for this project. The study will prepare the potential project for the Front End Engineering & Design (FEED) phase. The contract will take six months to complete. Status: New Tender Tender Categories: Industrial & Special Projects

BAB INTEgRATED FACILITIES PRojECT Project Number: MPP2693-U Client Name: Abu Dhabi Company for Onshore Oil Operations (ADCO) Address: Corniche Road, Abu Dhabi Phone: (+971-2) 604 0000 Fax: (+971-2) 666 5523 Website: www.adco.ae Description: The project involves an EPC contract for the development of integrated facilities in the Thamama production zone of the Bab oil field. Petrofac completed the FEED contract for the project, which aims to produce 450m barrels/day, in August 2014. The client has invited bids for the EPC contract by the first quarter of 2015. Status: New Tender Tender Categories: Gas processing & Distribution

KUWAIT LNg IMPoRT & RE-gASIFICATIoN TERMINAL PRojECT - AL ZoUR Project Number: MPP2890-K Client Name: Kuwait National Petroleum Company (KNPC) Address: Imad Commercial Centre, Safat Phone: (+965) 2244 7477

January 2015

Fax: (+965) 2244 7492 Website: www.knpc.com.kw Description: The project involves an EPC contract to build an onshore Liquefied Natural Gas (LNG) import and re-gasification terminal. Foster Wheeler has completed the pre-FEED and FEED studies for the project. The new terminal will have a design send-out capacity of approximately 1,500MMscf/d of gas, with four full-containment LNG storage tanks, each of 180,000m3. The design will also allow for future expansion(s) up to 3,000 MMscf/d and the installation of a further four LNG storage tanks of the same capacity as the initial four tanks. KNPC plans to start commercial operation of the terminal in 2020. The client has invited companies to prequalify for the EPC contract. Status: New Tender Tender Categories: Gas processing & Distribution

CENTRAL gAS UTILISATIoN PRojECT - wAFRA oIL FIELD Project Number: MPP2951-K Client Name: Kuwait Gulf Oil Company (KGOC) Address: Al-Khobar Office, Al Ahmadi 61008 Phone: (+965) 3864 5104 Fax: (+965) 3898 5436

Website: www.kgoc.com Description: The project involves an EPC contract to build central gas utilisation facilities with a capacity to produce 1bn cu.ft/day of natural gas and 720 tonnes of sulphur. The objective of this scheme is to gather gas from the oil fields and eliminate routine flaring. The FEED contract was awarded to WorleyParsons. However, FEED work is yet to be completed though the initial deadline was May 2014. Period: 2015 Status: New Tender Tender Categories: Gas Processing & Distribution

DoHA Ro DESALINATIoN PLANT PRojECT - PHASE 1 Project Number: MPP2668-K Client Name: Ministry of Electricity & Water Address: South Al Surra Street, Ministries Area, Safat 13001 Phone: (+965) 2537 1000 Fax: (+965) 2537 1420 Website: www.mew.gov.kw Description: The project involves an EPC contract to build a reverse osmosis (RO) desalination plant with capacity of 50 MIGD in Doha. The client has prequalified nine consortiums to bid for the project, with

MIDDLE EAST INFRASTRUCTURE TENDERS

passenger journey times to around three hours. Recently, OptaSense, a QinetiQ company, was awarded a five-year, $12m contract, split evenly with its partner TAQQAT Global Co – Abdulla Fouad Group, to provide security monitoring for the existing railway lines between the two cities. Status: New Tender Tender categories: Public transportation

BAhrAIn Spanish companies leading the pack. MEW is yet to release EPC contract documents, which were expected to be released by the end of last month. Period: 2016 Status: New Tender Tender Categories: Water works

pass.with hollow fibre RO elements in the first pass and spiral- wound elements in the second pass. Period: 2017 Status: New Tender Tender Categories: Water works

DAMMAM - RIyADH RAILwAy LINE PRojECT

KSA jEDDAH SwRo DESALINATIoN PLANT PRojECT Project Number: ZPR1350-SA Client Name: Saline Water Conversion Corporation (SWCC) Address: Riyadh 11691 Phone: (+966-1) 463 1111 Fax: (+966-1) 464 3235 Website: www.swcc.gov.sa Description: The project involves an EPC contract to build a Seawater Reverse Osmosis (SWRO) desalination plant with capacity of 400,000m3/ day. Black & Veatch has been awarded the contract to provide engineering design and consultancy services for the project. Tendering and bidding process for the main construction contract is expected to take place in January 2015. The targeted energy consumption for the projects will be 4.2-4.8 kWh/m³ and they will employ a two-pass design with hollow fibre RO elements in the first pass and spiral-wound elements in the second

Project Number: MPP2939-SA Client Name: Saudi Railways Company (SRC) Address: Bldg. S-24, Diplomatic Quarter, Riyadh 11452 Phone: (+966-1) 250 1111 Fax: (+966-1) 480 7517 Website: www.sar.com.sa Description: The project involves the construction of a high-speed railway line spanning 1,000km between Dammam and Riyadh through Hofuf. Spain’s Consultrans is carrying out the feasability study. The 10-month study will consider routes, technical requirements, costs, demand forecasts and potential revenue for a line suitable for electric trains running at 300-350km/h. The government is seeking to cut the rail travel time between Riyadh and Dammam to under three hours from 4.5 hours, by raising the average speed of trains from the current 180km/hour. The high-speed study will not affect ongoing works to upgrade the two existing lines between Riyadh and Dammam to increase freight capacity and cut

KINg HAMAD CAUSEwAy PRojECT Project Number: MPP2596-B Client Name: Ministry of Transportation Address: Manama 10325 Phone: (+973) 1732 1105 Fax: (+973) 1753 0243 Website: www.mot.gov.bh Description: The project involves a Build-Operate-Transfer (BOT) contract for the construction of second causeway between Saudi

January 2015

Arabia and Bahrain. The new causeway, which will be 25km long, will run in parallel with the existing King Fahd Causeway. A feasability study on the scheme is expected to be completed in early 2015, which will include projections for the cost and date of completion. The $5bn project will also accomodate railway lines, as part of the GCC Railway network, connecting Bahrain to the rest of the GCC. As per initial estimates, King Hamad Causeway will take about four years to complete. The final designs for the causeway and the railway lines have not yet been finalised. Status: New Tender Tender Categories: Public Transportation

ProdUcEd In ASSocIATIon WITh MIddlE EAST TEndErS

INFRASTRUCTURE MIDDLE EAST

TEN OMAN iNfrAsTrucTurE PrOJEcTs

oman infrastructurE PRoJECTS Despite the decline in global oil prices, Oman isnâ&#x20AC;&#x2122;t planning to cut spending on infrastructure projects, especially on those seen as vital to economic diversification

INFRASTRUCTURE MIDDLE EAST

January 2015

KhAzzAN & MAKAREM GAS FIELDS DEvELopMENT

Owner: Ministry of Oil & Gas Budget: $16bn Progress: EPC contracts BP is developing tight gas reservoirs in Block 61 and the Khazzan and Makarem gas fields that cover an area of some 2,800 sq km. The Khazzan Project has the potential to deliver up to 30% of Omanâ&#x20AC;&#x2122;s gas supply in 2020. The formal agreement between Oman and BP for the development of the project was ratified in February 2014. BP plans to drill around 300 wells over 15 years to deliver plateau production of 28.3Mcm/d of gas and 25,000bpd of gas condensate. So far, the company has awarded $4bn worth of contracts, including a $1.2bn engineering, procurement and construction (EPC) contract for building the central processing facility (CPF), and two longterm drilling contracts totalling $730m.

TEN OMAN iNfrAsTrucTurE PrOJEcTs

oMAN NATIoNAL RAILwAy pRojECT

BATINAh ExpRESSwAy CoNSTRUCTIoN pRojECT

Owner: Oman Railway Company (ORC) Budget: $15.5bn Progress: EPC stage

Owner: Ministry of Transport & Communications Budget: $3.9bn Progress: Work underway

Oman’s national railway network comprises 2,244km of track with 35km of tunnels, 40km of bridges, 50 terminals and eight marshalling yards. The network, which will connect the ports of Sohar, Duqm and Salalah, will comprise a double nonelectrified track carrying both freight (120km/h max speed) and passenger (220km/h max speed) traffic. Three consortia – Korea Rail Network Authority (KRNA), Técnicas Reunidas and Parsons International – have been shortlisted for the Project Management Consultancy (PMC) contract, which has yet to be awarded. ORC’s EPC tender for the 207km Phase 1 stretch between Sohar and Buraimi has attracted 18 bidders. The construction contract is expected to be awarded by mid-2015.

One of the biggest road projects in Oman, the Batinah Expressway will act as an extension of the Muscat Expressway and run for 265km to the Oman-UAE border. To be complete by 2018, the expressway will have four lanes on each side, with 75 interchanges and tunnels. The first 11 packages, including six main packages, have already been floated and are under various stages of planning and construction. Work has started on Packages 2, 3 and 4, while contracts are being finalised for Packages 6, 7, 8, 9, 10 and 11. Parsons International and Turkey’s Bosphorous Technical Consulting Corporation (BOTEK) rendered consultancy services for the project.

LIwA pLASTICS pRojECT

Owner: Oman Oil Refineries and Petroleum Industries Company (ORPIC) Budget: $3.6bn Progress: RFQ stage 2 The Liwa Plastics plant will be the country’s first steam cracker, allowing it to produce a range of products and providing several opportunities for downstream industries. The client has completed the first of the two-stage prequalification process for the four EPC packages – an 859KTA steam cracker, 880KTA polymer units, a natural gas liquids (NGL) extraction unit and a 300km-long NGL pipeline. According to Muscat Daily, the Invitation to Tender (ITT) will also be issued in two stages. The first stage is planned to start at the end of January 2015, with the basic design engineering package information and the conditions of contract issued to the bidders. The second stage is scheduled for the end of March 2015, once the FEED is finalised. January 2015

INFRASTRUCTURE MIDDLE EAST

TEN OMAN iNfrAsTrucTurE PrOJEcTs

SohAR REFINERy IMpRovEMENT pRojECT

Owner: ORPIC Budget: $2.1bn Progress: construction underway SRIP aims to overcome the existing technical constraints resulting from the change in the quality of the Oman Export Blend (OEB) and meet the increasing demand for refined products. Sohar Refinery will add 82,000bpd to its existing capacity of 116,000bpd, taking the total capacity to 198,000bpd. The ground breaking for the project was done in June 2014. A joint venture of Petrofac and Daelim was awarded the EPC contract in November 2013. Recent developments include the appointment of Trowers & Hamlins as legal counsel to advise the consortium of 21 local and international financial institutions funding the project. In November 2014, Majis Services was awarded a contract for long-term supply of cooling seawater to the project.

INFRASTRUCTURE MIDDLE EAST

January 2015

DUqM oIL REFINERy DEvELopMENT pRojECT - phASE 1

Owner: Oman Oil Company Budget: $6bn Progress: Expression of Interest (EoI) stage The project is being developed by Duqm Refinery and Petrochemical Industries Company (DRPIC), a 50:50 joint venture of Oman Oil Company and Abu Dhabi’s International Petroleum Investment Company (IPIC). In March, Foster Wheeler was awarded the Front-End Engineering Design (FEED) contract for project. The first phase will see the development of a 230,000bpd grassroots merchant export refinery within the Duqm Special Economic Zone (SEZ). Designed as a full conversion refinery, the plant will use delayed coking technology for bottom-of-the-barrel processing. The second phase is being planned as an associated petrochemical complex.

BIDBID - SUR DUAL CARRIAGEwAy pRojECT

Owner: Ministry of Transport & Communications Budget: $1.1bn Progress: Under construction The project connects the cities of Bidbid and Sur with a 247km, six-lane highway, and also includes the building of nine interchanges, two underpasses, two overpasses, associated retaining wall structures and about 171 reinforced concrete culverts. In February 2011, a joint venture of Italy’s Astaldi and Turkey’s Ozkar Insaat was awarded the $325.2m Phase 1A, while a JV of UAE’s Habtoor Leighton and Turkey’s STFA was awarded the $300m Phase 1B. Phase 2 was awarded in February 2014, with the $251m Phase 2A going to L&T Oman and local KAS Construction bagging the $233m Phase 2B. In August 2014, Hill International was awarded the Project Management Services contract.

TEN OMAN iNfrAsTrucTurE PrOJEcTs

pTA & pET CoMpLEx pRojECT - SohAR poRT

SUR STEEL pLANT pRojECT

Owner: Oman Oil Company Budget: $600m Progress: EPC award in 2015

Owner: Sun Metal Casting Budget: $400m Progress: Construction underway

The project involves an EPC contract to build a Purified Terephthalic Acid (PTA) plant with capacity of 1.1 MTPA and a Polyethylene Terephthalate (PET) plant with capacity of 500,000 TPA. In December 2012, the client signed a Joint Development Agreement with South Korea’s LG International (LGI) to implement the scheme. The JV company is owned 70% by the client and 30% by LGI. Initially put on hold in 2013, the project was revived in March last year with the award of the project management contract to WorleyParsons to oversee the EPC phase. In October 2014, it was announced that the FEED was almost complete and the client was planning to tender the EPC contract at the beginning of 2015. Last month, SOHAR Port and Freezone signed a deal with OMPET to set up a 0.25 TPA PET facility.

The project involves setting up an integrated steel mill with capacity of 2.5m t/y of liquid steel, which will be converted into finished saleable products such as TMT re-bars, low alloy rounds, carbon construction and low alloy sections, and stainless steel seamless pipes. South Korea’s Posco Engineering and Construction will undertake the project planning, engineering, procurement, construction and operation and maintenance of the plant. Japan’s Sojitz Corporation has been appointed as raw material supplier and finished product offtaker. Sojitz will also supply the plant equipment. Most of the steel products are for the domestic market and the larger Gulf region. When operational, tentatively in 2017, it will be the first non-petroleum-based industrial investment in Sur Industrial Estate.

MUSCAT – SohAR pRoDUCT pIpELINE

Owner: ORPIC Budget: $300m Progress: EPC stage The project involves building a new 280km product pipeline to connect refineries in Sohar and Muscat. Last month saw the signing of the EPC contract for the project between Orpic Logistics Company (OLC) — a joint venture between ORPIC and Spain’s Compañía Logística de Hidrocarburos (CLH) – and the consortium of Oman’s Gulf Petrochemical Services (GPS) and Spain’s Abantia and Diseprosa. The financing agreement, which will cover 70% of the project value, has been given to Ahli Bank and Ahli United Bank (AUB). The construction of the pipeline and oil tanks facility will start in the first quarter of 2015, and the project is due to be commissioned in the second quarter of 2017. The pipeline is expected to reduce heavy fuel-tank truck traffic in Muscat by 70%. January 2015

INFRASTRUCTURE MIDDLE EAST

COVER STORY

EXCLUSIVE INTERVIEW

Bankable solar Under CTO Raffi Garabedian, First Solar firmly leverages its R&D strategy to drive business growth By Anoop K Menon ith over 10GW installed worldwide, First Solar is among a handful of solar companies that can claim to be vertically integrated. It not only designs, manufactures and sells advanced thin-film photovoltaic (PV) solar modules; it also develops, designs, constructs and sells PV solar power solutions based on its thin-film module technology. To top it all, First Solar is the world’s largest thin-film PV solar module manufacturer and one of the world’s largest PV solar module manufacturers. First Solar claims to outspend its industry peers in R&D, allowing the company to push the limits on efficiency and cost. The company R&D model is also characterised by its vertical integration, from advanced research to product development, manufacturing and applications. Its module conversion efficiency has improved at a pace that stands out in the industry, reporting seven substantial updates in its Cadmium Telluride (CdTe) record efficiency since 2011. First Solar recently set two world records for CdTe PV efficiency, achieving independently certified research cell efficiency of 20.4% and total area module efficiency of 16.1%. Raffi Garabedian, chief technology officer (CTO), First Solar, points out that “future LCOE [Levelised Cost of Electricity] reduction in PV is certain to come from continued technological improvement.” He is optimistic about “innovative electric storage technologies [driving down] the long-term cost of storage to the point where it can substantially increase the intermittent generation penetration rate.”

areas you are looking at, and why?

Module energy density [efficiency] improvements remain the core of First Solar’s R&D activities. We pursue this line of work in both the academic stages of basic research and creation of record cell technologies, as well as the industrial stages of scale-up and manufacturability development. Additionally, we’re seriously investing in system-level R&D to improve the integration of our power plants onto grids, while also driving out system inefficiencies. First Solar has announced a series of efficiency records. How quickly are you able to commercialise these improvements?

Record efficiencies are typically shown at the 1cm2 research cell level. These are largely academic pursuits, intended to demonstrate the core performance entitlement of the technology.

HOW 10GW OF SOLAR STACKS UP First Solar’s 10GW of installed capacity (in over 34 countries) translates to: • Power for 5m average homes • Displaces 7m metric tonnes of CO2 • Removes 1.4m cars from the road yearly • Displaces 3bn litres of gasoline • Equivalent of planting 180m trees • Saves 18bn litres of water (over 7,000 Olympic-size pools) • Enough panels to circle the Earth 3.5 times • Displaces 20 average coal plants and 10 average nuclear plants • Enough electricity to power the Kingdom of

How are PV market trends influencing your R&D priorities? Apart from ramping up module efficiencies, what are the other

INFRASTRUCTURE MIDDLE EAST

January 2015

Bahrain for a year

At First Solar, we constrain our research cell activities to process and material technologies that are compatible with our manufacturing platform. By imposing this constraint on ourselves, we are able to assure that our advanced research developments can be commercialised in a reasonable timeframe. Of course, some changes require re-tooling and may be slower to scale as a result. From time to time, we also have announced record module efficiencies. These results are built largely on our production tool-set, using processes that are not yet released to manufacturing. They are demonstrations of what could be in production in the next year or so, depending on the specific changes involved. Our published lead-line efficiency roadmap is based on research cell technology that was demonstrated early last year. Some of the road-mapped improvements have already been or are in the process of being implemented, while others will take until 2017 to bring to production. Of course, research cell improvements that we’ve made since then have not yet been incorporated into a roadmap revision and represent further upside that can be reaped in the future. What has been the company’s experience with utility-scale solar PV power plants and grid stability?

First Solar has developed grid-friendly capabilities that allow utility-scale PV plants to support the grid, contributing to its stability and reliability. The specific grid requirements are based on the North American Electric Reliability Corporation’s recommendations that include voltage control and regulation, voltage and frequency fault ride-through, reactive and real power control, and frequency response criteria. This grid-friendly capability was operationalised using our proprietary controls with excellent results at the 290MW

COVER STORY

“I am personally very optimistic that innovative electric storage technologies will be brought to market in the coming years, driving down the long-term cost of storage to the point where it can substantially increase the intermittent generation penetration rate” RAFFI GARABEDIAN, CTO, FIRST SOLAR

January 2015

INFRASTRUCTURE MIDDLE EAST

COVER STORY

Agua Caliente PV plant, to the satisfaction of the grid authorities. Subsequently, all First Solar utility-scale PV plants have incorporated these capabilities. The key point is that grid-friendly plant controls make it possible to increase utility-scale solar penetration without negatively impacting grid performance. The PV plant’s response to grid system disturbances becomes similar to the inherent electromechanical dynamics of conventional synchronous generator machines, like those found in gas or steam turbine plants, which forms the foundation of grid stability and reliability. Properly engineered modern PV plants can provide necessary grid services as conventional thermal plants reduce on the grid. Is solar PV going to get cheaper? Will the declining costs be technologyled, or is there more to it?

Solar PV is certain to become increasingly competitive relative to other generation sources. The US Department of Energy’s Sunshot programme has set a goal to reduce the installed cost of utility-scale PV plants to below $1/Wdc by 2020. Of course, the real measure of competitiveness in utility scale PV is the LCOE [Levelised Cost of Energy] relative to alternative energy sources such as fossil fuel plants, which are already extremely mature and now subject primarily to fuel price fluctuations. Some of the future LCOE reduction in PV is certain to come from continued technological improvement, both at the module level, which is essentially the fuel source of the PV power plant, and at the system level, including balance of system components like trackers and inverters, as well as plant architecture and energy yield. Having said that, there is also a tremendous opportunity for cost reduction in the other pieces of the PV system value pie. For example, finance costs are the largest single component of LCOE today. Similarly, project development and O&M costs are significant contributors to the overall LCOE. Reductions in these so-called soft costs will most likely come from non-technical advances, including regulatory framework, financial innovations, maturation of the industry and risk perception. The big question about renewable energy, and not just solar, is: can we get power

INFRASTRUCTURE MIDDLE EAST

January 2015

“Solar has become a very attractive and costeffective energy source that provides a significant hedge on conventional fuel price volatility” RAFFI GARABEDIAN, CTO, FIRST SOLAR

COVER STORY

when we need it? Will we see the trend of declining costs in PV repeat itself with the storage component as well?

Since solar, along with other renewable energy like wind, generates power only when the solar resource is available rather than when the power is needed, it should currently be looked upon more as an energy resource rather than a power source. As a result of rapidly declining costs, solar has become a very attractive and cost-effective energy source that provides a significant hedge on conventional fuel price volatility. A cost-effective storage component combined with solar will certainly make solar generation even more valuable. Storage, especially in the chemical form of batteries, has not yet seen the significant cost reductions necessary to make it sustainable for energy-shifting applications for bulk, grid-connected electricity generation. I am personally very optimistic that innovative electric storage technologies will be brought to market in the coming years, driving down the long-term cost of storage to the point where it can substantially increase the intermittent generation penetration rate. Initial applications of electrical storage will be for ancillary grid support services such as frequency regulation, where they can be used to marginally increase the practical penetration of intermittent renewables, particularly on weak grids. With further cost reduction, storage can become an important part of island and micro-grid PV systems, which are currently served largely by liquid fuels. Only in the very long term, with significant further cost reduction, will grid-scale bulk energy storage become economically viable. We are closely monitoring the storage industry for trends on declining costs, especially with increased economies of scale. However, it is not yet evident if the technologies currently proposed will reduce the cost of storage to a game-changing range of $100-200/kWh of storage capacity, which is the ARPA-E [Advanced Research Projects Agency-Energy] stated target for grid-connected bulk energy storage. Could you shed some light on the ‘nameplate capacity versus energy output’ conundrum, where utility-scale PV solar plants are concerned?

The nameplate capacity of a solar power

IN NUMBERS

295 3.9%

Number of dedicated R&D associates

R&D to revenue ratio in 2013 (the industry’s highest)

$134.3m

R&D spend in 2013 (as a comparison, the entire crystalline silicon industry spent $288m) plant is based on the AC output of the plant (measured in MWac). It the aggregation of the AC output of the inverters used within the plant. The energy output of the plant (measured in MWh) is principally a function of the total DC power installed at the plant and several other parameters such as the insolation and ambient conditions at the plant. The industry typically uses “capacity factor” as a measure of energy output of the plant. It represents the ratio of the actual annual energy production of the plant and the energy produced if the plant was operating at full power all the year around. The capacity factor in PV plants varies widely from anywhere from 15% to even over 35%. Technology and plant configuration choices can substantially alter the plant capacity factor. For example, the use of a single axis tracker can deliver 10% more capacity factor than a fixed tilt system. In many markets, the result is a lower LCOE despite the somewhat higher initial equipment cost. One can also optimise the energy output of the plant by configuring the total amount of DC power and taking actual operating conditions into account. The DC power of the modules is based on standard test condition specifications. However, realistic operating conditions are different from standard test conditions and can have up to 10% impact of DC power. This can make a substantial difference in terms of LCOE and energy economics.

Is First Solar looking to develop technologies specifically for the distributed generation segment?

Distributed generation is a large and diverse segment of the PV market, with applications in the range of a few kilowatts to a few megawatts. Many distributed generation applications are not highly space-constrained and are driven by the same fundamental energy economics as utility-scale PV power plants. A great example might be customerdedicated PV power wheeled over the grid to supply low carbon energy to a data centre. Another example might be a large flat distribution warehouse roof, where balance of system and installation costs are moderately low and the end customer’s peak energy consumption doesn’t warrant the use of specialised, extremely high efficiency components. Our well-established Cadmium Telluride modules and ground mount Balance of Systems [BOS] components are ideally suited to these types of applications. For space-constrained roof-mounted applications where BOS costs are high and system output must be maximised, we are committed to leveraging our TetraSun high efficiency crystalline module technology, which we are bringing to market in 2015. What are the new efficiency benchmarks in the pipeline from your R&D labs?

Our latest third party-verified cell efficiency record is 21%. This is for a 1cm^2 research cell. We have multiple technologies in our labs that we hope will lead to new records being set in 2015. Our mid-term research cell target remains around 23%, with a long-term target of 25%. Finally, are there any experiences from your previous roles (prior to First Solar) that you find useful in your current job?

Absolutely. I’m actually not a solar industry veteran and only entered the field in 2008. Fortunately for me, the core constraints and challenges in technology and product development are consistent across industries. Defining clear and appropriately ambitious goals, empowering and supporting the right people with the necessary resources, and providing vision and leadership are all staples of the job that I strive towards. January 2015

INFRASTRUCTURE MIDDLE EAST

OIL & GAS

CHANGE OF SCENE

Low expectations APICORP’s latest five-year Arab Energy Investment Outlook predicts a dip in energy sector investments in the MENA region

nergy capital investments in the Arab world will total $685bn over the next five years, according to a report by the Arab Petroleum Investments Corporation (APICORP), presented to attendees at the 10th Arab Energy Conference in Abu Dhabi last month. Set against the backdrop of continuing regional turmoil, uncertainty in many global and regional economies, and a declining oil price, APICORP’s latest Arab Energy Investment Outlook (2015-2019) has predicted lower investment levels compared to the previous

E 36

INFRASTRUCTURE MIDDLE EAST

January 2015

year’s report. It stated that energy sector investments would have dipped even further had it not been for an apparent catch-up effect, particularly evident in the power sector. A little more than three-quarters of these investments are in seven Arab countries, among the region’s biggest holders of oil and natural gas reserves. Saudi Arabia continues to top the ranking, followed by the UAE, Algeria, Iraq, Qatar, Kuwait and Libya. Except for Iraq and Libya, where the bulk of investment is expected to be back-ended towards the end of the review period, the geographical pattern has favoured countries that have been relatively shielded from the turmoil.

However, Saudi Arabia’s investment is projected to fall to $127bn during the review period, the most significant factors in this relative decline being achievement of the major upstream oil development phase and diminished opportunities for further downstream mega projects. Other factors include difficulties facing domestic private investors in securing feedstock and funding and Saudi Aramco’s recent drive to reduce its capital cost by 20%. The UAE has established itself as the region’s second-largest investor, with its projects’ worth increasing to $116bn followed by Algeria at $84bn, thanks to catch-up investment and early steps in shale gas.

OIL & GAS

Oil and natural gas markets

in numBers

The report noted that increased oil production from Saudi Arabia, Iraq and the dramatic rise in production of light-tight oil (LTO) in North America, has helped mitigate the loss of Iranian and Libyan oil. In the face of weaker demand, associated with slower global economic growth thus far, oil prices would have softened much earlier if not for geopolitical uncertainty. Accordingly, the value of the OPEC basket of crudes settled near $106/barrel in 2013 and the first half of 2014, somewhat below previous trends, and slightly less than the preceding three-year average of $108/barrel. However, since its June’s peak of nearly $115/barrel, the value of the OPEC basket of crudes has been falling unchecked before collapsing below $60/ barrel at the time of updating the report. As demonstrated during OPEC’s November meeting, agreeing on a production cut is proving to be considerably more difficult in face of the unrelenting surge in US oil production, a protracted weak global demand and a strong US dollar. The resulting lower call on OPEC oil and hence a higher spare capacity will most likely keep prices depressed for some time to come. Meanwhile, a further complicating factor for OPEC policy agenda will be the prospect of accommodating increased production from Libya and Iraq should these countries recover from current turmoil, as well as from Iran, should a deal on its nuclear programme succeed.

Japan’s oil-linked LNG import prices are likely to fall below $15 per MBTU, while LNG spot prices could weaken to $10-$12 per MBTU.

divergence Of gas prices

investment cOnstraints

In the more complex and fragmented natural gas markets, prices have failed to converge as long anticipated. For not only have they mostly deviated from oil parity, but they have also been diverging along different regional paths. The greater potential for arbitrage that the US shale-based LNG exports would create from 2016 onward is unlikely to further such convergence within the report’s medium-term framework. The report expects prices to evolve between $4 and $6 per MBTU in the liberalised and well supplied North American markets. In Continental Europe, with hub pricing taking over progressively oil indexation and oilindexed pipeline gas imports already marked down as a consequence, gas prices will tend to be market-driven with a ‘ceiling’ provided by Russian oil-indexed contract prices. With falling oil prices, this ceiling is not far above current European hub prices of about $8.50 per MBtu. Finally, in the Asian market, prior to US LNG exports and the forthcoming new generation of Australian LNG projects,

APICORP’s report highlighted the growing divide between the GCC and rest of the Arab region in terms of their credit ratings, and pinpointed three primary constraints on energy investments: unrelenting cost of project inflation; the paradoxical scarcity of fuel and feedstock such as natural gas and ethane; and the accessibility of funding, which will be exacerbated if oil prices remain low and below national break-even levels over the long term. Ali Aissaoui, Senior Consultant at APICORP and author of the Outlook, says: “The energy scene is changing rapidly but we expect oil prices to remain depressed for some time. The general macroeconomic and energy investment climate is already impacting on many Arab countries’ ability to access the necessary funding for investment in energy related projects, but the lower price of oil will likely be an additional constraint on access to finance.” According to the report, internal financing could tighten if the price of benchmark crude (Brent) stays below the value of OPEC’s fiscal

43%

Arab world’s share of world’s proven reserves of crude oil and condensate

$105/bbl OPEC’s fiscal break-even price as estimated by the APICORP outlook

$755bn

Cumulative energy investment for the MENA region during 2015-19

$48bn

Potential annual debt requirements for financing MENA energy investments in the medium term

break-even price, which it estimates at $105/bbl. External financing, which comes predominantly in the form of dollar-denominated loans, will also be challenging as long as the region’s syndicated loan market has not fully recovered. “While we are not a policy making organisation, given the investment outlook and current constraints, we would propose steps are taken by the relevant authorities to improve the overarching investment climate,” says Ali Aissaoui. “They should consider methods to reduce the cost of projects and the impact of inflation, address the feedstock scarcity paradox, and promote the full sweep of equity and debt financing options available to the sector.” The recommendations made by the report were as follows: • Investment climate: Policy-makers should focus their commitment on improving the investment climate and creating a more enabling environment for the development of the oil, gas and power sectors. This is particularly the case of countries that have witnessed a wave of social and political unrest and, therefore, are in greatest need to attract investors back. • Project costs: In the context of the Arab/ MENA region, escalating project costs have stemmed from the concurrent inflation of the main price components of engineering, procurement and construction (EPC). Since EPC prices are the major component of these costs, policy-makers should encourage project sponsors to review and monitor the dominantly prevailing contractual lump-sum-turnkey (LSTK) provisions and devise alternative riskmitigating strategies to reduce costs. • Fuel and feedstock: Confronting the region’s natural gas paradox – a paradox of scarcity amidst plenty – requires both a supply and a demand response. Policymakers need to push for reform of domestic energy pricing in order to moderate overconsumption and enhance the incentives for exploration and development (E&D) of natural gas resources in the region. • Financing: Securing medium to long-term financing is the most daunting challenge facing project sponsors. In the face of competing demands on the region’s state budgets, governments may no longer be able to ease internal funding shortfalls. Therefore, policy-makers should embrace and push towards sustainable, non-oilprice-dependent sources of financing, most importantly from the capital markets. January 2015

INFRASTRUCTURE MIDDLE EAST

OIL & GAS

FUTURE FOCUS

Innovation radar Global research from Lloyd’s Register Energy takes the pulse of technical innovation trends and challenges in the oil and gas sector. By Anoop K Menon eading compliance, risk and technical consultancy services group Lloyd’s Register Energy (LR Energy) recently conducted a study to determine future investment drivers for research and technological innovation in the oil & gas industry. The Technology Radar survey revealed the key investment drivers to be safety improvements (45%), improving operational efficiency (44%), reducing costs (43%), accessing new reserves (29%) and increasing asset lifespan (27%), in that order. Other highlights include: Technology drivers: • Near term: EOR, injection fluids, depositresistant materials, automation • Medium term: Horizontal ESPs, digital wells, automated / wireless monitoring, 3D printing, remote sensing, subsea boosting • Long term: MEOR, subsea robotics, laser drilling, nanotechnology

INFRASTRUCTURE MIDDLE EAST

January 2015

59% of respondents increased their R&D spend in the last two years; 68% intend to increase R&D budgets in the next two years IOCs have introduced the most breakthrough technologies in the last two years The biggest barriers to bringing a new technology or innovation to the market: cost of development (41%), uncertainty over returns (30%), risk of failure (26%) NOCs are a rising force in innovation – 63% agree that state-backed players are rapidly increasing R&D spend The survey was presented to the region’s oil & gas industry leaders at the company’s inaugural Global Executive Briefing Network session, during ADIPEC 2014 in Abu Dhabi. Speaking to Infrastructure ME, John Wishart, Energy Director, LR Energy, notes that the survey strongly underlines the critical role of technology as a business enabler in the oil and gas industry. “Technology is a business enabler... whether it is moving people away from challenging environments, or how to better image reservoirs, or what drilling techniques can we develop

IN NUMBERS

2014 257

Year the survey was conducted

Senior industry professionals interviewed for the survey across America, Europe and Asia

Number of specific technologies the survey focuses on

2025

The furthest year out for the forecasts

OIL & GAS

“Collaboration is key, because it affects how we are going to work together to drive innovation,” says Wishart. “However, collaboration is going to mean a lot to lots of different people, and I think that is going to be quite an interesting challenge. Initiatives that nurture technical innovation can no longer be an afterthought for business or government; they must be central to any organisation’s strategy for sustainable growth and leadership.” So what does he think about ADNOC’s ambition to nearly double its recovery by 2017, from 30-40% to 70%, despite the fact that Abu Dhabi will continue to have access to easy oil for the near future? “Unless you set your sights on something big, you won’t get there,” says Wishart. “Setting a target and working towards it will actually drive innovation, because it is not going to be little steps that we take, it’s going to have to be transformational change to get us there. “If you look at the North Sea, and other areas around the world, we have probably taken the recovery from 30-35% to 40%, which has taken quite a while. To get to 70% quickly is going to be a challenge, but again I think the industry is ready for the challenge.” SEttINg thE pacE

and use, or how can we improve production or get more from existing reservoirs.” Wishart feels the survey’s findings, in terms of extending the life of assets and resources and unlocking innovation through collaboration, resonated strongly with the regional executives. “When you look around the world, you see a lot of plants that are 30-40 years old. How can we extend that to improve the economics? How can we get more out of existing reservoirs through Enhanced Oil Recovery [EOR]?” According to the survey, industry executives believe that the most important technological advances today fall into the category of either life extension – extending the useful life span of existing assets and resources – or uptime and efficiency –improving production and operations. The survey also found that while in-house research has been most the most widespread approach to innovation, companies are now looking to spread the costs and reduce the risks of development by partnering with third parties such as companies, sectors, universities and public bodies.

Interestingly, the LR Energy survey found that International Oil Companies (IOCs) have been behind most of the technological innovation to date. However, a wide ecosystem of players – Exploration and Production (E&P) companies, start-ups, dedicated joint ventures and partnerships, and National Oil Companies (NOCs) – is now growing in importance. In the next two years, two-thirds surveyed expect NOCs to significantly increase R&D spend, supporting their drive for greater international growth. Their operations will increasingly resemble IOCs. The question is whether this sentiment applies to the region as well; per Wishart, it does. “The NOCs will invest more because they will be local challenges going forward. For example, in the North Sea, water is not a big issue; but here in the Gulf, you have to deal with challenges like applying EOR with minimum water or doing hydraulic fracturing without using water. These are challenges that will be important to oil companies here, and thus drive technology development. In that sense, the technology developed here will be slightly different to technology developed by companies working in deep water or the Arctic.” Prodded further on the shortage of skilled people, especially locals, as a barrier to sustainable

R&D environment, Wishart draws attention to Abu Dhabi National Oil Company’s (ADNOC) significant investment in the education of UAE nationals for careers in oil & gas. ADNOC’s notable initiatives include the Petroleum Institute, set up in 2001 to provide world-class engineering education and research in areas of significance to the oil & gas industry; and ADNOC Technical Institute (ATI), which provides vocational training to nationals and also initiatives to find talent at school level. “They are starting at the basic level, which is a tremendous step because unless we have got people we can’t do the technology and next steps,” says Wishart. From its side, LR Energy has set up a Global Technology Centre (GTC) in Singapore, focusing on research themes critical to safety in the energy and marine sectors. These include subsea drilling and well control equipment; risk (including asset performance management and life extension); deepwater / floating offshore installations; and enabling / emerging technologies (including renewables). Wishart explains: “We are bringing in postgraduate students to help with technology development, and hopefully move them towards further postgraduate qualifications, which also opens up career opportunities within our organisation because we train them through technology. We are driving the development of new concepts and technologies through collaborative R&D.” The report also draws a link between NOC R&D spending and their international ambitions. While they have a domestic advantage, NOCs have to fight for international success through innovation and hardcore exploration. For example, Norway’s Statoil is active in the US shale gas sector, while Malaysia’s Petronas explores in regions like Iraq and Sudan and is also active in Coal-Bed Methane LNG in Australia. Moreover, NOCs are able to think more long-term, unlike their commercial competitors, enabling a more strategic approach to innovation. Wishart has a nuanced view on the impact of falling international oil prices. “Traditionally, this has always been an economic issue; but this time, there are also geopolitical issues, so it is a bit more complicated. I don’t think we are going to see the price coming up quickly or even shutting down production quickly. I suspect it will go on for a while. For consumers, low oil prices are good because they get cheap energy, but if it goes too low, it can hurt the industry. The entire oil & gas industry hangs off new projects, and if they get backed up, that could be a challenge.” January 2015

INFRASTRUCTURE MIDDLE EAST

CONSTRUCTION

bRIDgES

The high road What challenges will the GCC encounter in constructing bridges for its rail projects? By Neha Bhatia

he GCC’s ambitious spending on railway projects can be counted on to open up markets for various construction sectors in the years to come. As of November 2013, the planned and underway railway projects were worth the hefty sum of $194 billion. It is hoped that the unified GCC railway network will provide the same cargo and logistical transport benefits which European countries enjoy. Saudi Arabia, the UAE and Qatar are, for their part, working with international partners to draw from their expertise, but long-distance high-speed rail networks require more infrastructure than just steel tracks. Rail networks that pierce through different terrains and altitudes need bridges – sometimes even the world’s highest bridge. The bridge in question, 359 metres tall when completed, is currently being built over the Himalayas in India. The Chenab River Bridge will be 35 metres taller than the Eiffel

INFRASTRUCTURE MIDDLE EAST

January 2015

Tower, and 84 metres taller than the world’s current highest railway bridge, over the Beipan River in China’s Guizhou Province. The project is due in 2016, but it has not been a smooth ride. In a July 2014 report, ABC News said 25,000 tonnes of steel had to be transported on-site via helicopters due to rough terrain. The project also stalled in 2008 due to safety concerns. “One of the biggest challenges involved was constructing the bridge without obstructing the flow of the river,” an Indian railways officer relates. “Approach roads had to be constructed to reach the foundations of the bridge.” Chenab Bridge is expected to be used for both freight and passenger travel services, but the Middle East is more ambitious. All member states of the GCC are concurrently working on projects that fall under starkly different railway families. In a chat with Big Project ME, Dr Ghassan Ziadat, regional director for Planning and Infrastructure at Atkins Middle East, elaborates on the construction challenges posed while working on each category. “Normally, long-distance rail projects have

bridges going through waterways, channels, coastal waters and rivers; or they are based around coastal areas where the bridges cross marine water or the creek,” Dr Ziadat says. “In some cases, the bridges go through mountainous terrain where they need to be elevated.” “The challenges for long-distance railways in these cases is accessibility. To make the logistics of the project work, and how to actually build these bridges through different terrains is the main concern. How do you get materials to your construction site in the middle of nowhere? “Some areas are based over water, deep wadis, valleys and the like. In places like Oman, storms and flash floods are also a factor. Construction in these difficult areas is an inherent problem of such projects. Investigations and site surveys need to look out for these factors.” These hurdles are unlike those faced while working on rail projects in the urban environment. Dubai and Abu Dhabi in the UAE; Jeddah, Mecca and Riyadh in Saudi Arabia; and Doha and Lusail in Qatar are some of the major cities slated to develop or

CONSTRUCTION

expand their metro lines in the near future. Understandably, however, constructing in busy city environments is a tough task. Early in July 2014, the Haramain Rail Project in Saudi Arabia was brought to a stop by the Jeddah Municipality, after the city’s residents complained about inconvenience caused by road narrowing on-site. An “error” by the project consultant, it was found, led to a main commercial road being narrowed to almost half its width after the project contractor installed pillars in the middle of the road. Arab News said Jeddah Municipality found the consultant had deviated from project plans. These, and many such challenges, are perhaps inherent to the project site, Dr Ziadat opines. “Urban environments tend to mostly include metros and light rail systems, and constructing for these involves different considerations. The main factor here is to build the bridge as quickly as possible, with minimal disruption to existing traffic utilities on ground and minimal disruption to the life of the residents,” encapsulating why the Haramain Project suffered a setback in Jeddah. Sustainable construction is hogging the limelight across the region, and railway bridges are not free of the demands made by its advocates. In that sense, the challenges of railway bridge construction are much like those faced by any other civil engineering project, and can be broadly distributed as environmental, health and technical. Pierre Santorini, regional head for Highways and Bridges at CH2M HILL – MENAI and India (MENAI), agrees. “The GCC region represents an aggressive environment for the traditional construction materials of steel and concrete. Bridge designers have to carefully consider the expansion and contraction that these temperatures cause, exacerbated by the linear nature of the structure itself,” he says. “The choice of materials, protective coatings and other treatment is critical. It needs to be context- and bridge-type specific. Aggressive ground water, typically hyper-saline, means bridges require special protection on foundation parts and materials.” The “aggressive” region Santorini speaks of is also a desert, and sandstorms are a common hurdle to overcome for all structures in the region, well past their construction phase. “The management, prevention and maintenance of windblown sand accumulation is a major issue on all construction sites in the region,” Santorini says. “It is also critical for the safe operations of railways.” Eventually, it all comes down to intelligent

“To make the logistics of the project work is the main concern. How do you get materials to your construction site in the middle of nowhere?” DR ghASSAN ZIADAT, REgIoNAL DIRECToR FoR PLANNINg AND INFRASTRUCTURE, ATkINS MIDDLE EAST design and engineering practices. Santorini claims therein lies the solution to every challenge a railway bridge might be met with. “There is always a solution from an engineering perspective. The challenge is to find the most cost-effective option given a specific set of parameters. Rail-specific vertical and horizontal alignments are key elements of the design,” CH2M HILL’s bridge expert explains. “There are clever ways of designing embankments to allow sand to blow across a road or a railway. Wind tunnel studies can help derive these. Other factors to remember during design include railroad loadings, which are significantly higher than car or truck loadings; clearance envelope, especially for electrified railways; demarcation to prevent trespassing onto the track; interaction of multiple transport modes at crossing points for pedestrians, cars and trains and so on.” Nevertheless, the most obvious concern

when building rail networks, bridges included, is perhaps to efficiently and smoothly incorporate them with existing terrestrial infrastructure. The Haramain Rail Project is yet again a victim of these inconveniences. In January 2014, an anonymous source from the Ministry of Transport told Arab News that the number of vacant plots blocking the course of the Haramain project had increased by 40.6%. This was attributed to incomplete expropriation procedures by landowners. 130 plots, it is reported, will have to be razed for the construction of the 49.2-kilometre Haramain project. Legal battles aside, the roadwork operations are also a massive factor to work railway plans around. But such projects are not without solutions, Santorini insists. “Railroads do not normally [run with] parallel roads for long distances. In most cases, topography requires that roads be built with sharper curves and steeper gradients. It is thus always preferable to elevate roads over railways rather than the other way around.” Santorini goes on to explain the design processes that follow once the railway has been set below the road. “Specific railings have to be designed to prevent debris from falling over a railway, as they could interfere with safe movement of trains, especially if the railway is electrified. The angle of incidence is also significant, especially in the case of an elevated railway crossing, over a wadi for example, given the quantities of earthworks required, which is why most

Right combinations A combination of adequate funding and political will is needed to make these infrastructure projects a success.

January 2015

INFRASTRUCTURE MIDDLE EAST

CONSTRUCTION

railway crossings occur at a 90-degree angle.” Santorini echoes Dr Ziadat’s concern about mitigating risk and disturbance to prevailing conditions. “On the softer side, disruption to the existing infrastructure and communities, as well as the management of such disruption, are the main challenges we face,” he reiterates. “But we found that, as in other parts of the world, early and focused stakeholder engagement is the key to resolving issues associated with these disturbances.” Atkins’ infrastructure head is a proponent of inviting foreign investors to undertake railway bridge projects in both funding and engineering capacities. “Big causeway projects need large capital finance up front. Furthermore, operational costs are also substantial. If the government is facing budget limitations but has a good credit rating, then it can also invite foreign investment to work with the public private partnership [PPP] model,” Dr Ziadat says. Ask him if the GCC offers foreign investors any benefits, and he’s quick to point out that the region will have to develop a congenial atmosphere where international companies feel welcomed and are not viewed as competitors. “Railway bridges are complex projects. They require specialist skills to be built but such know-how is not easy to find. For example, Oman is currently

The Benchmarks “The prime example of a good metro or urban city rail project is the Dubai Metro. There is no doubt about that and everybody looks at it as the benchmark for railway projects here in the region. But for long-distance railway projects, Saudi Arabia is the place to look at. It is unquestionable that they are further ahead than other countries in terms of their development pace. They’re building sections of the GCC rail, have advanced in the North South Rail Project, and the Haramain Rail Link between Mecca and Madina is also under construction. The Landbridge Connection will link Saudi Arabia from the country’s east to its west. Add to that their internal metro connections such as those in Jeddah and Riyadh, and you’ll find that Saudi is very well connected and served by its rail lines.” – Dr Ghassan Ziadat from Atkins Middle East.

INFRASTRUCTURE MIDDLE EAST

January 2015

working on highway projects where it is facing difficulty to build bridges across mountainous terrain. You need mechanised methods to complete these projects,” Dr Ziadat says. “Methods developed in Europe and North America in the past fifty years are slowly finding their way into the market here. Resource shortages and pressures mean it makes sense to adopt futuristic methods of construction such as prefabrication, where bridges are built in small segments; much like the Dubai Metro, but set in the mountains and across larger distances.” Local clients, Dr Ziadat insists, are insisting on collaborations with international players to strengthen their know-how and abilities. The process holistically allows local contractors to grow and upgrade their competitiveness to match international markets. “Some contractors are embracing the idea, but some are opposing these alliances and partnerships because they view it [foreign involvement] as competition,” Dr Ziadat says. “They’re happy to be doing things the conventional way, but I think the more enlightened ones will see this as an opportunity.” Shortly before this piece went to press, Saudi Arabia and Bahrain announced the construction of a second bridge linking their borders, to be called the King Hamad Causeway. A report

by Cluttons estimated the new causeway will benefit Bahrain’s industrial, residential and commercial property sectors in the years to come. King Hamad Causeway, when complete, will also offer Saudi Arabians the chance to explore second homes in Bahrain. Dr Ziadat believes this project is comparable to the onceplanned Qatar-Bahrain Causeway, Kuwait’s Subiya Causeway and other developments like the Saudi Landbridge Project and Etihad Rail in terms of the functionality it can provide. Ultimately, however, Atkins’ expert believes the success of these projects depends greatly on a government which is both decisive about the infrastructure it aspires to and economically stable enough to convert them into reality. “You need a combination of adequate funding with the right political will to make such projects happen. Various countries in the region are going through different situations, both economically and politically. They constantly reassess their priorities and these big railway projects, depending on which country you look at, will take a different position on each list,” Dr Ziadat says. “Eventually, you’ll find that countries which are really focused on getting their infrastructure improved will include metro, rail and related projects high up on their list because they see the benefits of such networks.”

SPECIAL REPORT

TELECOM

5G future GSMA study explores technical requirements, use cases and implications for 5G ecosystem ast month, the GSMA released a major new report at the GSMA Mobile 360-Europe event in Brussels, outlining its perspective on the development of 5G. The new GSMA Intelligence report, ‘Understanding 5G: Perspectives on Future Technological Advancements in Mobile’, provides an overview of network technology innovation today and how this is setting the agenda for the 5G future. It outlines the technical requirements of future 5G networks and explores potential use cases, as well as the implications for operators and other mobile ecosystem players. “Already being widely discussed, the arrival of 5G will help deliver a fresh wave of mobile innovation that will further transform the lives of individuals, businesses and societies around the world,” says Anne Bouverot, director general, GSMA. “Of course, 5G is still to be standardised by the industry and it has not been fully agreed what 5G will look like or what it will enable. However, the GSMA is already collaborating with operators, vendors, governments and other industry organisations in ensuring that the future 5G standard is both technically and economically viable.”

Understanding 5g

The new GSMA report provides clarity on the industry’s evolutionary path towards 5G and addresses many of the misconceptions around 5G. It examines the two main views on 5G that exist today, which are frequently mixed together to form the basis of the 5G definition. View 1 – The hyper-connected vision: In this view, 5G is seen as a blend of existing technologies (2G, 3G, 4G, Wi-Fi and others) that can deliver greater coverage and availability, higher network density in terms of cells and devices, and the ability to provide the

INFRASTRUCTURE MIDDLE EAST

January 2015

connectivity that enables machine-to-machine (M2M) services and the Internet of Things. View 2 – Next-generation radio access technology: This perspective outlines 5G in generational terms, setting specific targets that new radio interfaces must meet in terms of data rates (faster than 1Gbps downlink) and latency (less than 1ms delay). These two views identify eight core technical requirements for 5G, and set targets for data rate; latency; network densification (both number of connections and number of cells); coverage; availability; operational expenditure reduction; and the field life of devices. However, only two of these – data rates and latency – relate to a true generational shift, with the remaining six being either economic objectives or aspirations applicable to all network technologies. The reduction of power consumption by networks and devices is fundamentally important to the economic and ecological sustainability of the industry. A general industry principle for minimising power usage in network and terminal equipment should pervade all generations of technology, and is recognised as an ecological goal as well as having a significant positive impact

“already being widely discussed, the arrival of 5g will help deliver a fresh wave of mobile innovation that will further transform the lives of individuals, businesses and societies around the world” anne BoUverot, direCtor general, gsma

on the OPEX associated with running a network. At present, it is not clear how a new generation of technology with higher bandwidths being deployed as an overlay (rather than a replacement) on top of all pre-existing network equipment could result in a net reduction in power consumption. Some use cases for M2M require the connected device in the field to lie dormant for extended periods of time. It is important that innovation in how these devices are powered and the leanness of the signalling they use when becoming active and connected is pursued. However, this requirement is juxtaposed with 5G headline requirements on data rate – what is required for mass sensor networks is very occasional connectivity with minimal throughput and signalling load. Work to develop such technology predates the current 5G requirements and is already being pursued in Standards bodies. the evolUtion from 4g to 5g

Many of the 5G technical requirements already form part of the network innovations being undertaken by operators today. For example, technologies such as network functions virtualisation (NFV), softwaredefined networks (SDN), heterogeneous networks (HetNets) and Low Power, Low Throughput networks are being bundled under the title of 5G despite the fact that they are already being brought to market by vendors and deployed by operators. Meanwhile, there remains considerable opportunity for growth in 4G, which still only accounts for 5% of the world’s mobile connections. 4G penetration as a percentage of connections is already as high as 69% in South Korea, 46% in Japan and 40% in the US, but 4G penetration in the developing world stands at just 2%. According to the report, mobile operators will invest $1.7tn globally in network infrastructure over the period 2014-2020, much of which will be spent on 4G networks.

SPECIAL REPORT

evolUtion of teChnologY generations in terms of evolUtion & performanCe generation

primary services

Key differentiator

Weakness (addressed by subsequent generation)

Analogue phone calls

Mobility

Poor spectral efficiency, major security issues

Digital phone calls and messaging

Secure, mass adoption

Limited data rates – difficult to support demand for internet/e-mail

Phone calls, messaging, data

Better internet experience

Real performance failed to match hype, failure of WAP for internet access

3.5G

Phone calls, messaging, broadband data

Broadband internet, applications

Tied to legacy and mobile specific architecture

All-IP services (including voice, messaging)

Faster broadband internet, lower latency

exploring 5g Use Cases

Applications that require at least one of the two key 5G technical requirements (greater than 1Gbps downlink and sub-1ms latency) can be considered true 5G use cases. Because 5G is at an early stage, there may be many use cases that will emerge over the coming years that we cannot anticipate today. However, the report highlights a number of use cases that will offer an optimum experience within the 5G environment. Virtual Reality/Augmented Reality/ Immersive or Tactile Internet: These technologies have a number of potential use cases, both in entertainment (for example, gaming) and also in more practical scenarios such as manufacturing or medicine, and could extend to many wearable technologies. For example, an operation could be performed by a robot that is remotely controlled by a surgeon on the other side of the world. This type of application would require both high bandwidth and low latency beyond the capabilities of LTE, and therefore has the potential to be a key business model for 5G networks. However, it should be pointed out that VR/ AR systems are very much in their infancy and their development will largely depend on advances in a host of other technologies such as motion sensors and heads-up display (HUD). It remains to be seen whether these applications can become profitable businesses for operators in the future. Autonomous driving/Connected cars: Enabling vehicles to communicate with the outside world could result in considerably more efficient and safer use of existing road infrastructure. If all of the vehicles on a road

“5g is still to be standardised by the industry and it has not been fully agreed what 5g will look like or what it will enable” anne BoUverot, direCtor general, gsma were connected to a network incorporating a traffic management system, they could potentially travel at much higher speeds and within greater proximity of each other without risk of accident – with fully autonomous cars further reducing the potential for human error. While such systems would not require high bandwidth, providing data with a command response time close to zero would be crucial for their safe operation, and thus such applications clearly require the 1 millisecond delay time provided in the 5G specification. In addition, a fully driverless car would need to be driverless in all geographies, and hence would require full road network coverage with 100% reliability to be a viable proposition. Wireless cloud-based office/ Multi-person videoconferencing: High bandwidth data networks have the potential to make the concept of a wireless cloud office a reality, with vast amounts of data storage capacity sufficient to make such systems ubiquitous. However, these applications already exist and their requirements are being met by existing 4G networks. While demand

for cloud services will only increase, for now they do not require particularly low latencies and therefore can continue to be provided by current technologies or those already in development. While multi-person video calling – another potential business application – has a requirement for lower latency, this can likely be met by existing 4G technology. Machine-to-machine connectivity (M2M): M2M is already used in a vast range of applications, but its possibilities are almost endless and our forecasts predict that the number of cellular M2M connections worldwide will grow from 250m this year to between 1-2bn by 2020, dependent on the extent to which the industry and its regulators are able to establish the necessary frameworks to fully take advantage of the cellular M2M opportunity. Typical M2M applications can be found in ‘connected home’ systems (for example, smart meters, smart thermostats, smoke detectors), vehicle telemetric systems (a field which overlaps with Connected cars above), consumer electronics and healthcare monitoring. Yet the vast majority of M2M systems transmit very low levels of data, and the data transmitted is seldom time-critical. Many currently operate on 2G networks or can be integrated with the IP Multimedia Subsystem (IMS) – so at present the business case for M2M attached to 5G is not immediately obvious. CollaBorating to set the 5g agenda

As the association representing the mobile industry, the GSMA expects to play a significant role in shaping the strategic, commercial and regulatory development of the 5G ecosystem. This will include areas such as the definition of roaming and interconnect in 5G, and the identification and alignment of suitable spectrum bands. Once a stable definition of 5G is reached, the GSMA will work with its members to identify and develop commercially viable 5G applications. “Our new report aims to reset the discussion on 5G, drawing the distinction between a true generational shift versus the ongoing evolution of existing technologies that are already delivering a next-generation mobile experience,” adds Bouverot. “The GSMA will support the industry to continue to innovate and grow, working in close collaboration with our members, the wider mobile ecosystem, governments and other industry organisations to deliver a digital future for all.”

January 2015

INFRASTRUCTURE MIDDLE EAST

EXECUTIVE INSIGHT

Mohamed Al-Mady

“The time to either reap benefits from established competitive advantages or react to unforeseen events has tightened”

Innovating to stay ahead Mohamed Al-Mady, vice chairman and CEO, SABIC, presents his take on the strategic direction of the GCC chemical industry or our industry, the chemical industry, transforming natural resources into solutions for our customers has been, is and will always be the core capability, of course within a framework of sustainable development. When we look at global financial indicators, we often see natural resources as a key contributor to the growth of both GDP and the chemical industry. A good example is the growth in the US after recent advances in shale gas technologies. The capability to link natural resources to solutions is innovation, and innovation is indeed linked to growth metrics. Looking at the three regions with the highest compilation of patents and start-ups – the US, Northeast Asia and Europe – we can see they account for about two thirds of the world’s GDP and enjoy a high rank in competitive indices. Abundant feedstock is indeed a source of competitive advantage for us. We can see this in the Gulf countries and more recently in the US, where shale gas and oil production has grown so rapidly. Yet, I underline, we cannot rely solely

INFRASTRUCTURE MIDDLE EAST

on natural resources for our future growth. In the current economic environment, we expect success to come to those companies that generate innovative products, services, processes and business models to gain competitive advantage. These companies will stay ahead of change. Within this framework, companies that are able to attract and develop talent have been proven to grow faster and be more resilient in downturn. The same can be said for nations. Countries such as China, India and South Korea have achieved remarkable growth as a result of their strong educational systems capable of producing economic advantage for their countries. There are two trends that the industry and its stakeholders need to address. Firstly, the time to either reap benefits from established competitive advantages or react to unforeseen events has tightened. Whether on the feedstock or value chain front, developments are taking place faster. Clear examples are coal to chemicals in China, and product cycles in the electronics industry. Secondly, there is the ever-growing availability of information, as well as the

January 2015

growth of a new generation which has adopted novel ways of learning to become successful. Big data is indeed with us, with its blessings and challenges. Those who are able to harness its power, or attract those able to do so, will be well positioned to shape the future. Shorter timeframes, new capabilities and the coming of a new generation certainly need deeper insights and vision. This is why I emphasise the wisdom of governments anticipating events and creating the right regulation and investment environment remains essential in these times of change. At this point, I would like to cite the example of Saudi Arabia. The recent energy efficiency initiatives taken by the Kingdom, the investment in supercomputing, its strong resolve to boost educational opportunities and its efforts to create a favourable business climate indeed reflect best practices. In conclusion, I would say the chemical industry is doing well and the region is also increasingly looking competitive. It is foresight and vision that will make the difference going forward for our industry. (Excerpted from the welcome address delivered at 9th Annual GPCA Forum 2014)

EvENTS

Mark your diary... WORLD FUTURE ENERGY SUMIT 19–22 JANUARY, 2015 ABU DHABI Held under the patronage of HH Sheikh Mohammed Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, the World Future Energy Summit (WFES) is the world’s foremost event dedicated to renewable energies, energy efficiency and clean technologies. Contact: Claude Talj Tel: +971 2 409 0409 Email: claude.talj@reedexpo.ae www.worldfutureenergy summit.com

HAPPENING IN 2015

SAUDI WATER AND PoWER FoRUM 12-14 January 2015, Riyadh audi Water and Power Forum (SWPF) returns to Riyadh next year at a new location in Al Faisaliah Hotel. The 2015 edition also marks the 10th anniversary celebrations of SWPF, an annual forum and exhibition for water and power stakeholders in the Kingdom of Saudi Arabia. SWPF is held under the patronage of the Ministry of Water & Electricity and produced by CWC Group in partnership with Moya Bushnak. The event is supported by key industry stakeholders such as Saudi Electric Company (SEC), Saline Water Conversion Corporation (SWCC), the National Water Company (NWC) and K.A. CARE. SWPF is renowned for uniting Saudi and global stakeholders to debate policies and strategies which determine the future of the power and water sectors in the Kingdom. The 2015 event will focus on achievements attained in the past 10 years for both water and power sectors. It will bring together the key stakeholders involved in these sectors to

enable discussions, which will assist in shaping the Kingdom’s power and water agenda. The list of distinguished speakers includes HE Abdullah Al-Hussayen, Minister of Water and Electricity; HE Dr Saleh Alawaji, chairman of the board of directors, Saudi Electricity Company (SEC), and Deputy Minister for Water, Ministry of Water & Electricity; HE Dr Abdulrahman Al-Ibrahim, governor, SWCC; Dr Loay Ahmed Al-Musallam, CEO and member of board of directors, National Water Company (NWC); Paddy Padmanathan, president and CEO, ACWA Power; Phillipe Cochet, president, Alstom Thermal Power, and executive vice-president, Alstom; and Dr Fareed Al Yagout, president, National Power Company (NPC). The Annual SWPF Awards 2015 will take place during the inauguration ceremony on 12 January and will present the SWPF Award for Innovation alongside the Marafiq Award for Sustainability. Contact: Chris Hugall Tel: +44 20 7978 0084 Email: chugall@thecwcgroup.com www.ksawpf.com January 2015

SAUDI RAIL AND LOGITRANS 25-27 JANUARY, 2015 RIYADH The Saudi Rail and Logitrans Conference will bring together leading stakeholders involved in Saudi Arabia’s efforts to enhance its transportation infrastructure. Contact: ACM Tel: +961 5 959 111 Email: nour.naffi@acm-events.com www.saudirailandlogitrans.com GIL 2015: MIDDLE EAST 16 FEBRUARY, 2015 DUBAI The sixth edition of Frost & Sullivan’s Global community of Growth, Innovation and Leadership (GIL) event, to be held at Atlantis The Palm, aims to enable regional companies to leverage innovation as a resource to help shape a better future. Contact: Abhra Mukherjee Tel: +91 20 40778816 Email: AbhraM@frost.com gil-events.gilcommunity.com

INFRASTRUCTURE MIDDLE EAST

INFRASTRUCTURE MILESToNES

#011 Sheikh Rashid Tower The erstwhile Dubai World Trade Centre played a key role in the city’s rise as a commercial centre at the global crossroads By Mariam Elsayed n pursuit of his dream of transforming Dubai into the region’s premier trade and business hub, the late Sheikh Rashid bin Saeed Al Maktoum adopted the strategy of building infrastructure ahead of demand. These audacious gambles on infrastructure – the Jebel Ali Port, perhaps, being the biggest – have not only passed the test of time with flying colours, but continue to inspire Dubai’s progress to this day. One such infrastructure gamble was the World Trade Centre tower, the intention being to lay the foundations to position Dubai as a global business centre. As with Jebel Ali Port and Dubai Drydocks, the proposal was met with a flood of criticism: “too far from town”, “not commercially viable”, “over-

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ambitious”, “an exercise in futility.” The location was considered too remote from the old city centre, where all the action was, to be of any use to anyone. However, Sheikh Rashid ordered the start of construction in 1974, and on February 26, 1979, Dubai’s first skyscraper was formally inaugurated by Queen Elizabeth II. The tower, which rose up in splendid isolation above an empty stretch of desert, was the tallest building in the Middle East for quite some time. Belying critics, the Dubai World Trade Centre became a sought-after location for multinationals and foreign consulates desperate for superior office space. Tenants included MNCs like Federal Express, General Motors, Johnson & Johnson and IBM, and also the consulates of Italy, Japan, Spain, Switzerland, Turkey and, until recently, the US. Eventually, the lone tower became the anchor for future development

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Fast facts Year of construction 1973 Year of operation: 1979 Height: 149 metres Number of floors: 39 Architect: John R Harris

along the Sheikh Zayed Road (which links Dubai and Abu Dhabi), helping transform an empty stretch of desert into the city’s central business district with a world-beating skyline. Renamed the Sheikh Rashid Tower, the iconic building, with its bold mix of Islamic and modernist architecture, is featured on the AED100 banknote, a salute to its pioneering status as a global business centre and construction landmark in the region. From a single tower, the Dubai World Trade Centre has grown into a 90,000sqm complex, embodying Sheikh Rashid’s vision of a modern city attracting the world’s leading companies. And the growth story continues, with Dubai World Trade Centre (DWTC) awarding the main contract for the first phase delivery of the Dubai Trade Centre District (DTCD), a 146,000sqm mixed-use development, in March last year.