Privatising power
A major privatisation of the power sector in the Gulf state of Oman is encouraging plenty of investment into a very lucrative sphere. The Al Kamil Power Company is one business benefiting from the system, producing both electricity and excellent results.
Despite the sharp drop in oil prices brought on by the global recession, the Gulf states have, in many ways, been far less severely affected than many Western countries. Governments of Gulf Cooperation Council (GCC) member states have continued to increase spending during the recession rather than slashing itÔÇöin total, over the past seven years, it has more than doubledÔÇöand in striking contrast to those in the West, private organisations in the Gulf seem to be growing, albeit slowly, rather than collapsing. In fact, on the whole, the GCC statesÔÇÖ demeanour during the crash has been one of relative calm, with substantial overseas assets cushioning many of them from the blow and providing far more stability than in other oil-exporting areas of the world. In fact, in recent months, the Gulf region has been widely regarded as a port in this particularly turbulent storm.
Over the past decade, the GCC countriesÔÇöthe United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar and KuwaitÔÇöhave been transforming their power sectors as a result of ever-increasing demand, brought on by rapid population and industrial growth. The six governments have embarked on restructuring and privatisation initiatives in order both to relieve themselves of the financial burden of constructing new facilities and to encourage private sector investment.
Demand for electricity in the state of Oman, which lies on the southeast coast of the Arabian Peninsula, has soared in recent years due to an increase in industrial activity. With a nine per cent demand increase forecast for next year, the Government is seeking to increase the countryÔÇÖs power generation capacity to 4,500 MW by next year, which it hopes to achieve as a result of its ongoing privatisation drive.
In 1999, Omani ministers approved policies for the restructuring and privatisation of the power sector, which involves both electricity and water. As unbundling began, the Government began to set up independent companies on a commercial basis to provide power for the state. One of these was Al Kamil Power Company (AKPC), which was established back in 2000 to build and operate an electricity generating station at Al Kamil, in the Sharqiya region, which lies in the east of the country.
Now with 1,000 employees, AKPC is contracted to supply power to the Omani national grid until 2017 under the terms laid out in the national Power Purchase Agreement (PPA). Although the plant is situated on government-owned land, the ownership of the power station remains with the company until the contract to supply electricity runs out.
The dual-fired plant is located roughly 25 kilometres north-west of Al Kamil, near the main gas transmission system and electricity grid network. The plant uses three gas turbines and three electrical generators rotating at a speed of 50 Hz, to generate electricity for Oman.
Under the Natural Gas Sales Agreement, or NGSA, the Ministry of Oil and Gas (MOG) is obliged to supply gas to the plant to drive the turbines. Arriving at the plant from the centrally-located Saih Rawl gas field via a pipeline, the natural gas is mixed with air and drawn though filters at a rate of 27 tonnes per minute, creating a hot, high-pressure combination of gases. The gases then expand through the power turbine, turning the turbine shaft. The electrical generator is driven, producing around 95 megawatts of electricity, which is then transformed from 15,000 volts to 132,000 volts and supplied to OmanÔÇÖs 132kV grid.
The Oman Electricity Transmission Company (OETC) supplies the electricity to the end consumer, setting out its daily requirements to the Al Kamil plant. Constancy of supply is ensured by a store of back-up fuel which can be utilised if the gas supply is interrupted for any reason. MOG then reimburses AKPC for any extra costs incurred.
To maintain the highest operating standards, the plant has an ongoing operations and maintenance agreement with Al Kamil Construction and Services (AKCS), a firm related to AKPC that supplies power plant and power generation equipment and services. The agreement has been drawn up to last 15 yearsÔÇöthe duration of the power supply contractÔÇöand in return for a fixed fee, all operations and maintenance tasks are carried out by the firm. AKCS in turn has its own ongoing agreement with General Electric, for the maintenance of the plantÔÇÖs turbinesÔÇÖ hot gas paths.
Being so central to the stateÔÇÖs infrastructure, it is not surprising that AKPC takes its role as a corporate citizen very seriously. It encourages engineering students from across the country to undertake vocational training at the plant, and is also heavily involved in corporate social responsibility activities in Al Kamil and the surrounding provinces. Environmental awareness is another key issue, and AKPC is particularly keen to educate and engage local schoolchildren on the subject by holding regular drawing competitions with an environmental theme. It also runs health awareness programmes and sponsored fun runs, as well as supporting a number of different charities working in the social, education and health arenas.
AKPC places substantial value on high standards of corporate governance, seeing it not only as a duty but as an opportunity to ensure that its corporate values all point towards the same end goalÔÇötransparency and accountability. It has found this approach to raise the confidence of current shareholders, as well as that of any potential investors. Under the Authority for Electricity Regulation (AER), set up to regulate the power and water sectors in Oman, AKPC is regularly audited and is producing particularly high scores, outperforming many other power stations in the region.
