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Oman // Overview

14. Oman14.1 Overview

Figure 14.1 Population projections, 2015–2025Population (million) 2015 2020 2025Urban 3.2 3.6 3.9Rural 0.9 0.9 0.9Total 4.2 4.5 4.8

Source: World Urbanization Prospects: The 2014 Revision, United Nations, Department of Economic and Social Affairs, Population Division

Figure 14.2 Economic indicatorsEconomic Indicator (2014) Nominal GDP GDP at PPPTotal GDP ($ billion) 80.5 163.6GDP per capita ($) 21,687.7 44,062.0GDP growth rate 2.9%

Source: World Economic Outlook, October 2014, International Monetary Fund

14.1.1 Water availability and demandLocated in one of the driest regions in the world, Oman has limited freshwater resources. Its total renewable water resources are estimated at 1,400 million m³/yr in 2014, not including desalination.

Figure 14.3 Estimated water resources, 2014

Water resourceVolume

(million m³/yr)Groundwater (renewable, actual) 1,300Surface water (renewable, actual) 1,050Total water resources (renewable, actual)* 1,400

*Note that this may not be the actual total of groundwater + surface water because of overlap between surface water and groundwater resourcesSource: AQUASTAT, FAO, 2014

In terms of water withdrawal, the agricultural sector accounts for the vast majority of freshwater withdrawals.

Projected demand for potable or process water in Oman is set to rise to over 1.3 million m³/d in 2020, . The following figure shows demand for desalinated water versus capacity in Oman,

Desalination Markets 2016

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Figure 14.4 OPWP desal capacity vs. peak Omani water demand (2014–2020)

mill

ion

m³/

d

2020201920182017201620152014

Note: Excludes Musandum GovernorateSource: OPWP/GWI

14.1.2 Sector structureThe Public Authority for Electricity and Water (PAEW) is the regulator for both water and electricity services in Oman, and is also responsible for supplying potable water to consumers in Oman except in Sohar city and the Dhofar governorate. The Authority for Electricity Regulation (AER) is the authority established for the regulation and privatisation of the electricity and related water sector, i.e. desalinated water.

The Oman Power and Water Procurement Company (OPWP) is the single buyer (offtaker) of power and water for all integrated power and water plants (IWPPs) in Oman, as well as being responsible for their procurement. It also undertakes long-term generation planning and publishes a 7-year statement annually for demand and capacity forecasts.

OPWP is government owned via the Electricity Holding Company and the Ministry of Finance, which hold 99.99% and 0.01% stakes, respectively. It secures production capacity to meet desalinated water demands in Oman, and engages with the private sector to procure additional capacity. OPWP does not own any generation facilities but has the exclusive right to buy and sell desalinated water and electricity from licensed generation companies.

The following figure shows how these different bodies interact.

Figure 14.5 Omani water and electricity sector structure

Generators

Oman Electricity Transmission Company

SOAC

Distribution companies PAEW

Oman Power & WaterProcurement Company

SOAC

Consumers / Subsidy

Water

Electricity

Paym

ents

Source: OPWP


Oman // Desalination profile

Private sector involvement in desalination in Oman is extensive. The country has favoured a 100% private sector ownership structure for its independent water and power plant (IWPP) programme, which is a contrast to neighbouring countries such as Saudi Arabia and the UAE, who maintain some degree of government ownership of large power and water projects. Privatisation in the water sector is part of the government’s strategy to increase private sector participation across a number of industries in Oman. A law for the regulation and privatisation of the electricity and related water sector was promulgated by Royal Decree 78/2004 on 1 August 2004.

Under the Omani model, private sector developers take an initial 100% stake in the project company. As part of a primary aim to facilitate public ownership within the Omani population, the developers are then under the obligation to publicly list a portion of the company on the Muscat Securities Market once the project has reached commercial operation. Until 2014 developers were required to offer a 35% share of the project company to the market through an initial public offering (IPO) within four years of contract award. From January 2014 this percentage was increased to 40%.

14.2 Desalination profileSituated in the Gulf, Oman has limited renewable water resources, and desalination has played a major role in potable water supply since the 1970s. The sultanate has pursued a policy of moving away from groundwater and towards desalination for its water supply.

Oman tends to have smaller desalination plants than its neighbours (e.g. Saudi Arabia, UAE) for two main reasons:

• A more disparate population in the country means that centralised desal facilities are less of an option.

• Oman has significant surface and groundwater resources, which means drinking water can be supplied from dams.

A further, but lesser, reason is that Oman has a smaller population than neighbouring nations.

The development of Oman’s desalination capacity accelerated after the turn of the century, with and standing out as lucrative years thanks to the award of contracts for the and plants, respectively. The majority of the capacity made up by extra-large plants has been added since the turn of the century. Until only the plant fitted into this category. Extra-large plants now account for of capacity. Many of the medium-sized plants are for industrial applications.

Unlike other Gulf Cooperation Council (GCC) countries, Oman has been more receptive to . This is due to the fact that Oman has smaller plants – particularly for utility clients – than countries such as Saudi Arabia and the UAE, while it also does not co-locate power and water plants so prolifically. A further reason is that the location of the plants in the Gulf of Oman or the Arabian Sea means the water is less saline than that of the Gulf or Red Sea, rendering the ability of thermal technologies to deal with high salinity water as less appealing. accounts for of installed capacity. has been used in .

One especially interesting aspect of the technology landscape in Oman is the presence of forward osmosis (FO). In 2012 UK-based Modern Water commissioned a 200 m³/d forward osmosis desalination plant at Al Najdah in the Al Wusta region of Oman, the first such commercial plant in the world. The Middle East could be suited to alternatives to RO or thermal desalination because of the challenging water streams that desalting plants have to treat – FO is regarded as much cheaper than thermal and does not require as much chemical cleaning as RO.

Oman’s reliance on seawater for potable water is demonstrated in figure 14.7. Desalinated water’s main role in meeting the demand for potable water from homes and businesses can also be seen: (see section 14.2.2).

Although engineering-procurement-construction (EPC) is the most common contract model, of installed capacity has included private sector participation, notably through IWPP projects such as Barka and Sohar.



Figure 14.6 Annual cumulative and additional contracted capacity in Oman, 1985–2015

2015201020052000199519901985

Addi

tiona

l (m

illio

n m

³/d)

Cum

ulat

ive

(mill

ion

m³/

d)

Souce: DesalData

Figure 14.7 Profile of cumulative installed desalination capacity in Oman, 2015

Source: DesalData


Oman // Desalination profile

14.2.1 Utility desalinationThe necessity to meet the rapidly rising needs of Oman’s population has led the OPWP to reconsider its procurement method in recent years. While projects in the past have been based on the model of IWPPs, an increasing demand for water from the PAEW has resulted in projects being tendered as independent water projects (IWPs) to expedite supply. While increasing power capacity has been a more pressing issue than water for Oman in recent years, the need for water is coming sharply into focus – tendering projects as IWPs means that the added consideration of a power plant is not required, thus accelerating the procurement process.

Similar to IWPPs, IWPs tend to follow the build-own-operate (BOO) model, whereby developers, operators and investors build, own and operate the desalination plant.

The relatively short lifespans of power and water purchase agreements with IWPs and IWPPs in Oman (generally 15 years rather than 20 or 25 as elsewhere in the Gulf) means that the country is the first to face the issue of how to deal with expiring agreements with the private sector for water and power production projects. Although a full strategy has not yet been outlined, the actions of developers such as ACWA Power Barka – which chose to expand the desalination plant at Barka 1 with just a handful of years left on the plant’s contracted offtake period – indicates that they expect to realise value from the projects beyond the lifespan of the initial offtake contracts.

In a bid to make future IWP projects more bankable, the OPWP has offered a longer offtake period of 20 years – rather than 15 – for two such projects to hit the market to date: Al Ghubrah and Sur.

The latest large project, the 200,000 m³/d Qurayat IWP, reached financial close at the end of 2014. A consortium of Hyflux and the National Power and Water Company (50/50) was awarded the contract. Like Al Ghubrah and Sur, the project has a 20-year operating period, with the start of commercial operations slated for May 2017. Meanwhile, in February 2015 the owners of the Sur IWP plant awarded an EPC contract for an expansion of 48,000 m³/d to Veolia OTV/SIDEM.

The following figure shows Oman’s largest plants for utility and public sector clients.

Figure 14.8 Top plants for utility and public sector clients in Oman

Name Client Plant supplier

Current capacity (m³/d) Contract type Technology

Contract year

Online year

*Expected online later this yearSource: OPWP/DesalData

The Al Ghubrah Power and Desalination Plant is in the process of gradually being taken out of service by the OPWP. Units 1 and 2 have already been decommissioned, while the remaining desalination units will fall out of contract by 2018 and are expected to be decommissioned at that time.



14.2.2 Industrial desalinationThe main sector of interest for desalination in Oman is the oil and gas sector, particularly upstream. The sultanate has significant reserves of heavy oil, and the application of steam flooding is the chosen method of enhanced oil recovery (EOR).

Steam flooding is where steam is injected into one or more vertical wells to reduce oil viscosity and help drive it to a producing well. It involves the use of a once-through steam generator (OTSG) or a drum boiler. Before the water can go into either of these, it needs to be treated to remove salts and silica before being boiled to produce steam.

Examples of steam EOR projects developed in Oman are as follows:

• The first operating full-field steam injection project in Oman. Produced water at the field is recycled for use in the boiler system. In 2008 installed a mechanical vapour compression (MVC) evaporator there to treat produced water and make distilled water for the boiler feed.

• A full-field steam injection project, in which a single steam-generation facility was built for both fields. won a further contract in 2012 to supply a unique ion exchange technology based super softening plant for treating high TDS and high temperature produced water.

• The world’s first full-field steam injection project using thermally assisted gas/oil gravity drainage in a fractured carbonate reservoir. In 2009 a 25,000 m³/d RO plant was commissioned to treat brackish water for 18 injection wells. This was Petroleum Development Oman’s (PDO) first oilfield steam injection project.

Other interesting projects include developing , which contains a number of ‘tight gas’ reservoirs. First gas there is targeted in late 2017. is currently building a 6,000 m³/d RO plant to treat brackish water to provide process and drinking water.

A key industrial user of desalinated water is the Sohar industrial port, located northwest of Muscat. Majis Industrial Services (Majis) was established in 2006 to provide water services to Oman’s growing industrial port and other special economic areas in Sohar. It procured its own desalination plant in 2011, through a design-build-operate (DBO) model, and is in the process of considering bids for a new 28,000 m³/d plant to satisfy increasing demand.

The following figure shows the major plants for industrial clients.

Figure 14.9 Top plants for industrial clients

Name Client Plant supplier

Current capacity (m³/d) Industry Technology

Contract year

Online year

*Expected online later this yearSource: DesalData


Oman // Offtaker profile

14.3 Offtaker profile

14.3.1 Oman Power and Water Procurement Company (OPWP)The key offtaker in Oman is the OPWP, the sole buyer of power and water for IWPP and IWP projects (and integrated power projects) in the sultanate. Such projects operate under an independent power and water purchase agreement (PWPA), where OPWP buys the water (and electricity) from the holding company in order to supply it across the country.

Under sector law the duty of the company is to secure the production of desalinated water according to the maximum limit consistent with the “Economic Purchase of Production Capacity” and “Output of Electricity and Desalinated Water”. It is also obliged to make bulk supply of desalinated water to the PAEW.

To date, OPWP has been involved in six plants where developers take 100% ownership of the asset (before floating a stake on the stock exchange). In all cases 35% of the plant owner companies are publicly traded on the Muscat securities market. The plants are as follows:

•

•

•

•

•

•

The older plant at Al Ghubrah, built in six stages between 1976 and 2001 and owned by the Al Ghubrah Power and Desalination Company, has been operated under a PWPA since it was spun out from government control in 2005.

OPWP acts as offtaker for around of the installed desalination capacity in Oman.

14.4 Proposed plants and opportunitiesBy annually updating expected demand and capacity projections for desalinated water, the OPWP has a good grip on requirements in terms of building or expanding desalting plants. Currently the strategy is essentially to undertake expansions at the current plants of Barka and Sohar.

The proposed plants at Barka and Sohar would be the largest in the sultanate once completed. Plans for a plant at Suwaiq were shelved after the authorities decided they needed more than twice the capacity planned, and the OPWP has now chosen to split the expanded capacity over the two sites at Barka and Sohar. The project at Khasab, although small, is interesting because in 2014 the OPWP was asked for the first time by the PAEW to get involved in providing water for the Musandum Governorate, the exclave separated from the rest of Oman by the UAE.

Oman’s commitment to private sector participation will give ample opportunity for developers to get involved in the country’s desalination projects. The open nature of the Omani market, combined with the fact that the desalination plants are both smaller than some of the massive Gulf projects and do not include an attached power element, means that the Omani desalination market has attracted a wide variety of international developers over the years.



The following figure shows the pipeline of desalination plants in Oman.

Figure 14.10 Tracked desalination projects in Oman

Project nameMin capacity (m³/d) Expected cost Description


Oman // Proposed plants and opportunities

Project nameMin capacity (m³/d) Expected cost Description

Source: GWI

Solar power – and its implications for desalination – is being extensively explored by some GCC nations. Oman is not embracing it as enthusiastically as neighbouring nations, but this could change. At the end of 2014, the International Renewable Energy Agency (IRENA) prepared a report in close collaboration with the PAEW on Oman’s use of renewable energy sources. The document flagged up the potential of using solar power for water desalination, particularly after a steep drop in the cost of photo-voltaic (PV) systems.

Reverse osmosis is the prime technology candidate for PV systems because it runs solely off electricity. Solar thermal desalination processes – where heat is supplied by concentrating solar collectors – are also currently being piloted. According to the IRENA, there is potential for implementing pilot desalination plants that use solar energy in rural areas of the sultanate (North Oman, Musandam coastal areas). However, there is no specific plan for this as yet.



14.5 Market forecast


Oman // Market forecast

14. oman - global water intelligence · pdf filedesalinated water and electricity from...

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