Saudi power sector needs $90 billion investment over 22 years
The power sector in OPEC giant Saudi Arabia needs investments of more than 340 billion riyals ($90.5 billion) in the next 22 years to meet increasing demand, the minister of industry and electricity said Tuesday, November 6.
About 100 billion riyals ($26.6 billion) of domestic and foreign investments are needed in the first five years of a long-term plan that ends in 2023, Hashem Yamani told an energy conference in Riyadh. About half of the sum was required for generation, a quarter for transmission and the rest for the distribution sector.
The estimates are based on projections that production capacity will rise from 25,000 megawatts currently to 66,000 megawatts at the end of the plan, and the number of consumers from 3.7 million now to 8.5 million in 2023.
Maximum consumption, which stands at 23,582 megawatts today, is projected to more than double to 59,000 megawatts in 2023, while high-voltage lines would also increase from 18,637 km (11,648 miles) to 31,000 km (19,375 miles). The fields of transmission and distribution are still off-limits to foreign investors, but Yamani said transmission would be opened up
The Saudi electricity sector is undergoing major restructuring with the Saudi Electricity Company (SEC) becoming more private following the complete lifting in April 2000 of government subsidies for electricity. Yamani said the sector is full of lucrative opportunities for local as well as foreign investors especially once the transmission field is opened up.
The ministry has submitted a draft to the Supreme Economic Council for the establishment of a regulator in the power sector to "regulate the interests of consumers, operators and investors," Yamani said. A decision on this issue is anticipated during next Sunday's meeting of the Council. "This will complete the restructuring of the power sector," said the minister.
SEC is now ready to negotiate with any local or foreign investor for joint power projects, for investors to build new stations or to take part in the rehabilitation of old stations. Economists had said the population of Saudi Arabia is projected to double to 38.4 million people by 2023 and the annual increase in electricity demand was estimated at 4.5 percent.
Saudi Arabia in October last year hiked the average electricity tariff rates for residents from 2.1 cents per kilowatt/hour to 4.5 cents per kilowatt/hour. Before the increase, the combined losses of the Saudi power sector reached 48 percent of total sales revenues and the total outstanding debt of the power sector reached $26 billion at the end of 1999.
The Saudi Electricity Company was formed last year with a capital of nine billion dollars through the merger of several smaller companies, following the government decision to cut subsidies. Saudi Arabia will get part of its power requirements from the so-called "gas initiative", a huge multi-billion foreign investment project to explore and produce gas from three giant natural gas fields. — (AFP, Riyadh)
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)