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Oman's OETC: Establishing a reliable grid to meet growing demand [free access]

November 14, 2018

Oman’s electricity demand is expected to increase at a compound annual growth rate (CAGR) of 8.4 per cent over the next 10 years and reach 228,238 GWh in 2027, primarily due to growing infrastructure, the government’s focus on expanding non-oil sectors and the increasing population.

 

To meet the rising demand, Oman has plans to add over 4 GW of capacity by 2021, including renewable energy-based projects. These plans necessitate transmission development to handle the increased load on the existing transmission system and to provide new electricity transport facilities. Oman’s transmission network operator, Oman Electricity Transmission Company SAOG (OETC), plans to not only handle the increased load on the existing transmission system, but also provide new evacuation facilities.

 

Existing network

 

OETC has a monopoly over the power transmission segment in Oman and is wholly owned by the government. It was incorporated in 2003 as part of the restructuring programme, under the holding company Electricity Holding Company (EHC), which owns a majority stake in OETC.

 

Oman’s power system is segregated into four power networks, namely, the main interconnected system (MIS) which covers the northern half of the country; the Salalah power system which covers the southern Dhofar region; the Duqm system in the east; and Petroleum Development Oman (PDO) in central Oman.

 

At the end of 2017, OETC’s transmission infrastructure comprised 6,620 circuit km of lines and 42,087 MVA of transformer capacity at the 132 kV, 220 kV and 400 kV voltage levels. Between 2012 and 2017, OETC’s transmission network grew at a CAGR of 7.73 per cent. Between 2016 and 2017, OETC completed works on 27 major projects with a total value of OMR249 million and comprising new grid stations, overhead transmission lines and underground cables.

 

In addition to the domestic transmission network, Oman’s grid is interconnected with the transmission system of the United Arab Emirates (UAE) via a 220 kV line from the Mahadah (Al Wasit) grid station to Al Foah. Through this interconnection, Oman is also connected to its neighbouring countries through the Gulf Connecting Countries (GCC) Interconnecting Authority’s (GCCIA) grid interconnection system, which facilitates the transmission of power among the six connected countries, namely, Kuwait, Saudi Arabia, Qatar, Bahrain, the UAE and Oman. The connection between Oman and the UAE was established in 2011.

 

Table 1: Growth in OETC's transmission line length (circuit km)

Voltage

2012

2013

2014

2015

2016

2017

132 kV

3,161

3,249

3,784

           3,890

4,086

3,730

–OHL

3,062

3,138

3,669

           3,732

3,899

3,576

–UGC

99

111

115

158

           187

           154

220 kV

1,400

1,781

1,849

           1,651

1,668

1,679

–OHL

1,345

1,719

1,787

           1,589

1,601

1,608

–UGC

55

62

62

62

67

71

400 kV

0

0

0

                  -  

           684

1,212

Total

4,561

           5,029

           5,632

           5,541

        6,439

        6,620

Annual growth rate (%)

  -

             10.3

             12.0

             (1.6)

          16.2

            2.8

Source: OETC; Global Transmission Research

 

Financial and operational performance

OETC’s financial performance has improved consistently over the years. The utility’s revenue increased from OMR56.5 million in 2012 to OMR98.5 billion in 2017, recording a CAGR of about 11.74 per cent.

 

OETC’s net income increased from OMR27.6 million in 2012 to OMR44.5 million in 2014, witnessing a CAGR of about 10.9 per cent. However, the net income witnessed a significant fall from OMR41.7 million in 2015 to OMR34.6 million in 2016 and then to OMR17 million in 2017. This was mainly due to increasing finance charges related to the Lamar I bond of USD1 billion raised in 2015, the Omgrid bond worth USD500 million raised in 2017 and increasing depreciation witnessed by the utility during this period.

 

The utility’s capital expenditure has varied between OMR122.3 million in 2012 and OMR184 million in 2017. In comparison to the previous review period (2016), during 2017, the company’s operating expenditure increased at a CAGR of 3.9 per cent.

 

Table 2: Key financial indicators (OMR million)

 

2012

2013

2014

2015

2016

2017

 Revenue 

56.5

77.9

92.1

99.0

95.8

98.5

 Net income  

27.6

46.2

44.5

41.7

34.6

17.0

 Capital expenditure on transmission 

122.3

76.0

165.8

94.0

132.0

184.0

 Operating expenditure  

15.0

18.1

24.2

26.9

29.1

30.2

Source: OETC; Global Transmission Research

 

Overall, the average interruption time, i.e. the total energy not supplied normalised to the annual demand specified in minutes per year, has witnessed a significant decrease from 23.64 minutes to 4.30 minutes. Similarly, the system reliability has remained consistent through the five-year period (2012-17). In addition, the transmission losses also witnessed a significant decrease from 2.7 per cent in 2012 to 1.64 per cent in 2017. The utility’s consistent improvement in operational performance over the five-year period is a result of its increased focus on improving the reliability of the network through effective capital investment and asset management.

 

Table 3: Key indicators of operational performance

 

2012

2013

2014

2015

2016

2017

 Average interruption time (minutes)

           23.64

           34.00

           10.70

31.90

6.00

4.30

 System reliability (%)

99.995

99.994

99.998

99.994

99.99

99.99

Source: OETC; Global Transmission Research

 

Figure 1: OETC’s transmission losses

 

 tso_639

 

Source: OETC; Global Transmission Research

 

Network expansion plans

To accommodate new generation capacity, incorporate the changes in power flow resulting from the retirement of existing plants and meet future power demand, OETC has planned 38 transmission projects to expand the MIS system and the network of the Dhofar region over the 2018-2022 five-year period.

 

The utility has a budgeted capex programme of OMR400 million over the next five years (2018-2022) covering OMR149 million for generation-related activities, OMR228 million for load-reduction related projects, OMR14 million for non-load related projects and OMR9 million for common assets.  Majority of these projects are designed for the evacuation of new generation capacity and to support load growth and system security.

 

Nearly 58 per cent of the transmission line addition is expected to be at the 400 kV voltage level, and will be developed mainly to evacuate power from power plants such as Ibri and Sohar. Some of the major 400 kV projects under the grid expansion plan include the 41-km-long Sohar IPP-3–Sohar Free Zone line; the 250-km connection line to the Ibri IPP power plant; the 106-km Sohar Free Zone–Mahadha line; and the Sohar Free Zone–Sohar Interconnector Station (SIS) connection lines. All these projects are expected to be commissioned by the end of 2018.

 

In addition, OETC is in the process of developing a north-south interconnector project. The OMR500 million project will interconnect Oman’s four existing power networks to a 400 kV transmission system. Recently, in June 2018, state-owned Nama Group presented the final results and the study proposal for the project and concluded that its economic and strategic feasibility would reflect in the increased efficiency of the electricity system in Oman. The interconnection is expected to come online by 2021.

 

In order to accommodate the expected increase in generation capacity and power demand OETC is also focusing on developing new substations along with the expansion of the existing grid stations. Some of the major grid station works to be undertaken by 2021 include construction of the 400 kV Sohar Free Zone grid station (3,000 MVA), the 400/132 kV Qabel grid station (1,000 MVA), the 1,000 MVA Khaborah interconnection station (KIS) and the 132/33kV Uwaynat grid station (500 MVA); and the upgrade of the Rusail industrial grid station to 400 kV (1,500 MVA).

 

 

Table 4: List of key transmission projects

Project

Voltage (kV)

Length (km)

Scheduled commissioning

Upgrade of Rusail industrial grid station to 400 kV

400

Not applicable

2021

Construction of Qabel grid station

400

1

2019

Sohar IPP 3–Sohar Free Zone line

400

27 km undeground and 14 km overhead

2018

Transmission line to Ibri IPP

400

250

2018

Sohar Free Zone–SIS line

400

42

2018

Sohar Free Zone–Mahadha line

400

63

2018

Construction of Sohar Free Zone grid station

400

Not applicable

2018

Construction of Khaborah interconnection station (KIS)

220

Not applicable

2019

Misfah IPP connection

220

Not applicable

2021

Sumail industrial 132/33kV grid station

132

45 km overhead, 6 km underground

2019

Rustaq-Wadi bani Auwf–Nakhal line

132

85

2018

Samad 132/33kV grid station

132

38.5

2019

Source: OETC; Global Transmission Research

 

OETC’s privatisation plans

In December 2017, the Oman government approved the privatisation of five power sector utilities involving OETC and four distribution companies, namely, Muscat Electricity Distribution Company (MEDC), Majan Electricity Distribution Company (MJEC), Mazoon Electricity Distribution Company (MZEC) and Dhofar Power Company (DPC).

 

In line with the government’s approval, state-owned Nama Holding is planning to sell 49 per cent of its stake in OETC and is in the process of issuing an expression of interest (EoI) for the transaction. In addition, Nama Holding is planning for the sale of up to 70 per cent of its shares in the remaining four eligible distribution companies.

 

Currently, OETC and MEDC are being considered for privatisation. The sale of both companies, which have a combined asset total of USD3.2 billion, is expected to close in 2019 and help the government boost its depleted financial reserves.

 

Summing up

Oman is set to witness significant growth in power demand in the coming years propelled by the country’s overall growth. In order to keep pace with the demand expansion, Oman is planning to add around 3.2 GW of net generation capacity by 2021.

 

In line, OETC plans to undertake a major programme of capital investment, which will be spread across the whole network to improve transmission system performance in northern and southern Oman.

 

Therefore, it will be crucial for the country to successfully execute the planned projects that are aimed at building the required capacity for the overall development of the power sector.