Oman (2012)

Degree of reliance on imported energy: 

<p>
Oman is a net exporter of electricity, being one of the world&#39;s significant non-OPEC oil exporters. Net exports in 2007 were 43,530 ktoe, mostly in the form of crude oil (75%) and natural gas (24%). Oman exports its crude oil largely to Asia, led by China and Japan and gas (LNG) to China, South Korea and Japan.</p>

Main sources of Energy: 

<p>
Total Installed Electricity Capacity (2008): 2,476 MW</p>
<p>
Total Primary Energy Supply (2009): 15,063 ktoe<br />
Natural Gas: 72.1%<br />
Oil: 27.9%</p>
<p>
In 2009, Oman produced 17,823 GWh of electricity from oil (3,208) and gas (14,615).</p>

Country: 

Oman

Extent of the network: 

<p>
Electrification across Oman is approaching 100%, however there are still rural and remote areas that are not electrified. Officials from the <b><i>Rural Areas Electricity Company</i></b> (<i><b>RAECO</b></i>, <a href="http://www.reefiah.com/">www.reefiah.com/</a>) hope to implement distributed solar and wind power systems to electrify the majority of the rural population by 2012.</p>
<p>
The main interconnected system (MIS) serves the majority of people in Oman (almost 500,000 accounts). The system interconnects seven main power plants with around 3000MW of net generation capacity and transmits power over 220 and 132 kV lines. The Salalah system with the generation capacity of around 312MW covers Salalah and surrounding areas in the Dhofar region, south of Oman, serving around 50,000 accounts. The remaining of scattered rural areas of Oman is provided with the electrical power by mainly diesel generators, with total installed capacity of 1000 MW.</p>
<p>
A regional power grid has been constructed through <b><i>GCC</i></b> (<b><i>Gulf Cooperation Council</i></b>) <i><b>Interconnection Project</b></i>. The phase I to interconnect Kuwait, Saudi Arabia, Bahrain and Qatar (the Northern System) and phase II for the interconnection of the UAE and Oman (the Southern Systems) have been completed; and the phase III to interconnect the Northern and Southern Systems started in 2010. This GCC power grid will create the possibility to import electricity, especially from neighboring UAE and its nuclear plants planned for 2017, and lessen the strain on domestic natural gas supplies used as feedstock.</p>

Capacity concerns: 

<p>
Historically, Oman has sought to maximise its oil and gas revenues by exporting the bulk of its output. Due to the rapid increase in domestic consumption over the past decade (135% increase from 1999 to 2009), gas reinjection use, and the long-term liquidified natural gas (LNG) export contracts, the country has too little feedstock for electricity generation at seasonal peak times. This shortfall has resulted in service interruptions. In 2008, Oman found itself in the unusual situation of having to import gas by pipeline from the UAE to honour its export commitments and meet domestic electricity demand.</p>
<p>
Peak electricity demand in Oman will increase from 2773MW in 2007 to an expected 5691MW in 2014. The annual growth rate, at approximately 17.8%, is high, and peak demand is envisaged to continue increasing due to the accelerated industrial and population growth in Oman. The electricity generation forecasting in 2014 will be 24.0 TWh; and electricity shortages are expected to occur as Oman relies on natural gas for electricity production. The production of natural gas in 2009 is 1,097,661 MNSCF. The Omani government accounts for 29.16% of total gas consumption in 2008, while the remainder is used in oil-production and for export, and up to 92% of the natural gas is domestically used for producing electricity. There is an urgent need to seek alternative sources for electricity generation.</p>
<p>
The technical and non-technical system losses were reduced from 21.4% in 2006 to 20.9% in 2007. The total power system losses in 2007 were 20.9%.</p>

Potential for Renewable Energy: 

<p>
<strong>Solar energy</strong><br />
A 2008 study by Oman found the nation&#39;s solar energy potential is sufficient to meet all domestic electricity requirements and provide electricity for export. Theoretically it would be possible to supply all of Oman&#39;s present consumption of 13,900 GWh by utilising about 280 sq km of desert area for solar collectors, (around 0.1 per cent of the Sultanate&#39;s land area). Steps are in place to develop the first large scale solar power plant whose capacity will range between 50 and 200 MW.</p>
<p>
Elaborating on the findings of a feasibility study conducted by the Public Authority for Electricity and Water (PAEW) in December 2009, the study found that a large scale, commercial solar power project is feasible in the country. However, the performance parameters of potential PV system in Oman such as longitude, latitude, incident angle, air mass, module temperature, cell temperature, voltage, current, power, efficiency, and pollution have not been investigated on their study.</p>
<p>
Solar thermal power plant, Concentrated Solar Power (CSP) plant, can be built in Oman to produce substantial amount of energy. The potential for producing energy from this technology is more or less independent on the season with a slight decrease in winter time. The consumption of energy is higher during the summer time due to the need for air condition. During the winter time the surplus production can be exported to Europe where the need for energy is highest. Theoretically, it is possible to power Oman by utilizing about 280km2 of desert from solar collectors, corresponding to 0.1% of the area of the country. Oman may start combining electricity generation and sea water desalination with a 100MW CSP pilot project in the Duqum region. However, owing to the large amount of water required for CSP technology, it would not be wise to rush and implement CSP plants now in Oman.</p>
<p>
<b>Wind energy</b><br />
Wind energy has a high potential in Oman, with over 6.7 full-load wind hours per day on average. Average wind speeds of 5-6 m/s at 10 metres height have been observed along coastal areas of the country. The government is currently considering six pilot projects in the wind sector.</p>
<p>
It is observed that wind speed in general is higher in the coastal regions and in particular in the south and south east of Oman. The maximum wind speeds are observed in this region in June, July and August with an average wind speed at 50 m of 6.96, 7.86 and 7.18 m/s for the three months respectively. There is also a lot of wind energy available offshore as Oman has a coastline of almost 1,700km. However, little studies have been done to specify offshore wind energy in the last 20 years.</p>
<p>
<b>Biomass</b><br />
Greater recovery of wood from unmanaged and managed woodland could make a significant contribution to Oman energy targets.</p>
<p>
<b>Biofuels</b><br />
Private-sector investment in biofuel production from date palms is ongoing, with 80,000 palms allocated for the first phase of the project. In addition, it is estimated that Oman could produce a net 100,000 MWh a year from waste biogas, corresponding to a continuous power capacity of roughly 4 MW.</p>
<p>
<b>Hydropower</b><br />
Oman has limited to no hydropower potential.</p>
<p>
<b>Ocean power</b><br />
No studies have been done to specify the potential of tide energy. Regarding wave energy, there has been some scientific study of internal waves in the Arabian Sea and Gulf of Oman through the use of satellite imagery, which shows evidence of fine scale internal wave signatures along the continental shelf around the entire region. More studies need to be carried out to specify the potential of wave energy in the country. In addition, there may be possibility to find feasible ocean thermal energy converter energy in Oman because of the depth of Arab Sea and Gulf of Oman (4,652m at the deepest); however no studies have been carried out in the last 20 years.</p>
<p>
<b>Geothermal energy</b><br />
Oman has 55 possible thermal boreholes with an average temperature in excess of 100&ordm;C. The highest temperature borehole is 174&ordm;C, meaning Oman&#39;s geothermal resource is not suitable for electricity generation on a large scale.</p>

Potential for Energy Efficiency: 

<p>
The price of energy in Oman is generally subsidised, reducing the incentive on individuals and industry to make energy efficiency a priority, officials from the Public Authority for Electricity and Water (PAEW, <a href="http://www.paew.gov.om">www.paew.gov.om</a>) have said.&nbsp;</p>
<p>
According to the Authority for Electricity Regulation (AER), energy demand by the residential sector is the largest at 55%, followed by the industrial sector (8%), commercial sector (22%), government (15%), agriculture &amp; fisheries (1%) and defence (1%). However, the industrial sector is the fastest growing part with an annual growth rate of 14.4% in comparison to nonindustrial sectors which has growth rate of 6.3%. The industrial sector has the highest primary energy demand, due to the high proportion of oil extraction and cement manufacture.</p>
<p>
The first demand side management (DSM) study in Oman (1998), &lsquo;&lsquo;The Study on Demand Supply Management for Power Sector in Sultanate of Oman&rsquo;&rsquo;, was conducted by Japan International Cooperation Agency (JICA). The study identified several strategies for potential load management including (i) gas cooling systems for Government buildings, hospital, hotels commercial complexes and large houses; and (ii) shifting load from peak time to off-peak time in the industrial and commercial sectors by application of ice thermal storage system and introducing time-of-use tariffs. However, the study recommendations were never implemented.</p>
<p>
Another theoretical study estimated the DSM energy saving and load management potential in commercial and government/institutional sectors in Oman (MIS area) and evaluated its impact on generation capacity and energy savings. The study found that DSM is financially beneficial from customers&rsquo; point of view as the discounted payback period of investment in efficient lighting and air-conditioning is between 4 and 12 years of the surveyed sample (even with the subsidized tariff). From the utility point of view the capacity saving at the horizon year (2024) is between 372 and 596MW and the overall energy saving for the whole planning horizon is about 29&ndash; 44 TW h. The total avoided cost in generation and capacity saving is somewhere between 416 and 597 million dollars. However, there has been no serious effort from the Government side to implement time-of-use tariffs or offer rebates to encourage customers to buy efficient end-use appliances. On the contrary there are large subsidies in tariffs especially in the residential and commercial sectors which are the main hurdle in the implementation of DSM. There is a huge potential for DSM and energy conservation in all the energy sectors of Oman.</p>

Ownership: 

<p>
<b>Electricity market</b><br />
The government of Oman owns a majority share in all companies in the energy sector.</p>
<p>
The <i><b>Oman Power and Water Procurement Company</b></i> (<i><b>OPWP</b></i>, <a href="http://www.omanpwp.com/">www.omanpwp.com/</a>) is the single Buyer of power and water for all IPP/IWPP projects within the Sultanate of Oman. The Oman power system is not fully interconnected. The largest part of the system, known as the MIS (Main Interconnected System) covers the northern part of the Sultanate. A smaller system owned by the <i><b>Dhofar Power Company SAOG</b></i> (<b><i>DPC</i></b>) serves the Salalah area in the south and the rest of the country is supplied by the <i><b>Rural Areas Electricity Company</b></i> (<b><i>RAECO</i></b>, <a href="http://www.reefiah.com/">www.reefiah.com/</a>).</p>
<p>
The <i><b>Electricity Holding Company</b></i> (<i><b>EHC</b></i>, <a href="http://www.ehcoman.com">www.ehcoman.com</a>) is responsible for generation in the country as well as privatisation of the electricity sector. The EHC, registered in 2002, is wholly-owned by the Ministry of Finance and owns 99.99% of shares of <i><b>Oman Power and Water Procurement Company</b></i> (<i><b>OPWP</b></i>, <a href="http://www.omanpwp.co.om/">www.omanpwp.co.om/</a>) and 98.1% of shares of the DPC. The EHC holds the shares of the Government in nine companies engaged in the generation, transmission and distribution of electricity and related water services. The <i><b>Oman Electricity Transmission Company</b></i> (<i><b>OETC</b></i>, <a href="http://www.omangrid.com/">http://www.omangrid.com/</a>) is responsible for transmission activities. The Main Interconnected System (MIS) comprises three distribution systems that are owned and operated by the subsidiaries of the EHC: <i><b>Muscat Electricity Distribution Co</b></i>. (<i><b>MEDC</b></i>), <i><b>Mazoon Electricity Co.</b></i> (<i><b>MZEC</b></i>) and <i><b>Majan Electricty Co.</b></i> (<i><b>MJEC</b></i>).</p>
<p>
Petroleum Development Oman (PDO) has its own dedicated system of 618 MW; and there are also other companies that produce power for their own need, such as Oman Mining Company, Oman Cement Company, Sohar Refinery, Sohar Aluminum Company, Ministry of Defense and Occidental of Oman.</p>
<p>
<b>Oil market</b><br />
<i><b>Petroleum Development Oman</b></i> (<i><b>PDO</b></i>, <a href="http://www.pdo.co.om/">www.pdo.co.om/</a>) is the foremost exploration and production company in Oman. It accounts for more than 70% of production. PDO&rsquo;s shares are owned by the government (60%), Shell (34%), Total (4%) and Portugal&rsquo;s Partex (2%). Occidental Petroleum has the largest presence of any foreign firm and is the second largest oil-producer in Oman. Oman&rsquo;s government manages its investments in the downstream sector through the state-owned Oman Oil Company (OOC, <a href="http://www.oman-oil.com/">www.oman-oil.com/</a>).</p>
<p>
<b>Gas market</b><br />
The PDO accounts for nearly all of the natural gas supply in Oman. The <b><i>Oman Gas Company</i></b> (<i><b>OGC</b></i>) directs the country&rsquo;s natural gas transmission and distribution systems. The OGC is a joint venture between the Omani Ministry of Oil and Gas (80%) and OOC (20%). The <i><b>Oman Liquefied Natural Gas LLC</b></i> (<i><b>OLNGC</b></i>, <a href="http://www.omanlng.com/">www.omanlng.com/</a>) is a limited liability incorporated joint venture company established by Royal Decree in 1994 and operating under the laws of the Sultanate of Oman. It produces and sells LNG and a byproduct, Natural Gas Liquids (NGL&rsquo;s).</p>

Structure / extent of competition: 

<p>
<b>Electricity market</b><br />
Following the promulgation of a <i><b>Sector Law</b></i> in 2004, the government started carrying out unbundling of the power sector and setting up of independent companies on a commercial basis. On May 1st, 2005, the Ministry of National Economy implemented a transfer scheme whereby the electricity and related water assets, liabilities and staff of <i><b>Ministry of Housing Electricity and Water</b></i> (<i><b>MHEW</b></i>) are transferred to the successor companies. The successor companies are a holding company, four generation companies, three generation and desalination companies, one transmission company, three distribution and supply companies, a company servicing the rural areas and a single power and water procurement company. With the exception of the electricity holding company, the successor companies are now responsible for the electricity function previously undertaken by MHEW.</p>
<p>
<b>Oil market</b><br />
Oman&rsquo;s Ministry of Oil and Gas coordinates the state&rsquo;s role in the oil sector though final approval on policy and investment rests with the sultan of Oman, who also holds the office of prime minister.</p>
<p>
<b>Gas market</b><br />
The government enlists foreign companies in new exploration and production projects, requiring the sophisticated technology and expertise of the private sector. Developing gas projects with foreign firms such as Occidental, BP, and Petronas will determine Oman&rsquo;s future production.</p>

Existence of an energy framework and programmes to promote sustainable energy: 

<p>
In December 1999 the Council of Ministers of Sultanate of Oman approved policies for the wholesale restructuring and privatization of the sultanate&rsquo;s electricity and related water sectors.</p>
<p>
On the 1st August 2004, a <b><i>Sector Law</i></b> was announced by the Royal Decree 78/2004 to oversee the development of law for regulation and privatization of the sultanate&rsquo;s electricity and related water sector. The <i><b>Sector Law</b></i> implements a new market structure, paves the way for further electricity privatization, and establishes an independent regulator to oversee the public interest regulation of the sector. The government started carrying out unbundling of the sector and setting up independent companies on a commercial basis. The Authority is also involved with the PAEW in proposing further changes in the current <i><b>Sector Law</b></i> to promote competition, and define subsidies and tariffs for large-scale renewable projects.</p>
<p>
Despite having considerable solar and wind energy potential, Oman has not yet implemented an energy policy framework.</p>
<p>
In 2008, the <i><b>Authority for Electricity Regulation</b></i> (<i><b>AER</b></i>) published a study detailing the need for a dedicated national authority in Oman, to administer Clean Development Mechanisms (CDMs) in accordance with the UNFCCC. The Authority has also invited the RAEC to identify possible locations for pilot distributed solar and wind power projects.</p>
<p>
The strategy in Oman to harness renewable energy resources will cover three main streams: the first is developing policy to promote applications of renewable energy; the second is the implementation of a number of projects to improve learning; and the third stream is building local capacity to have a sustainable business model. The AER has confirmed a shortlist of six renewable energy pilot projects of which four are solar projects as follows: (i) A 100kW PV solar project in Hiji; (ii) A 292kW solar project in Al Mazyonah; (iii) A 1500kW project at location to be confirmed; (iv) A 28 kW solar project in Al Mathfa incorporating battery storage capability; (v) A 500kW wind project in Masirah Island; and (vi) A 4200kW wind project in Saih Al Khairat, Wilyiat of Thumrait. Moreover, large scale solar power plant with a capacity of 200MW is expected to become available in 2014.</p>

Current energy debates or legislation: 

<p>
The RAEC has recently launched a project to install digital meters in homes across the country, in an effort to better analyse consumption.</p>
<p>
Public interest regulation of the electricity sector has recently been proposed as an improvement to the current energy-sector law. Under the program, the regulating authority can authorise persons to undertake activities in the sector as regulated activities.</p>

Major energy studies: 

<p>
<i>Study on Renewable Energy Resources in Oman</i>: COWI and Partners LLC, May 2008, <a href="http://www.aer-oman.org/pdf/studyreport.pdf">http://www.aer-oman.org/pdf...
<p>
<i>Assessment of Renewable Energy Resources Potential in Oman and Identification of Barriers to their Significant Utilisation</i>: A.H. Al-Badi, A. Malik and A. Gastli, December 2008, <a href="http://www.linkinghub.elsevier.com/retrieve/pii/S1364032109000999">www.l...

Role of government: 

<p>
The energy sector in the country is owned in majority by the government, hence a high degree of involvement in all areas of power generation, distribution et al.</p>
<p>
The <i><b>Public Authority for Electricity and Water</b></i> (<i><b>PAEW</b></i>) was established under Law of Public Authority for Electricity and Water (Royal Decree 58/2009) with the objectives of development and enhancement of the government&rsquo;s policy in respect of the development of the electricity and water sectors,&nbsp;securing the electricity supply to all the citizens in all the areas of the Sultanate,&nbsp;encourage private sector to invest in the sectors and provision the drinking water. The PAEW is currently involved in implementing &ldquo;cost-reflective&rdquo; price tariffs in an effort to improve energy efficiency and reduce consumption in the Sultanate.</p>

Government agencies in sustainable energy: 

<p>
<br />
There are no dedicated agencies for the promotion of sustainable energy, although most government agencies appear to have an interest in the subject, with the PAEW liaising with various government bodies to acquire feasibility data for solar power installations in 2009.</p>

Energy planning procedures: 

<p>
Numerous plans are currently being implemented to extend access to electricity to the most isolated communities in the country, as well as expand the market share of renewable energy sources in the country. The RAEC plans to implement distributed solar and wind generation in rural areas.<br />
<br />
Oman forms part of the inter-connected Gulf Co-operation Council Grid with a 220kV line connecting the country to the UAE. Phase one of the connection project is currently ongoing.</p>

Energy regulator Date of creation: 

<p>
The <b><i>Authority for Electricity Regulation Oman</i></b> (<b><i>AER</i></b>, <a href="http://www.aer-oman.org">www.aer-oman.org</a>) was established in August 2004 by Article (19) of the <b><i>Sector Law</i></b> for the regulation and privatisation of the electricity and related water sector, which was promulgated by Royal Decree 78/2004 on 1st August 2004. The AER is competent to regulate the electricity and related water sector pursuant to Article (2) of the <b><i>Sector Law</i></b>.</p>

Degree of independence: 

<p>
The Government has determined that, pursuant to Article (40) of the <b><i>Sector Law</i></b>, the AER shall have three Members. Accordingly, the Council of Ministers approved at its session 33/2011 on the 29 October 2011 the appointment of the three Members of the Authority. The three permanent Members, including a non-executive Chairman, a non-executive member, and an executive director, are collectively responsible for managing the Authority&rsquo;s affairs and for ensuring that the Authority fulfils all of its statutory obligations. The majority of the organisation&#39;s income is derived from licensing fees.</p>

Regulatory framework for sustainable energy: 

<p>
The Authority has a number of duties, largely reflecting key Government objectives for the electricity and related water sector in Oman. The Authority&rsquo;s duties include:</p>
<ul>
<li>
To promote competition</li>
<li>
To secure the safe, effective and economic operation of the sector ,</li>
<li>
To protect the interests of customers, in particular those with limited income, the elderly and sick,</li>
<li>
To secure compliance with Government policy relating to the protection of the environment, Omanisation and Omani Content,</li>
<li>
To ensure the financial and technical capabilities of licensees and to ensure companies operating efficiently can finance their activities,</li>
<li>
To secure the conduct of fair and transparent competitions for new capacity and output by the Oman Power and Water Procurement Company SAOC,</li>
<li>
To facilitate the privatisation of the electricity and related water sector in Oman and review the scope for further liberalisation.</li>
</ul>

Regulatory roles: 

<p>
The <i><b>Sector Law</b></i> provides the Authority with the powers required to perform its functions, including:</p>
<ul>
<li>
The power to grant licences and exemptions,</li>
<li>
Licence modification</li>
<li>
The power to investigate and&nbsp; to require provision of information,</li>
<li>
Enforcement powers to require licensees or exemption holders to comply with&nbsp; statutory obligations and to impose penalties,</li>
<li>
powers to revoke Licences and Exemptions,</li>
</ul>

Role of government department in energy regulation: 

<p>
The Economic and Financial Affairs Directorate is responsible for the economic and financial regulation of the electricity and related water sector.</p>
<p>
The Authority constrains the exercise of market power through enforcement of economic purchase conditions and intervention to approve the pricing structures of electricity and water bulk supply tariffs and charges for connection and use of licensed systems. The principal instrument of economic regulation is RPI-X type price controls.</p>

Regulatory barriers: 

<p>
Due to the geography of the country, some areas are particularly difficult to access, in particular the mountainous north. Dissemination of distributed generation systems is made more difficult by this fact.</p>
<p>
The formation of a dedicated agency to support renewable energy could speed market uptake. In addition, the creation of a subsidy/feed-in tariff system would give additional incentive for renewable energy projects.</p>
<p>
The patchy and widely disparate patterns of renewable energy development in Oman, facing a host of policy and administrative barriers &ndash; including highly subsidized cheap electricity competing with renewable technologies&ndash;as well as the lack of adequate fiscal incentives to consumers for their installation, have prevented the spread of renewable energies in the country. Flows of foreign technology and finance were also way below needs.</p>

References: 

Al-Badi, A., Malik, A., Al-Areimi, K. and Al-Mamari, A. (2009) &lsquo;Power sector of Oman &ndash; Today and tomorrow&rsquo;, Renewable and Sustainable Energy Reviews, 13: 2192-2196.<br />
<br />
Malik, A. and Al-Badi, A. H. (2009) &lsquo;Economics of Wind turbine as an energy fuel saver &ndash; A case study for remote application in Oman&rsquo;, Energy, 34: 1573-1578.<br />
<br />
Jervase, J. A. and Al-Lawati, A. M. (2012) &lsquo;Wind energy potential assessment for the Sultanate of Oman&rsquo;, Renewable and Sustainable Energy Reviews, 16: 1496-1507.<br />
<br />
Al-Badi, A. H., Malik, A. and Gastli, A. (2011) &lsquo;Sustainable energy usage in Oman &ndash; Opportunities and barriers&rsquo;, Renewable and Sustainable Energy Reviews, 15: 3780-3788.<br />
<br />
EIA (2011) &lsquo;Country Analysis Briefs: Oman&rsquo;, Last Updated: August 2012, available from: <a href="http://www.eia.gov/countries/country-data.cfm?fips=mu">http://www.eia.go... [Accessed on 28 July 2013].<br />
<br />
Kazem, H. A. (2011) &lsquo;Renewable energy in Oman: Status and future prospects&rsquo;, Renewable and Sustainable Energy Reviews, 15: 3465-3469.<br />
<br />
Oman Time (2011) &lsquo;Direct link to GCC grid mulled&rsquo;, available from: <a href="http://www.omaninfo.com/news/direct-link-gcc-grid-mulled.asp">http://www... [Accessed on 28 July 2013].<br />
<br />
GulfBase: &quot;US expert hails Oman&#39;s renewable energy initiatives&quot;, 4th March 2010. http://<a href="http://www.gulfbase.com/news/us-expert-hails-oman-s-renewable-energy-ini... on 30 July 2013]<br />
<br />
AER: <a href="http://www.aer-oman.org/">http://www.aer-oman.org/</a>&nbsp;[Accessed on 28 July 2013]<br />
<br />
Global Transmission Report: &quot;Transmission Privatisation: Oman to lead the way for the Middle East&quot;, 1st April 2009.&nbsp;<a href="http://www.globaltransmission.info/archive.php?id=1702">http://www.globa... on 30 July 2013]