New gas allocation to power sector ‘capped’

BOLD STEP: Ministry of Oil and Gas urges power industry to explore alternative fuel resources

The Sultanate has decided to ‘cap’ new allocations of natural gas to the nation’s power sector in a move designed to prod the latter into exploring alternatives to gas — long the dominant fuel resource powering the country’s electricity generation sector.

The groundbreaking step was conveyed to the power sector in recent weeks, according to a top official of the Ministry of Oil and Gas.

Salim bin Nasser al Aufi, UnderSecretary, said: “Historically we have been generating power using gas, but we have been thinking of making a drastic change in that direction. And in the last few weeks we have decided to cap it to drive home the message to the power generators that we want you to look for alternatives. Gas is no longer a secured supply for you. Perhaps we can (secure supply) if required to, but we really want you to look for alternatives,” he noted.

The stark revelation came on the concluding day of the executive committee meetings of the International Gas Union (IGU) held at Shangri-La’s Barr Al Jissah Resort & Spa on Thursday.

Speaking at the event, Al Aufi pointed out that gas allocations to consumers such as power plants were typically underpinned by long-term commitments extending over 1520 years — timeframes that present significant challenges in the face of growing domestic gas demand.

The cap on new gas allocations to the power sector is expected to remain in place for “some time”, said Al Aufi, stressing the need for the sector to also enhance efficiency in the utilization of the resource. “I believe this step will drive the discussion on renewables, alternative resources, and so on, and that is a healthy discussion we would like to have,” he added.

According to figures published by the National Centre for Statistics and Information (NCSI), the power sector consumes around 20 per cent of the Sultanate’s total gas production. While the sector has been expanding at the rate of 8-10 per cent per annum in terms of electricity demand growth, the use of energy efficient combined cycle gas turbine technology currently installed at the majority of Oman’s modern plants is helping generate more electricity for every molecule of gas in comparison with performance levels of the past.

Natural gas supplied by the Ministry of Oil and Gas is the primary fuel resource for power generation and associated water production within the Main Interconnected System (MIS) covering much of the northern half of the Sultanate. Gas consumption within this grid totalled about 7.4 billion standard cubic metres (Sm3) in 2015, equivalent to 20.2 million Sm3/day. This is projected to rise to 26.7 million Sm3/ day in 2022, based on average annual growth of 4 per cent, according to the Oman Power and Water Procurement Co (OPWP), the sole procurer of new electricity and water capacity in the Sultanate.

Gas consumption in the Salalah System, which serves Dhofar Governorate, totalled about 850 million Sm3 in 2015 (equivalent to 2.33 million Sm3/day). This is projected to jump to 3.2 million Sm3/day in 2022, based on an average 5 per cent increase in annual consumption.

For its part, OPWP says it has secured commitments from the ministry for the fuel requirements of new power plants under various stages of development in Suhar, Ibri and Salalah.

However gas availability with regard to future plants is not assured, it warned in its 2016 Outlook Statement. In the event that further allocations are not forthcoming, it said it would pursue a number of options, notably a strategy to bring forward plans to procure new generation capacity based on a fuel other than gas. Additionally, it would discuss with the government the feasibility of importing gas specifically for use in power generation (and associated water production), it added.