Boston, MA -- (SBWIRE) -- 01/09/2014 -- Gas-fired electricity generation will make up the bulk of Kuwait's planned investment in new generating capacity over the coming years, with plans to move towards nuclear energy having been largely abandoned in the aftermath of the Fukushima disaster in Japan. Although oil currently accounts for a significant portion of the country's electricity generation, it is the government's goal to make more of its oil available for export, even if this leads to an increased reliance on imported gas. Building new capacity is likely to become a greater priority in the years ahead, as power consumption runs up against available capacity. However, extremely low domestic power prices mean projects are unlikely to attract foreign investors, forcing Kuwait to go it alone in meeting its growing power demand.
Conventional thermal sources will remain the dominant fuel for electricity generation in the coming years. Following the Fukushima tragedy in 2011, Kuwait ordered the National Nuclear Energy Committee to be dissolved and officially abandoned its pursuit of nuclear power. However, the country is nevertheless aiming to reduce its domestic oil consumption in an effort to free up additional barrels for export, with many power projects that are planned or under construction set to use gas.
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The electricity and water ministry wishes to more than double generating and desalination capacity by 2017 and an estimated US$2.5bn is expected to be invested over the medium term to cater for the projected power demand until 2015. The government has also set ambitious targets with regard to the use of renewable energy, but there is a long way to go before renewables will play a major role in the country's energy mix. Moreover, the country's highly dysfunctional political system poses significant downside risks for the sector in the coming years, with bureaucratic wrangling regularly causing delays to the implementation of planned projects.
Key trends and developments in the Kuwaiti electricity market
- The Kuwaiti government has awarded a US$2bn contract for the construction of the emirate's first independent water and power contract, Al-Zour North Phase 1. The plant will have a generating capacity of approximately 1,500MW, and is expected to be operational by 2018. The project was awarded to a GDF SUEZ-led consortium including Sumitomo Corporation and Abdullah Hamad Al Sagar and Brothers, who together hold 40% of the shares in the project company, with 10% held by Kuwait's sovereign wealth funds Kuwait Investment Authority and the Public Institution for Social Security. The remaining 50% of the shares have been the subject of an initial public offering that was fully subscribed and will be distributed to Kuwaiti citizens once the plant is fully operational.
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