Why an integrated energy authority for Oman would make eminent sense

Oman’s energy landscape, long dominated by hydrocarbons, is on the cusp of an exciting transformation.
By 2025, nearly 2,500 megawatts (MW) of renewables based capacity is projected to come on stream in the Sultanate, supplying around 10 per cent of the nation’s grid-connected electricity requirements – up from zilch at present. Roof-top solar photovoltaic installations will be a ubiquitous feature of the urban landscape, while biogas plants and waste-to-energy schemes will likely be a facet of sustainable energy production in every governorate in the Sultanate.

While the plans are ambitious and the intentions sincere, they are driven by a multiplicity of ministries, government authorities, and public and private sector organisations that, some market observers warn, amounts to the compartmentalization of a strategic national objective.

After all, different energy resources fall under the purview of different ministries. Regulating oil and gas activities, and related aspects of the hydrocarbon industry in the Sultanate, is the Ministry of Oil and Gas.  But what is unclear at this juncture is the regulation of imported liquefied natural gas (LNG) for power generation, an option being mooted in some quarters to help secure the long-term energy requirements of industrial investors in the Special Economic Zone (SEZ) at Duqm.

Likewise, imports of coal for a proposed coal-fired Independent Power Project (IPP) being weighed at Duqm will require a policy decision by the government, effectively granting a specific ministry or government agency the mandate to regulate the handling of this feedstock.

Last year, Oman Power and Water Procurement Company (OPWP) – the sole procurer of all new power generation and water desalination capacity under the sector law – appointed a team of consultants to study the ‘techno-economic’ feasibility of established a coal-based plant of a capacity ranging from 1500 – 2,500 MW.  The project, if indeed given the green-light by the government, is proposed to be implemented on a Build – Own – Operate (BOO) basis, mirroring the methodology currently in place for the execution of conventional natural gas-based power projects.

According to Dr Mohammed bin Hamed al Rumhy, Minister of Oil and Gas, the influential Finance Affairs and Energy Resources Council has the broad mandate to pronounce policies on energy related matters.

“Energy policies are generally governed by the Finance Affairs and Energy Resources Council. Issues related to the energy mix, renewables, and so on, in regards to meeting the Sultanate’s power needs are overseen by the Public Authority for Electricity and Water (PAEW),” Dr Al Rumhy said.

Renewables

Regulation of grid-connected renewables – a key game-changer for the energy sector going forward – is in the safe hands of the Authority for Electricity Regulation (AER).  Anticipating the strong uptake of utility-scale solar photovoltaic capacity and rooftop-installed solar PV systems, the Authority is moving to put in place regulatory frameworks and guidelines to support the aggressive deployment of renewables-based power generation in the Sultanate.

Of late, however, sustainable power sources that would have been inconceivable as fuel resources perhaps a decade ago, are now being actively championed by Oman-based organisations.

Be’ah, the Sultanate’s solid waste management utility, has unveiled a string of waste-to-energy schemes that aim to utilize municipal, biogas and organic waste as fuel for the production of either electricity or for the production of desalination water.  Waste is also seen as a fuel in the production of steam for oilfield applications, or in the manufacture of refuse derived fuel (RDF), which can be used in a variety of industries.

As with any fuel source being harnessed to produce electricity supplied to the national grids, OPWP is weighing the technical and economic feasibility of a maiden waste-to-energy plant in the Sultanate.  Municipal waste is the fuel resource for the estimated 50 – 60 MW plant, which if found viable, is proposed to be located in Barka.

But what about fuel resources and related activities that do not fall strictly within the regulatory purview of existing agencies, notably the Ministry of Oil & Gas, Public Authority for Electricity and Water, and the Authority for Electricity Regulation?

Silo effect

Speaking at a recent business forum hosted by a leading publishing house in Muscat, PDO Managing Director Raoul Restucci welcomed the groundswell of enthusiasm in renewable energy development in the Sultanate, but lamented that “things were happening in silos”.  Integration under one authority would help accelerate the entire process, he noted.

Majority-government-owned Petroleum Development Oman (PDO) is itself preparing to transition from an oil and gas focused company to a ‘fully-fledged energy company’ with interests spanning renewables, energy management, and so on.  The company is also a partner in the landmark Miraah project – one of the world’s largest solar plants capable of delivering 1,021 MW of peak thermal energy to generate steam for heavy oil production targeting the Amal oilfield.  More recently, PDO floated a tender for a 100 MW solar PV system to offset gas-based power generation with solar energy.

Proposals for the establishment of an integrated energy authority in the Sultanate are not new, however.  Two years ago, around 100 stakeholders from industry, academia, government, energy and the private sector debating the ingredients of a 25-year Energy Master-Plan for the Sultanate, called for the establishment of a Ministry of Energy, among scores of other recommendations.  A new energy ministry, the forum noted, would bring hydrocarbons and renewables under one roof.

More recently, Tanfeedh – the National Programme for Enhancing Economic Diversification – called for the merger of “institutions which are concerned with energy policy into a single government entity”.

The agency made the recommendation in support of its plea for a review of current gas pricing policies governing the use of natural gas as a fuel resource.  Tanfeedh is mooting a price-based allocation as the principal mechanism for future gas sales to industry. While calling for the scrapping of controls on the pricing of gas for industrial applications, it has advocated instead new mechanisms, such as dealing with third parties to sell gas to power producers or delivering gas directly to businesses that are end-users of electricity.