Boost for steam and gas turbines in Middle East

Edited by the Engineeringtalk editorial team Mar 2, 2006

Report finds strong economic growth, youthful demographics and diversification away from oil underlining escalating demand for power in the Middle East and North Africa.

Strong economic growth, youthful demographics and diversification away from oil are underlining the escalating demand for power in the Middle East and North Africa (MENA), according to a report by market watcher Frost and Sullivan.

As power generation markets expand to meet the increasing need for power, the steam and gas turbines markets in the region should receive a resultant fillip.

Economic liberalisation and privatisation initiatives are set to reinforce further such positive trends.

Frost and Sullivan finds that the MENA steam and gas turbines markets are set to expand from $2.53 billion in 2005 to $3.25 billion in 2011.

Of the total megawatt addition of 100,409MW over the period 2005 to 2011, gas turbines are expected to account for 77.1%, with steam turbines capturing the remainder.

In terms of the total revenue addition of $20,738.6 million during this period, gas turbines are projected to contribute 87.2%, with the remainder from steam turbines.

Soaring demand for electricity - estimated to be growing as high as 8 to 9% annually in some countries - is providing major impetus to the MENA steam and gas turbines markets.

The residential sector (with an expanding population and youthful demography) as well as the booming hydrocarbon and industrial sector are contributing to an increase in demand for power.

This trend, with overall regional economic growth due to booming oil prices and increased oil production quotas, is set to push market expansion.

While augmented revenues due to economic growth could lead to higher investments to the power generation market, it will still be insufficient to meet the investments required to meet domestic demand.

This is poised to create opportunities for private investors to build installed power capacities in the region.

In this context, the United Arab Emirates and Saudi Arabia have been front runners in increasing the benefits of private investment, followed by Qatar and Egypt.

"As privatisation is seen as the potential method of building national infrastructure, governments are liberalising their economies and are increasingly seeking to attract investments from other sources; however, existing policies and procedures are making the situation less attractive," said Frost and Sullivan Research Analyst Karthikeyan Vadamalairaaj.

An unfavourable investment climate, including the lack of clear legal frameworks and regulations in some countries, is retarding progress in attracting private capital.

At the same time, highly subsidised electricity systems with distorted contract structures and tariff rates are lowering the difference between operating costs and actual revenue generation.

This situation is discouraging potential private investors for whom RoI is crucial.

"Since a majority of upcoming power plants are expected to be built by private investors, strategic collaborations with prospective bidders by OEMs on all occasions are essential to tap growth potential," said Vadamalairaaj.

"This will also pave the way for a competitive contract-awarding process by ensuring that there is a check on pricing".

Gas turbines are likely to dominate the market until 2011, as the resources of the region will complement its power generation needs.

Steam turbines are anticipated to have a consistent share with gas turbines, due to the combined cycle power generation facility.

Most power requirements are expected to come from higher output categories.

The 80 to 180MW and above 300MW output segments of gas and steam turbines respectively are likely to occupy the highest share of capacity additions due to the growing popularity of combined cycle power generation.

Machines providing better output efficiency and lower emissions are set to become increasingly popular in the market.

Iran, Saudi Arabia and the UAE are among the key countries in the MENA that are likely to witness high activity over the long term.

Iraq and the smaller Gulf states will collectively register the highest capacity addition in the region.

The market is not expected to be concentrated over a specific region, but spread relatively evenly, with all the countries having a considerable share.