July 25, 2008

Gulf power crisis presents big opportunity to global majors

It is reported that the demand for power plants in the GCC over the next seven years could lead to contractors gaining a stake in power projects.

According to estimates from MEED, projects worth a combined USD 50 billion will be needed to meet the demand for 60,000MW of power by 2015. But as demand escalates, contractors grappling with capacity issues have said that plants may only get built if project ownership is shared with developers.

Mr Ilias Abdo CEO of Powerflow Engineering said "If the current demand continues we believe we may have to become stakeholders. He said one of the biggest impediments to power plant construction is finding skilled engineers.”

He added that "Timeframes are not being kept because of the vested interest of the different contractors on a project all working on different phases, which has a knock on effect on the next phase. One of our challenges is getting all those involved to have a vested interest in the entire project.”

According to Dr David Barlow head of business development, Middle East & Africa, International Power, making contractors stakeholders to overcome such issues could lead to other problems. He said "We have seen contractors take stakes in independent power projects, particularly elsewhere in the world, but unless the investment is managed well there could be a conflict of interest."

Mr Sujit Tharakan director of engineering & projects division of Kuwait-based K4 General Trading & Contracting Company said "Obviously, the contractor will be looking to maximise its profit. It will want to make a profit as a contractor and also out of the development, which could lead to a conflict of interest."