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Over $100 Billion to be Spent on Power in Saudi

Saudi Arabia : 29 March 2011

There are plans in Saudi Arabia to invest over $100 billion in the power generation and distribution industry over the course of the next decade. This spending should help the Kingdom to meet a domestic demand that is swelling two times as quickly as the largest economy within the Arab world.

According to Saleh Al-Awaji, deputy minister of the Water and Power Ministry in Saudi Arabia, forecasts are that the earlier estimate of spending within the power industry of $81 billion (or 303 billion riyals) will increase by 30 percent over the next ten years. Al-Awaji spoke in Abu Dhabi at a conference.

The governor of the Electricity and Co-Generation Regulatory Authority in Saudi Arabia, Abdullah al-Shehri, stated that this amount is fairly conservative. He noted that around one third of this fresh spending will be marked for power plants, while the balance will go into the nation’s grid.

This forecasted rise in spending is partly due to the power generation necessary for the 500,000 new residents that King Abdullah promised in a bid to quell political unrest in Saudi Arabia. Across the Middle East region there have been protests regarding the lack of job opportunities and democratic political systems.

The King announced back on March 18 that $67 billion will be invested into public spending, which includes new home construction intended for those religious and military groups that have supported the government ban against demonstrations. The new money is extra on top of the $36 billion in spending  announced back in late February.

Saudi Arabia still controls the largest oil reserves on the planet and has a goal to increase the supply of power in order to fuel growth in the economy and create work opportunities for the swelling population of 27 million people. There are cities currently being built on the coast of the Red Sea as well as the Persian Gulf and the nation is moving in the plastics industry, as well as steelmaking and other more diversified industries.

The government expects that the demand for power will grow at around 8 percent each year for the coming five-year period. That number is about twice the rate of growth expected within the economy, which currently sits at 4 percent based on recent forecasts made by Saudi Arabian central bank governor Muhammad Al-Jasser.

Based on reports by Saudi Electrcity Co. back in 2009 Saudi has a generation capacity of around 45,000 megawatts. To meet the rising future demands that capacity must increase up to 75,000 megawatts before 2018 and climb to higher than 120,000 megawatts in the next 20 years, according to al-Sherhi.

As the power demand climbs Saudi is still burning more and more crude oil and other refined products in the power plants. Crude and other liquids are used for the generation of around 60 percent of the nation’s electricity currently, according to Al-Awaji’s comments at a recent conference.

Renewable energy is also an option that Saudi is looking at, notably solar power. Nuclear power plants are another option to expand the output of the nation. An upcoming Riyadh conference covering solar power should be where announcements are made regarding the supplementary power sources Saudi is aiming at.

Andrew Reid, Staff Writer, Gulf Jobs Market News
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