Gulf may need over $35b to finance power projects

Dubai: Gulf Arab countries face an acute challenge in meeting the rising demand for electricity as they power ahead with an unprecedented construction spree.

The power sector in the Gulf Cooperation Council (GCC) could require more than $35 billion in financing in the next 10 years, ratings agency Moody's said in a report.

Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE are expected to spend $50 billion by 2015 to boost generation capacity by nearly 60,000 megawatts.

"The electricity industry in the GCC countries is experiencing a period of great challenges as it attempts to keep up with unprecedented economic and demographic growth," the agency said.

It said most GCC countries, which are the world's top oil exporters, will face fuel procurement problems in the coming years.

Further government support, mainly through subsidies, may be required in some markets to ensure profitability of power producers, "particularly if tariffs remain motivated by political rather than economic considerations."

Encouraged by high oil revenues, governments in the region have launched massive infrastructure projects in recent years.

The value of Gulf projects under development has crossed $2 trillion, the Middle East Economic Digest said earlier this year.

In the last two days, new real estate projects worth some $150 billion were announced in the UAE.

As most of the new plants to be built by 2015 will be gas-fired, current gas supplies may not be sufficient.