KUWAIT AIMS FOR ENERGY SELF-SUFFICIENCY BY 2012

UNCLAS SECTION 01 OF 02 KUWAIT 000687 SENSITIVE SIPDIS STATE FOR NEA/ARP, EEB E.O. 12958: N/A TAGS: ENRG ECON EINV KU SUBJECT: KUWAIT AIMS FOR ENERGY SELF-SUFFICIENCY BY 2012 REF: A. 08 KUWAIT 1030 ¶B. KUWAIT 659 ¶1. (SBU) Summary: The GOK seeks to end perennial electricity shortfalls by summer 2012 through the construction of two (long-planned) power plants, the 2,000 MW Subiya power plant and the 4,800 MW As-Zour North power plant. U.S. firm General Electric is involved in two of three consortia being considered for the $2.4 billion Subiya project; the contract award will likely be decided by the end of July. Separately, the GOK expects to import electricity from Qatar during the summer of 2010 and beyond. End Summary. ¶2. (SBU) Ministry of Electricity and Water (MEW) Assistant Undersecretary Ahmad Al-Jassar told Econoff July 8 that Kuwait -- which has one of the highest per capita power consumption rates in the world -- expects an average power shortfall of 1,436 MW for 2009, 1,441 MW for 2010, 1,163 MW for 2011 and a surplus of 492 MW for 2012. These targets assume that the Subiya power plant provides interim output of at least 1,300 MW by June 2011 and that the first two phases of the As-Zour North project are completed by summer 2012. (Note: This information from the MEW's second most senior civil servant contradicts data provided to Econoff by the MEW's Director of the Studies and Research in October 2008; ref A. End Note). 2,000 MW Subiya Plant -------------- ¶3. (SBU) Jassar said the MEW expects to finalize contract negotiations for the Subiya power plant project by September. Despite the cancellation of two tenders relating to this project in the past three years, Jassar asserted that the MEW was committed to initiating work on the project this year and that his political masters were on the same page. The project calls for an interim output of 1,320 MW by June 1, 2011 and final output (2,000 MW) by June 2012. The bidding consortia are: (i) GE and Hyundai Heavy Industries (local partner: Al-Rashed); (ii) Ibedrola, using GE turbines and generators (local partner: Kharafi); and (iii) Siemens and Doosan Heavy Industries (local partner: Alghanim International). ¶4. (SBU) He said that the GE/HHI consortium is currently the lowest bidder but that deviations from the MEW's specifications will undermine the viability of the GE-led group's bid. He suggested that GE/HHI needs to hew closely to the GOK's specifications if the consortium hopes to win the contract. Jassar noted that achieving interim output of approx. 1,100 MW by June 2011 is critical, otherwise Kuwait faces a massive electricity shortfall of approximately 2,500 MW in 2011. ¶5. (SBU) Embassy conveyed the essence of Jassar's comments to GE officials in Dubai. 4,800 MW As-Zour North Plant -------------- ¶6. (SBU) The GOK plans to construct a 4,800 MW power plant and 280 million gallons per day (g/d) desalination plant in a combined facility in As-Zour in southern Kuwait. The project comprises four primary phases and one smaller fifth phase, as follows: phase 1 - 1,500 MW and 102 million g/d; phase 2 - 1,500 MW and 102 million g/d; phase 3 - 800 MW and 51 million g/d; phase 4 - 1,000 MW; and phase 5: 25 million g/d. The first two phases need to be completed by 2012 if the GOK is to achieve the national output targets stated in paragraph two above. ¶7. (SBU) Jassar said that the six consortia pre-qualified for the Subiya power plant project would be invited to bid on the As-Zour project, as would other firms. He said the tender process for the project would last from seven to ten months. Jassar said the tender process needs to commence expeditiously if the GOK is to meet short-term electricity targets; he did not know why his political masters had not approved the initiation of the tender process. He added that the contractor who wins the bid for the project's first phase will be well placed to be awarded contracts for the subsequent phases. ¶8. (SBU) Responding to a query about local media reports regarding a GCC grid, Jassar said that Kuwait was already hooked up to Saudi Arabia and Qatar via two 600 MW circuits. He said that Qatar had surplus power which Kuwait expected to buy for summer 2011 and beyond, if need be. He said that KUWAIT 00000687 002 OF 002 Qatar didn't sell power to Kuwait this summer because the GOQ may have been committed to other buyers. Jassar said that a GCC-wide grid made sound technical sense inasmuch as a larger grid reduces the need for a high spinning reserve; he said that a regional grid would need a spinning reserve of five percent while Kuwait's national grid currently requires 15 percent. Comment -------------- ¶9. (SBU) Petroleum-rich Kuwait's drive to be energy self-sufficient within three years is contingent on the completion of two long-delayed projects, namely the Subiya and As-Zour power plants. A newly assertive executive branch -- which commanded clear majorities in critical votes in the new National Assembly (ref B) -- may be gearing up to implement a series of long-planned infrastructure programs stymied by the political paralysis of the past three years. Embassy is cautiously optimistic that the GOK is, at long last, in a position to make good on plans to develop the country's faltering infrastructure, including power generation. End Comment. ********************************************* ********* For more reporting from Embassy Kuwait, visit: visit Kuwait's Classified Website at: http://www.intelink.sgov.gov/wiki/Portal:Kuwa it ********************************************* ********* JONES