Steam and gas turbines to galvanise the MENA power generation markets

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 further reinforce such positive trends.

Frost & Sullivan finds that the Middle East and North Africa Steam and Gas Turbines Markets are set to expand from US$2.53 billion in 2005 to US$3.25 billion in 2011. Of the total MW addition of 100,409 MW over the period 2005-2011, gas turbines are expected to account for 77.1 per cent, with steam turbines capturing the remainder. In terms of the total revenue addition of US$20,738.6 million during this period, gas turbines are projected to contribute 87.2 per cent, with the remainder accounted for by steam turbines.

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Soaring demand for electricity - estimated to be growing as high as 8-9 per cent 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, together 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 (UAE) and Saudi Arabia have been frontrunners in maximising 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," notes Frost & Sullivan Research Analyst Karthikeyan Vadamalairaaj.

An unfavourable investment climate, including the lack of clear legal frameworks and regulations in some countries, is indeed 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 original equipment manufacturers on all occasions is essential to tap growth potential," says 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.

The majority of power requirements are expected to come from higher output categories. The 80-180 MW and above 300 MW 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.

Middle East and North Africa Steam and Gas Turbines Markets, part of the 9851 Subscription, provides an overview and outlook for the market. This study has been segmented into steam turbines market and gas turbines market. All research included in subscriptions provide detailed market opportunities and industry trends. All research is evaluated following extensive interviews with market participants. Interviews are available to the press.