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Officials from Gulf oil producers have met in Saudi Arabia and signed an agreement on the exchange of power supplies in the event of shortage or disruption within a planned power grid.
"This agreement is for the exchange of commercial power supplies among GCC countries as part of their project to connect their electricity networks in a single grid," says Yousuf Ganahi, chairman of the Gulf Co-operation Council Interconnection Authority (GCCIA).
It is the second agreement to be signed by GCC members as the first one included general terms and technical relations within the power grid.
How will the agreement help the member states?
The deal will allow GCC states to supply each other with electricity from their own grids.
GCC states are expected to launch the power grid late this year or in early 2010 after the first two phases are completed.
The UAE and neighbouring Oman completed their common electricity network last year, while another project involving four other members of the organisation was finished this year, GCCIA says.
What is the cost factor and how viable is the project?
Officials put the cost of the project at more than $1 billion, but say it will pay off in economic and conservation terms.
For example, a GCC state that suffers from a shortage or sudden disruption of its electricity supplies could get such supplies from another member. Another thing is that one member with surplus supplies could lease part of its network to another with a deficit or sudden shortage.
The project will also save funds because it means member countries will construct fewer power stations in the future.
The grid will not only make power cuts a thing of the past, but will also lead to a drop in costs, says Bahrain's Electricity and Water Authority (EWA) chief executive officer Dr Abdul Majeed Al Awadhi.
The project was needed due to a rapid growth in power consumption in the GCC as a result of steady economic expansion and high population growth. It estimates electricity growth at between eight and 10 per cent annually - one of the highest rates in the world.
It was launched nearly seven years after it was approved by GCC heads of state in the mid- 90s. GCCIA is overseeing the project, which officials expect to result in a 50 per cent reduction in operational reserve and slash costs of power projects in the region in the long term.
Bahrain signed an agreement in March enabling it to import up to 600 MW a day from the grid, or up to 1,200 MW during emergencies.
The country has so far paid $134 million for joining the grid.
The interconnection project is being undertaken by Italian-Norwegian joint venture Prysmian-Nexans, which has awarded a subcontract for laying land cables in Bahrain to Alkomed Engineering.
Five kilometres of land cables are being laid from the landing point of King Fahad Causeway on the Bahrain coast, to a substation in Jasra.
The first phase includes the interconnection of Kuwait, Saudi Arabia, Bahrain and Qatar, which is known as the GCC North Grid.
The second phase includes the introduction of independent systems in the UAE and Oman, named the South Grid, which the GCCIA is not involved in.
The third phase includes the interconnection of the South and North Grid, which completes the interconnection of all six GCC countries.
Supplies will be shared proportionately by the six members. For the UAE it is 900 MW, for Saudi Arabia 1,200 MW, for Bahrain 600 MW, for Oman 400 MW, for Qatar 750 MW and for Kuwait 1,200 MW.
The UAE owns 15.4 of the project while 31.6 per cent is controlled by Saudi Arabia, 26.7 per cent by Kuwait, 11.7 per cent by Qatar, nine per cent by Bahrain and 5.6 per cent by Oman.
But the grid coming alive solves only one part of GCC's problems relating to power. The other most important part is creating enough power to feed the requirements of individual states, which have a huge development agenda.
Looking at the statistics, the GCC still requires investments totalling $37.1 billion to add another 24,734 MW of generation capacity to its grid by 2014 if it is to match the growing demand for power in the region.
A report published by the Kuwait Financial Centre (Markaz) asset management firm, says that population growth and increased immigration is leading to increased demand for modern and efficient infrastructure.
The report says the growing demand for power has meant that installed capacity increased from 46,579 MW in 2002 to 73,339 in 2007, at a rate of 10 per cent a year. In the coming years demand is going to rise manifold.
Alternative energy sources, such as renewable and nuclear energy, are being evaluated by the governments to meet the increased demand, particularly as some countries run short of gas and the region's fuel mix remains overexposed to gas and oil.
As a solution, Moody's Investors Service has pointed out that government support, involvement of private operators, a unified electricity grid, and more regulatory transparency could help ease the burden.
