Light It Up

The UAE’s energy industry has been the fuel for the Emirate’s rapid growth over the past few decades. Since the discovery of oil in the early 20th century, oil and gas revenues have been the primary source of income for the country. Recent years have brought increased economic diversification as the Emirates have used their oil wealth to fund development in the tourism and manufacturing sectors, but the energy industry remains the core of the country’s economy. The fall in oil prices in recent years led to decreased revenue and a ripple effect across the nation, but production cuts led to improved prices in 2017.

Ras Al Khaimah has always been less reliant on the energy industry than some other Emirates thanks to its well-established industrial and trade sectors—it is home to the world’s largest ceramics factory and more than 13,000 international firms in its free trade zones. Still, the Emirate has proven oil reserves of more than 500 million barrels, fourth among the UAE. Elsewhere, state-owned RAK Gas, the Emirate’s primary hydrocarbons firm, has taken aggressive actions to increase production from new fields to ensure that domestic gas supply continues to support the Emirate’s industry.

The UAE’s oil production fell during 2017 as a result of OPEC’s agreement to cut production to counteract global oversupply and put upward pressure on prices. Production decreased by 36 million barrels in 2017, and early reports indicated that this trend would continue in 2018; February 2018 saw the UAE’s oil production fall to 50,000bpd below its OPEC target. January 2018 saw the price of oil rise above USD70 a barrel for the first time since prices began to drop in 2014. A December 2017 agreement between oil producers to extend the production cuts, originally expected to end in March 2018, through the end of the year should help further strengthen the sector, though there are still long-term questions about how the industry will respond to new supply from the US market. Ras Al Khaimah, unlike other Emirates, has traditionally had little reliance on oil due to its lack of reserves. State-owned RAK Gas was in charge of extracting natural gas from Ras Al Khaimah’s only offshore field but has shifted priorities to exploration as the Emirate’s oil and gas reserves have dwindled within. At present, the company sources gas from fields in Oman, Umm Al Quwain, and the Dolphin project in Qatar. Its processing plant in Khor Khwair in Ras Al Khaimah treats raw gas from the Omani and Umm Al Quwain fields and delivers LPG to customers across the Emirates.

The UAE’s Federal Electricity and Water Authority (FEWA) is the organization in charge of supplying most water and electricity to the Northern Emirates. While private firms can operate their own plans, FEWA oversees all generation activity and manages the distribution networks through which the Northern Emirates get their water and power. Although Ras Al Khaimah’s electrical and water supply infrastructure is largely adequate and well-established, FEWA has started to show the strain of increased demand from both the tourism and industrial sectors. In response, the utilities agency has rolled out a set of new plans for major electricity and water projects.

In mid-2017 FEWA announced that it would increase the capacity of Ras Al Khaimah’s Ghalila water treatment plant from 15 million gallons per day to 45 million gallons per day and build two new seawater desalination plants in Umm Al Quwain that will each produce 45 million gallons of water a day. Desalination is the primary source of potable water in the UAE, and rising commercial activity has placed new demands on the UAE’s water infrastructure. In response, FEWA is looking to technological solutions to increase production and reduce waste. Part of its water network upgrades launched in 2017 included ordering and beginning to install more than 30,000 smart water meters capable of transmitting more information about usage and identifying cases of leakage and tampering faster than previous meters. If FEWA’s desalination plants are as effective as expected, the utility will look into exporting water.
2017 also saw FEWA sign a 10-year agreement with Utico, a UAE-based private utilities firm, to supply water to the Northern Emirates. The agreement is unique in that it is a purchase contract model where payment is linked to usage. In the agreement, FEWA agrees to commit to receive at least 6 million gallons per day, but further pricing is dependent upon the rate of consumption within the Emirates. Utico’s contract calls for the firm to contribute to the Northern Emirates’ infrastructure by installing transmission lines form generation facilities and constructing a pipeline to help bring services to underserved areas in the UAE. Further benefits of the deal include fixed pricing for the duration of the period and no power tariff increases; in exchange for these economic concessions, the Northern Emirates will reap the energy and infrastructure experience of the Middle East’s largest private utilities firm.

Elsewhere, FEWA has continued to push new electric generation projects utilizing a number of power sources. In early 2018 the utility announced plans to develop a 1.8GW coal-fired power plant. Expected to be completed in Ras Al Khaimah by 2021, the station will be built in collaboration in the private sector. FEWA anticipates coal plants like these becoming a larger part of its generation mix due to their low production costs and ability to efficiently meet industrial demand. Along with this coal plant, FEWA’s plans for Ras Al Khaimah call for the construction of more than USD200 million of power stations to meet industrial, tourism, and commercial demand. As new resorts and residential developments have continued to pop up, FEWA has begun to coordinate more closely with developers to ensure that robust electrical infrastructure is in place well before the project is completed.