The United Arab Emirates has signed a deal worth up to US$2 billion for Malaysia Mining Corp Bhd (MMC) (MMCB.KL: Quote, Profile, Research) to build the Gulf’s first coal-fired power plant.
The UAE sits on around 3.5% of the world’s total gas reserves and is the fifth-largest oil exporter. But like other big oil exporters in the region, the UAE is short of natural gas for power generation and is looking for alternatives.
“This demonstrates the absurdity of the gas shortage in the region,” said Mark Lewis, Managing director of Energy Market Consultants. “It’s an energy producing country importing energy. The region is awash with gas but hasn’t developed supplies.”
The Gulf holds much of the world’s oil and gas reserves but has negligible coal, so power stations will need imports.
Gulf states Saudi Arabia, Oman and Bahrain have all studied the possibility of building coal-fired power plants as they struggle with rising power demand and gas shortages.
Coal plants would make economic sense as it was cheaper to import coal than keep back oil exports to burn for power, Lewis said.
The 1,000 megawatt plant will be built in the northern emirate of Ajman, UAE state news agency WAM reported on Thursday, citing a member of Ajman’s ruling family.
MMC will finance construction and operate the plant for 20 years, during which time part of the profit will go to Ajman.
Construction will take 40 months, WAM said.
Over the next six months, feasibility, technical and environmental studies would be carried out on how to limit the impact on the environment of burning coal, Sheikh Rashid bin Humaid al-Nuaimi, the head of municipality and planning said.
The plant will be close to hotels and tourist resorts in Ajman, he added.
Other emirates are also looking at alternatives to gas for power generation, from nuclear power to solar plants.
The emirate of Abu Dhabi, capital of the UAE and holder of over 90% of its oil reserves, signed in January a deal with oil major BP (BP.L: Quote, Profile, Research) and mining company Rio Tinto (RIO.AX: Quote, Profile, Research) (RIO.L: Quote, Profile, Research) to build a US$2 billion hydrogen power plant.
Abu Dhabi also plans to build a 100 MW solar plant.
Dubai is undertaking a feasibility study for a hydrogen-fired power plant, using imported hydrogen extracted from coal, a Dubai official said on Thursday.
Cement makers in the UAE and Oman already import coal to fire their furnaces when they face gas shortages.