Ghazlan II Power Plant

To meet increasing demand in Saudi Arabia, Saudi Consolidated Electricity Company – Eastern region (Sceco-East) has built a 2,400MW power plant. The project is located at Ghazlan, on the coast of the Arabian Gulf, 80km north of Damman.

The site had an existing 1,600MW plant, making it the biggest power station in the Middle East. The new capacity brings total electricity generation capacity in the Eastern Province to 9,600MW and will meet the future energy needs of the Eastern Province, which accounts for 90% of the total industrial energy consumption in Saudi Arabia.

Time-line for construction

Saudi Arabia has very recently and very quickly become an industrialised nation. The demand for power is swiftly increasing (in 1999 alone it grew by 12%). The country has been spending between $3bn and $4bn dollars on expansion per annum.

Construction of the Ghazlan II actually began several months before final contracts were signed, and the first of the plant’s four units came on line in 1999, around three years after work started. Ghazlan II power plant completed construction in March 2001, followed by commissioning including testing and dry runs.

As part of the country’s stated goal of ‘Saudiization’, Sceco-East maximised the local sources of their purchases. Main contractors were also required to use local suppliers where possible, and the new stations are operated by Saudi personnel.

Plant funding

The overall cost of the 2400MW Ghazlan II debt-financed project is reported as $1.7bn. The largest single investment, other than the actual power plant construction, was for the associated transmission works to cope with the massive increase in supply from the site.

The project was largely financed by Sceco-East internal funds. In addition, a $500m, ten-year commercial loan was raised from Saudi and foreign banks. These included Saudi French Bank, Chase, Gulf International, National Commercial Bank and Saudi British Bank. Loan pricing was reportedly under 100 basis points over Libor, which is much lower than credits to other Saudi corporations. Having blue chip consumers like Saudi Aramco, which takes almost 30% of Sceco-East power sales, provided important security in a market which otherwise presents serious finance obstacles such as subsidised power prices and lack of transparency.

Ghazlan II turnkey contract

Japan’s Mitsubishi Heavy Industries (MHI) and the US group Bechtel were contracted to design and build the plant as a joint venture. The two companies won the $1.1bn Ghazlan II turnkey contract against stiff competition from GE, Westinghouse and ABB. The project was one of the highest profile awards in the Middle East of the 1990s. The MHI scope of supply included procurement and installation of four 600MW dual oil and gas-fired steam turbines and generators, a high-voltage substation, storage and pipeline systems for fuel gas and crude oil, and several auxiliary installations. MHI was also responsible for commissioning, staff training and operations and maintenance during the warranty period.

Bechtel provided engineering and construction services as a close partner of MHI. Bechtel’s extensive energy industry experience, including major contracts in Saudi Arabia over several decades, undoubtedly underpinned MHI’s credibility in the negotiation process.

Consultancy and construction contracts

Consultancy services were provided by a joint venture between Merz and McLellan of the UK and local group Saud Consult. Assignments included construction supervision and engineering and design audits. They won the contract in competition with around a dozen of the leading names in global power consultancy.

Athens-based Consolidated Contractors International Company (CCC) won the $95m contract for constructing preliminary site works (roads, utilities, marina works and fencing), construction of turbine buildings and two chimneys, and buildings for offices, storage and warehouse facilities.

Four contracts worth over $300m were awarded for transmission and distribution work associated with the Ghazlan II project:

• ABB Contracting Co built the Al-Fadhli 380/230kV substation and reinforced the 230kV system in the Northern Operating Area
• A consortium of Al-Sharif Group and KEC International installed two 380kV transmission lines for linking the Ghazlan plant with the new Al-Fadhli Substation and the existing Ghunan 380/20kV substation
• Marubeni Saudi Arabia Company won the contract to expand the Ghunan 380/230kV substation
• Saudi Services for Electro Mechanic Works Co. installed 230kV transmission lines in Jubail and the northern area

A $24m contract for the construction of management and support services buildings and facilities was awarded to the local Al-Mashrik Contracting Company. Saudi dredging specialist Hute-Sete Marine Works was engaged in cutter-suction dredging for a large seawater intake basin at the Ghazlan Power Plant.