Q: Thanks for sitting down with MEES. What’s the thinking behind the recent spinoff of Siemens Energy?
A: Siemens Energy was spun off just four weeks ago with the aim of having an energy-focused company globally. Our aim is to look into the energy transition as the industry moves from fossil fuel-dominated generation toward green, renewable-based energy. This of course does not exclude the Middle East.
The company is built on four pillars: power generation, transmission, what we call industrial solutions, and a unit called ‘new energy business’ which looks into innovative schemes such as hydrogen. We are really looking at how to generate the most CO2-free electricity possible, and when you do so, you quickly find that each country, city, or customer is in a different state. So it’s not one size-fits-all. Neither is it technologically or financially possible to move completely into green scenarios.
Q: How will this business model translate into Siemens Energy’s Middle East portfolio?
A: We see each country developing its own roadmap for this transformation. Our job is to support them with that. In countries like the UAE or Saudi Arabia they already have stable energy generation and are on the brink of defining how much renewables they want in 20-25 years. Dubai aims for 75% for example (MEES, 14 June 2019). Our job is to support them and build around that – not just in terms of generation but also in the grid network. The more renewables coming into the grid, the more fluctuation you have in the system. You already see in other parts of the world the need for rotating mass in the network to ensure grid stability. If you just bring, say, solar projects into the grid, it becomes impossible to maintain grid stability. So the mix there is also important.
When you look beyond Saudi Arabia and the UAE at countries like Iraq, where we have a lot of work, we see completely different challenges. They have a huge gap in power generation, roughly 11GW, which they need to build up (MEES 17 July). They need to build based on what they have, making a major renewables scenario impossible. They need infrastructure and fuel to transform their electricity sector into a reliable one for customers. And then they can look to renewables once they’ve completed this. We talk to many countries and they all have a different status. They need to realistically assess where they stand, what their goals are, and then Siemens Energy can help them transform.
One other important point, Siemens Gamesa, which belongs to Siemens Energy, is a world leader in wind energy. They are providing turbines globally, and that’s also an essential part of our portfolio. So we have the entire span of petroleum to renewables and believe building up transmission systems is key to growth.
Power trading between countries is also beginning to develop further, and this must be intrinsically built into the transmission system. Some countries are blessed with energy sources and can help their neighbors through interconnectivity. We will see a lot of development on this in the future.
Q: How does hydrogen fit into this mix?
A: A big theme, particularly for countries like Saudi Arabia and the UAE coming from a fossil fuel-dominated world, is the increasing prospect for hydrogen. Hydrogen is a very viable storage for electricity. You can generate it with sunlight using a hydrolyzer. Siemens Energy has technology for that. It’s in very early stages and not yet industrial scale, but we are scaling up.
We predict this will really take off over the next five to 15 years with many hydrolyzers coming into the system for storage, but also using the electricity to generate further downstream possibilities. One thing you can do with hydrogen is put it into a petrochemicals plant to generate ammonia; you can generate various fuels with it too, like synthetic kerosene to use as jet fuel. We will see this, particularly in the Middle East, because this region will stand at the forefront of the energy transition.
ON MENA INTERCONNECTIVITY
Q: There is a renewed focus within the Middle East on developing more grid interconnections. How viable are these plans and what are the key challenges that need to be dealt with?
A: We already have an established GCC grid, so the mechanism is already in place. And now we are seeing the governments talking much more on collaboration (MEES, 28 June 2019). Perhaps Covid-19 has driven the need for such collaboration. Therefore you need a stable grid system. We also see talks between Saudi Arabia and Iraq. Kuwait is also linking up with Iraq. The recent peace treaties with Israel in the region also open up interesting opportunities. Israel has been isolated and could begin cooperating with its neighbors (MEES, 23 October).
In the past, the main focus has been bringing sufficient electricity into the grid, but going forward there will be a much greater emphasis on transmission and electricity trading amongst countries. That requires a platform, meaning digitalization. Different countries and regions have peak demand at different times, and power trading overcomes this through better utilization in a cost-effective way. We are supporting government initiatives on this front.
Q: You mentioned Saudi Arabia and the UAE investing heavily in cleaner energy alternatives. How is Siemens Energy poised to complement these developments, specifically with Dubai’s pilot solar-power hydrogen project?
A: Siemens Gamesa is a big factor here, and with Saudi Arabia looking to invest heavily in wind in the future, this is something Siemens Energy is participating in. In the UAE, we are working on the grid connection side with our customers and authorities.
As we speak, we are focusing especially on hydrogen’s downstream capabilities because both countries are interested in building these ecosystems around hydrogen. Dubai is at the forefront here (MEES, 3 April). As we speak, we are finalizing the commissioning of the plant. We will soon announce its inauguration, but due to the Covid-19 situation it’s not very easy at the moment. It’s a demonstration plant. In MW terms, it’s just 1MW. Not exactly industrial scale, but it gives us the opportunity of developing and showcasing the technology. This could be utilized in a bus or taxi fleet, and demonstrates how this technology can be used in the future.
We are developing a more scalable hydrolyzer for bigger solutions as we speak. This is a 17.5MW module and can generate more than 300kg of hydrogen per hour. Several modules could be integrated into a plant, allowing for several tons of hydrogen to be generated per day. This is pure green hydrogen – not blue or purple or whatever. This is the first path toward scalability and depends heavily on the input price of electricity used. That’s the most important parameter to determine the price of the hydrogen that comes out.
Legislation is also important. Do you take the power price the consumer is paying, or do you say “I’ll build the plant, and I’ve got a solar plant over here generating at $1.35/kWh like al-Dhafra in Abu Dhabi, and I’ll input at this price into the hydrolyzer and get my hydrogen.” The margin is much more advantageous than if you take the consumer [power] price. So these types of things aren’t yet developed.
Saudi Arabia now has the idea to generate a hydrogen downstream industry. Plans are being reviewed and within the next few months, government authorities working on it, we will see how this downstream vision comes together.
ON IRAQ AMBITIONS
Q; Iraq has clearly emerged as a focal point for Siemens’ Mena operations – particularly since the launch of the electricity roadmap in 2018-2019. Can you provide an update on your Iraq operations?
A: So our agreement with the government is over three phases. The speed of our work depends a lot on the government. There have been changes in the last year, and also the impact of lower oil prices. We are finalizing Phase-1 with two projects that have been signed but are now reaching financial close: a 500MW gas turbine extension at Zubaidiya and the upgrade of 40 gas turbines with upstream cooling systems that will add 790MW in increased capacity at various plants throughout the country by next summer if we reach financial close (MEES, 12 July 2019).
On the transmission side, we are working seriously to extend the grid. We are working as we speak on 13 additional substations as part of the roadmap. Additionally, we’ve brought 760-770MW of additional capacity online through service upgrades, maintenance, and reworking some of the stations. So we are close to full implementation of Phase-1.
Also, Prime Minister Mustafa al-Kadhimi was in Germany two weeks ago, so we are speaking with them on the matter and we are now on the brink of entering Phase-2. We will then receive requests for proposals (RfPs) and follow the government’s designated procedure for moving forward. This is happening over the next two weeks and hopefully these projects will be finalized and we can move into implementation next year.
So we are working on all of these projects. Lots has been achieved, but it moves a bit slowly. It could be faster but we are dealing with the speed of the government, changes, and everything else.
Q: Regarding Phase-2, do you have concrete plans for how much will be added?
A: We could add a couple gigawatts but it’s more a question of what the country can actually finance. At the end of the day, oil prices are a limiting factor. We are working on alternative sources of finance to take the capex burden off the government and onto private investors to stretch costs over 20 years. This is all work in progress but ultimately depends on their appetite. But seeing the ‘White Paper’ and seeing their plans, I think we are on the right path. We also have elections in Iraq next year, so we have to see the impact of that. So this is what we see, and we are focusing on a fast track for Phase-1. Phase-2 will take another couple of years once financed.
Q: Iraq also faces major feedstock issues and has planned connections with neighboring countries’ power grids to alleviate power shortages. How do you see these other factors playing into Siemens Energy’s plans?
A: The planned connection with Jordan is a good plan. Jordan has a surplus of energy and can sell it to Iraq, so a few hundred megawatts from Jordan is good and will ease shortages, but we are talking about 11GW+ needed just to meet current demand – not even the projected growth. So it’s a necessary thing that should happen, and we are working on substations related to that.
On the fuel side, Iraq is one of the biggest gas flarers in the world (MEES, 24 July). It’s not utilized. Fly over southern Iraq at night and see the extent of the flaring. We are working with partners to utilize this for electricity generation and create byproducts to sell. We’ve given our ideas to the government and worked with other partners on how to minimize this.
Q: Would Siemens Energy ever get directly involved in gas processing in Iraq, or is that too far away from your core operations?
A: We would partner with somebody and believe in partnership but we wouldn’t do it on our own. We have our own competencies and our existing portfolio.
ON LEBANON’S PROBLEMS
Q: Siemens made a high-profile pledge to provide Lebanon with two 40MW gas turbines to aid generation following the 4 August Beirut port explosion, but the deal fell through. Could you provide more details and talk about Siemens’ long-standing power roadmap for Lebanon?
A: My last official trip before Covid-19 was to Lebanon to meet the government. We already have a dedicated plan we’d submitted to the energy ministry there. The government is aware of this plan, which is comprehensive. It offers a gas-to-power solution that includes importing LNG and then also building power stations that would meet local demand with a much better cost position than they have today (MEES, 15 March 2019).
So this plan is on the table. We have government support – including from Germany – but at the end of the day we all know the situation there and the need for reforms. They have failed to form a new government in recent months and that’s the first step. So we are waiting to have a government to talk to, and then what is extremely important is that this government puts reforms in place so that the international community is willing to provide it with money. As we understand it, this is a precondition. So the plan is already drawn up and depends on which way the country moves – especially in the financial sector.
Immediately after the blast we asked ourselves what we can do, how we can help individuals and Beirut. We talked with government authorities and said we were willing to supply gas turbines to ease power shortages. Unfortunately the government could not supply the diesel, so we offered instead out of humanitarian support to do free maintenance on the two Siemens plants there with the money we reserved for the gas turbines (MEES, 4 September). This will add megawatts to total capacity, and the government was supportive of this measure. Now we will see if the new Prime Minister Designate [Saad al-Hariri] can form a government, and if so, we can carry forward with our original plan.
Q: Moving to Egypt, Siemens has been a major player there for years. Could you describe the most recent operations there and the potential for Siemens Energy to expand its Egypt footprint in the future?
A: The powerplants we built there really transformed the country – a lot of jobs were created, growth, and better power supply (MEES, 27 July 2018). In October we inaugurated a new service facility to service powerplants in the country – not just ours but others – so this is a huge initiative for us. We also introduced a training sector to teach technical skills to Egyptians. This was together with the German and Egyptian governments as well. This is what we are working on in terms of existing business.
In addition to that is the idea to focus on renewables. Siemens has also provided wind turbines for the Zafarana and Gebel el Zeit projects (MEES, 28 February), and there is more to come. We are working on new tenders to provide our technology and we will participate. We are positive on that. We have a good, stable footprint and have individuals working closely with the government. And most importantly, they have a better electricity system than they did before.
ON A LIBYA REENTRY
Q: Siemens signed a €700mn deal with Libya to build two power plants in 2017 that appears to have been derailed by ongoing instability (MEES, 15 December 2017). Last month Siemens reentered Libya by sending technicians to conduct maintenance on the Sarir power station. So what’s the current state of play, and is Siemens Energy hopeful of a near-term return to greenfield operations?
A: We have met with our customer there [state power firm] Gecol and the authorities there. As you rightly said, over the last two years the tense situation has made it difficult to execute projects. Not just for us but everybody. We’ve tried our best to do maintenance at the places where we had to. We have people in the country as we speak at several sites doing maintenance work. I myself had a call with the customer just two weeks ago where we discussed how to go forward, how to execute our project, and how we will do maintenance on plants where we haven’t yet. So we are in talks, we have people on the ground, and will continue to do so. So I hope for a continued ceasefire and the return of stability to the country so we can in a broader way execute these projects.
The good news is also that Libya is bringing oil output toward 1mn b/d which will give them the financial headway for such projects (MEES, 6 November). It all looks viable. I know the German government and others will support reconstruction, so we are in constant dialogue to do so.
ON NEW OPPORTUNITIES: KUWAIT, SUDAN...YEMEN?
Q: Other than the countries we’ve mentioned, where do you see potential growth opportunities for the Mena region in the future? Both in terms of countries and types of operations.
A: Looking around the region, you have countries with huge opportunities. Sudan, for example, has now been taken off the sanctions list and has demand for electricity (MEES, 6 November). We have projects in execution there which have been somehow stopped by the situation. If there are no longer these limitations, this will open opportunities – especially as aid flows into the country. So we see Sudan’s potential for electricity in the years to come. There is also the possibility for selling electricity to its neighbors, so we need to look into this as well.
Kuwait is another place we are looking. There have been substantial changes in the country, and their power fleet is quite aged. It’s also largely oil-fired (MEES, 6 November). So there will be new plants on the horizon that are more efficient, sustainable and environmentally friendly. So there is demand pipeline for 5-8GW over the coming years. They are slowly but constantly developing their infrastructure and have the possibility to supplying Iraq with quite more electricity.
There are other countries that deserve a look, like Yemen and Syria. They have been heavily under threat in recent years due to unrest, so we have to look how they eventually come back. They both have demand due to destroyed infrastructure. Rebuilding this should be seen as important in the future, so these are the most viable options as we look toward the next term.
Interview conducted by Waylon Fairbanks.
SIEMENS SEES MYRIAD MENA OPPORTUNITIES: HIGHLIGHTS FROM EXCLUSIVE MEES INTERVIEW
* The Middle East has a host of opportunities for Siemens Energy, ranging from hydrogen and renewable technology in the GCC to a wholesale revamp of Iraq’s grid.
* Mena governments are increasingly interested in grid interconnectivity which can maximize power trading and take advantage of differing demand peaks across the region. To date the GCC’s integrated grid offers the largest potential in this area.
* Within the GCC, Kuwait is a key point of interest. It needs to add 5-8GW of modern capacity to its aged and oil-fired power fleet over the coming years. With a track record in Kuwait, including the recent 260MW upgrade to the Az Zour South power plant, Siemens Energy is eying this business.
* Iraq is also a key business interest for Siemens Energy, but political strife and now low oil prices are complicating implementation. Phase-1 work has added a 500MW new gas turbine at Zubaidiya, a 790MW boost through installation of upstream cooling systems, and 770MW of additional transmission capacity.
* Baghdad in interested in Phase-2 work, which will add at least 2GW in additional capacity, but private and international financing may be essential. Elections next year could further complicate efforts to close Iraq’s 11GW+ gap between supply and peak demand.
* In Lebanon, Siemens has put forward a comprehensive electricity roadmap that would end the country’s significant power shortages. But this offer, which includes integrated gas-to-power, is dependent on Lebanon implementing domestic reform. But, amid financial and political crisis, reforms have not progressed with promised international aid withheld.
* While Lebanon and Iraq continue to struggle with power sector reform.
*Egypt stands out as a major success in Siemens’ portfolio. The German firm has vastly expanded Egypt’s generation capacity – both through new CCGT plans as well as on the renewables front through subsidiary Siemens Gamesa. Siemens is keen to participate in upcoming tenders as well.
* As Libya tries to recover from years of instability, Siemens is looking to reengage there. The firm currently has employees on the ground conducting maintenance, and is talking with state power firm Gecol over resuming work on two powerplants worth €700mn per a contract penned in 2017.
* With long-time economic sanctions out of the picture, Siemens Energy sees Sudan as a major new business opportunity. The country badly needs a power sector overhaul, and is centrally located meaning it can take advantage of power trading with its neighbors.
* With Syria and Yemen also in tatters, the two war-torn countries could offer additional opportunities for power upgrades. But political stability – and in Syria’s case an end to western sanctions – will have to come first.
* The energy transition offers lucrative opportunities in the coming years. As Saudi Arabia and the UAE in particular expand renewables capacity, upgrading grid capacity is of particular importance as renewables projects during peak generation periods can stress transmission systems initially built for conventional powergen.
* The growing focus on hydrogen technology is also unlocking new opportunities. Dubai, with Siemens support, is pursuing a pilot solar power hydrogen project that could complement the transportation industry. Saudi Arabia is keen to explore hydrogen’s downstream potential and is currently working on development.