A NEW ECONOMIST Intelligence Unit report, 'The GCC in 2020: Outlook for the Gulf and the Global Economy', forecasts that the GCC will be a US$2 trillion economy by 2020. The report, sponsored by the Qatar Financial Centre Authority, examines likely developments in the GCC over the next decade, and explores how the region’s relationship with the global economy might evolve. The findings are based on long-term forecasts and projections from the unit, along with a programme of in-depth interviews with experts on the region.
"Our report demonstrates the growing development of the GCC as an economic and trading hub," said Jane Kinninmont, an editor and economist at the Economist Intelligence Unit and author of the report. “However, there will be challenges for the region to overcome, including increasing global competition for migrant labour as the world’s population ages. The fortunes of member states could diverge as some states diversify their economies faster than others and as some face declining oil and gas production; further economic integration will require strong political will.” Key findings from the report include the following: The GCC will grow in importance as an economic and trading hub. In 2020, the GCC is projected to be a US$2 trillion economy, providing nearly one-quarter of the world’s oil supplies as well as increasing quantities of petrochemicals, metals and plastics.
As economic weight gradually shifts southwards and eastwards, emerging markets will become increasingly important trading partners and investment destinations for the GCC. Gulf investors and sovereign wealth funds are likely to diversify their assets into Asia and Africa, and the region is likely to export more of its oil to industrialising countries. There is likely to be closer economic and political integration between GCC countries. Under the Economist Intelligence Unit's core scenario, the GCC is likely to continue gradual efforts at economic integration, including a single currency, a single central bank and greater harmonisation of legal and regulatory environments. But political will is key - economic integration will depend on good political relations.
But formal political integration will remain elusive, with a common foreign policy or a strengthening of shared security forces remaining a longerterm project. Monetary union will be in place and there may be a shift from the dollar peg. By 2020, it is likely that the GCC countries will peg their common currency to a trade-weighted basket of currencies, although one or two states may opt out. Any such basket will be heavily weighted towards the dollar - unless there is a global shift away from the practice of trading oil in dollars. Commodity prices (e.g. for oil and gold) may also be included in the basket.
There will be a greater focus on manufacturing. Production of hydrocarbons in the GCC could rise substantially by 2020, but one likely trend is that the region will be seeking to export a smaller proportion of its oil as crude, which is a low value-added commodity that offers few employment opportunities. Instead, GCC states will aim to turn more of their oil into refined products or petrochemicals, and to use their oil and gas resources as feedstocks for industries that will add more value and provide more jobs. However, the GCC will remain dependent on foreign labour by 2020 despite a range of efforts to encourage the employment of nationals. GCC spending on food imports will more than double from US$24 billion in 2008 to US$49 billion by 2020.
An important reason for this growth in imports is water scarcity, which means that domestic agricultural production tends to be costly. Between now and 2020, GCC countries will explore wide-ranging purchases of agricultural land in regions such as Africa, Central Asia and Southeast Asia, in order to strengthen food security. While these investments could boost agricultural production in poor countries, there is a risk of political backlash, especially in times of food shortages.
Siemens Energy has secured a US$130mn order to supply gas turbine packages to Saudi Arabia. The components are to be installed in the Hail Extension II and Al Qurayat Expansion II power plants. The purchasers are the Alfanar Construction Company and Saudi Services for Electromechanic Works (SSEM) respectively and they will perform the project on a turnkey basis for the Saudi Electric Company (SEC) utility. Delivery of the components is scheduled for 2010 and 2011.
Power and automation technology group, ABB, has won an order worth US$89mn from the Saudi Electricity Company to build a new substation to ensure reliable power supplies for the King Abdullah Financial District in Riyadh. The substation will be close to the financial centre and feed four smaller substations situated within the district. The project is expected to be completed in around 22 months.
Air blowers using internal compression instead of external compression can set a new standard for energy efficiency in the low-pressure market according to a new technical whitepaper from Atlas Copco’s oil-free air division. The whitepaper explains the differences between screw technology and the traditional ‘Roots’ type lobe technology and says that screw technology, which is used in Atlas Copco's ZS screw blowers, is on average 30 per cent more energy efficient. The manufacturer recently launched its full range of ZS screw blowers that are designed to improve energy efficiency for low-pressure applications and industries such as wastewater treatment and pneumatic conveying.
Plans for the zero-carbon Masdar City project are to be revised, with details of the amended master plan to be announced “imminently” according to Masdar's head of supply-chain management, Richard Reynolds. “We’ll finalise the revised Masdar plan fairly imminently, in the next two to three weeks,” Reynolds was quoted as saying by Bloomberg. “We’d only built part of it, so it made sense to stop and revisit.”
Saudi Arabia has taken the first step towards becoming energy efficient by holding its first ever public stakeholder meeting, the initial step in certifying an energy efficiency project under the rules of the Kyoto Protocol’s Clean Development Mechanism (CDM), in Jeddah recently.
Power generation equipment and services supplier, Alstom, has announced the strengthening of its renewables portfolio through a partnership with BrightSource Energy Inc. Alstom's move into the high-growth solar energy market comes in the form of an investment of up to US$55mn in BrightSource Energy Inc, with an equity stake that positions Alstom as one of the main shareholders in the company. 
A high level delegation representing the energy sector in Dubai has visited China to look at the latest global practices in the area of sustainable energy and the diversification of its sources. The delegation exchanged knowledge on the usage of conventional power plant technologies (using ultra super critical power plant-coal and synthetic gas) to generate electricity and produce desalinated water.
The Abu Dhabi Fund for Development (ADFD), a fund established by the government to aid the economic development of developing nations, has granted a loan to Bahrain worth US$50mn. The loan will be used to erect two electric transmission lines, of 220KV and 66KV each, to meet the increasing demand for electric power.
Abu Dhabi Transmission and Despatch (Transco) has placed an order with Siemens Energy to supply transformer substations and switchgear for the UAE power distribution network expansion project. The US$184mn order includes the turnkey supply of three 132/11 kV transformer substations and two 132/22 kV substations.
Power and automation technology group, ABB, has signed a service contract with the Gulf Cooperation Council Interconnection Authority (GCCIA) to provide maintenance for equipment and systems at the Gulf Interconnection Grid's newly constructed substations. The two-year contract is worth US$8.3mn and will aim to optimise the grid's reliability through regular maintenance and provide technical and emergency assistance when required.
Abu Dhabi is considering a proposal to use solar energy equipment on rooftops in the city to generate about 500MW of power, according to the executive director at the city's Executive Affairs Authority, David Scott.
Masdar, Abu Dhabi’s renewable and alternative energy technologies and solutions initiative, has appointed the bidding consortium of Total and Abengoa Solar as a partner to own, build and operate Shams 1, the world’s largest concentrated solar power plant (CSP). One of Masdar’s flagship projects and the first plant of its kind in the Middle East, Shams 1 will directly contribute towards Abu Dhabi’s target of achieving 7 per cent renewable energy power generation capacity by the year 2020.
Oman has awarded France's GDF Suez a US$1.7 billion contract to build two power plants. A tender board official told Reuters, “GDF Suez has signed a 15-year contract with the government in a BOOT (build, own, operate and transfer) model for which the company will spend 700 million rials."
An executive from state oil company Saudi Aramco has said that renewable sources could account for up to 10 per cent of Saudi Arabia's power output by 2020 with prices coming down and a regulatory framework in place.
ABB, THE LEADING power and automation technology group, has won an order worth US$38mn from the Saudi Electricity Company, Saudi Arabia’s national power transmission and distribution utility, to improve the efficiency of 22 power distribution substations.
THE MIDDLE EAST has the opportunity to become a boom centre for solar energy in the next 10 years, according to AT Kearney.
THE INCANDESCENT LIGHT bulb is disappearing from stores. It has long been superseded by a new generation of light sources. In tomorrow’s multimedia society colour displays the size of an apartment will generate crystal-clear images, and entire sports stadiums will be lit by high-performance lamps.
Technical Review Middle East - Issue Three 2009 Power 60 IN THE PRESENT economic climate the fact that renewable energy can cut pollution levels may not be enough. As Phil Desmond discovers, some recent innovations in the field of cellular communications are being promoted not just as being better for the environment than conventional fuels but better for business too.
ARAMCO’S “FAIR” PRICE of US$75 a barrel has not yet been achieved but the giant Saudi economy is still surging ahead, prioritising the creation of new homes and diversified jobs in industry, social and other services to satisfy the needs of a 26mn young and wealthy population which grows at two per cent-plus every year. This means continued rapid progress on the development of the new Economic Cities, further and accelerated petrochemical and light industrial diversification, and the Middle East’s largest by far programme of dedicated passenger- and freightline rail construction. 
