1. Development of an Integrated Energy Market in Saudi Arabia
Saudi Arabia Global Super Project Conference
November 2000
Rick Bergsieker
President and COO
Enron Middle East

2. Overview Gas, water and electricity infrastructure challenges
The Saudi Gas Initiative - an integrated approach
Key considerations
What others have done
Managing the transition

3. The Challenge
$200 billion of capital investments required over the next 20 years for water, power and gas infrastructure
Peak electricity generation capacity expected to grow 4% per year, from 25 GW in 2000 to 55 GW in 2020
Water desalination capacity to increase by 4.1 million cubic meters/ day (MMCMD), from 6.3 MMCMD in 2000 to 10.4 MMCMD in 2020
Massive development of gas infrastructure needed to fuel this growth and to replace existing liquid fuels

4. Power generated using Natural gas a fuel source
Natural Gas is the Kingdom’s fuel of choice to meet power demand growth. By 2020, more than 5 BCFD will be needed just to supply power generation requirements. MW
Information obtained from “Investing in Saudi Arabia”, 20/21 June 2000 Conference, Four Season Hotel, London
Peak Load Demand
Power generated using Natural gas a fuel source

5. Challenges in the Water Sector
To meet future growth needs of 4.1 million cubic meters per day will require a combination of water desalination, wastewater recycling and enhanced conservation
Water Consumption m3
Source: Saline Water Conversion Corporation

6. Challenges in the Gas Sector
The Kingdom is blessed with plentiful gas reserves that can fuel electric power and water production growth
Gas can also displace higher value liquids currently being used for fuel
more than 2 BCFD equivalent of liquid fuels is currently being burned in the Western Province
Gas reserves are not close to some markets, and most known reserves are associated gas
Massive gas infrastructure development is needed

7. The Saudi Gas Initiative
A major “First Step” to develop gas resources and infrastructure
integrated concept to define the best way to convert gas in the ground in one area to electricity and water in another area
reliance on private sector and competition to optimize the system
Key benefits:
can provide optimum solutions on a “fast track” basis
attracts state-of-the-art technology
attracts foreign capital
creates opportunities for local investors, contractors, and employees

8. Key Considerations Power, water and gas development are inter-related
should be planned and developed on an “integrated” basis rather than as separate “components”
What’s the right balance between energy distributed by pipeline vs. energy distributed by wire?
i.e., large centralized power plants supplied by large gas pipelines vs. a broader gas distribution network to smaller flexible power plants
How to optimize power, water, co-generation and combined cycle requirements?
What is the correct balance between efficiency, reliability and cost?
How much backup (spare capacity, alternative fuels, etc.) is justified?

9. The Korean Approach Government developed initial infrastructure
SEOUL
Incheon LNG Receiving Termainal
Government developed expansions to connect additional end-users
Pyongtaek LNG Receiving Terminal
Privatization to proceed, now that basic infrastructure is in place
Tongyong Receiving Terminal
(under construction)
First LNG R/T
1986
First Gas pipeline
1987
Central Korean pipeline
1993
Second LNG R/T & Further pipelines
1996
Northern & Southern Korean pipeline
2000
Third LNG R/T
2001

10. The Florida Gas Approach
Started with need for electricity and clean fuels in Florida
Private investors build an initial pipeline and marketed gas
Existing base-load line made incremental development and gas conversion possible
Markets and supplies continue to expand
Today 8000 km of pipeline supplying 1.5 BCFD
Will reach 2 BCFD by 2002
Need for electric power
Gas supply Surplus

11. Once basic infrastructure is in place, the market can quickly respond to supply/demand changes
Enron-developed “Peaker” power plants:
1999: 1300 MW
2000: 1500 MW
Identified Market Opportunity
Sites Permitted and Began Construction
Gas Turbines Delivered
Testing
Commercial Operation
July 1998
September 1998
February 1999
May 1999
June 1999
Timeline for 1999 Peakers

12. Managing the Transition
Market systems work - end users and suppliers can determine the optimum allocation of resources and infrastructure
An optimal market-driven system needs transparent and predictable regulations that allow private industry to work
Pricing disparities will occur but can be managed
for example, subsidy programs can be targeted to solve specific end-user problems while minimizing the impact on infrastructure developers and investors

13. Conclusions Tremendous challenges are ahead
Saudi Gas Initiative is a great “First Step”
Many decisions are needed to optimize the system
Markets, acting within a clear regulatory environment, can and will optimize the system
Tough, but manageable, transition issues lie ahead
Substantial international experience is available and is ready to help as needed

14. Thank You