Report Summary
Saudi Arabia is the third largest consumer of water per capita in the world, but has limited groundwater to tap. The country has been plagued by shortages in recent years, and with consumption rising on the backof a growing population and economic growth set to soar, the government has needed to act quickly tostave off potential disaster and civil unrest.
Desalination forms the backbone of the government’s water strategy. Some 30 desalination plants have already been built by the state, but these have barely been able to keep pace with rising demand.We have revised down our forecasts for water desalination capacity additions over coming years. We nowexpect desalinated water to reach 1.159 billion cubic metres (bn m3) in 2010, down from 1.167bn m3 inour previous forecast. By 2014, we envisage water desalination supply to reach 1.294bn m3, comparedwith a previous forecast of 1.366bn m3.
The revision reflects slower than expected progress on key schemes, as well as the delays with the major new Ras al-Zour IWPP scheme, which was to have been let on a privately financed basis, but is nowbeing implemented as a state-backed scheme.
In Q3, one of the largest water deals in the region was awarded. South Korea’s Doosan Heavy Industries & Construction won the EPC contract for Ras al-Zour power and water scheme, in a deal worthUS$1.5bn. The reverse osmosis/thermal hybrid desalination plant will boast 226mn gallons per day (g/d)capacity.
Building on a master plan drawn up in 2002, some US$6bn a year has been committed by the government to bolster the water sector over the next two decades. This was regarded as too big a task for state-ownedutilities alone, so for the first time in Saudi Arabian infrastructure, outside the hydrocarbons sector, theprogramme involves massive input from the domestic and international private sectors.
Saudi Arabia’s regulatory system for the power and water sectors was overhauled to make it more investor-friendly and to enable the creation of bodies such as the Water and Electricity Company(WEC) and the National Water Company (NWC) to manage the transition and provide state partners forinvestors.
The main vehicles are independent power and water projects (IWPPs) in which the private sector can take stakes of up to 60%. Over US$15bn worth of IWPPs have been sanctioned since the programme started in2004. They will add over 1bn m3 a year to the country’s water supply and nearly 10 gigawatts (GW) ofpower capacity.
Implementation is the watchword in the wastewater treatment sector. NWC has successfully ensured the shortening of the expected duration of delivery on a number of critical water and wastewater projectsworth SAR1bn in Riyadh and Jeddah, following the use of acceleration mechanisms. The companyclaims to have reduced the delivery period on 13 impeded projects.
NWC completed the transfer of operation and management functions of water and wastewater sector in Mecca and Taif in July 2010. A French-Saudi consortium between Saur and Zamil Operations &Maintenance (Zomco) won a SR173mn contract to manage the water and wastewater infrastructure inthe two cities for a five-year period.
NWC had plans to outsource the management of the Medina’s water and wastewater networks under public private partnership (PPP) arrangements, with networks in the city of Dammam to follow in Q211.
However, the Medina and Al-Khobar management contracts have been mothballed for the time being, as part of a wider strategic rethink at NWC. Most wastewater projects will be financed under traditionalengineering, procurement and construction (EPC) contracts rather than build-operate-transfer (BOT)schemes over the next couple of years.
In Q3 2010, a SR6.6bn contract for the desalination plant was awarded to a consortium led by South Korea's Doosan Heavy Industries and Construction Company Ltd. The Ras al-Zour plant will have2,400MW of power and 1mn cubic metres per day (m3/d) water desalination capacity, making it theworld’s largest IWPP.