Flood of water projects hits the market

16 June 2015

Kuwait has opted to embark on a major capacity-building programme to meet rising demand for water, rather than managing consumption and curbing wastage

Kuwait is beginning a 400 million-imperial-gallon-a-day (MIGD) capacity-building drive to keep up with rising demand for water, with five desalination projects set to come online over seven years.

Along with spending on wastewater projects and network expansions, this brings Kuwait’s water projects pipeline to $7.7bn, according to regional projects tracker MEED Projects.

Key fact

Kuwait’s average per capita water usage is estimated to be about 500 litres a day

Source: MEED

The country has one of the highest per capita water usage rates in the world, estimated to be about 500 litres a day. This is largely due to heavily subsidised utility prices and minimal demand management efforts. While the Ministry of Electricity & Water (MEW) does not release official, up-to-date figures or projections, consumption is expected to increase as the population grows and new residential areas are connected.

“Kuwait is, per capita, one of the highest consumers of water in the world,” says Xavier Joseph, CEO for Gulf countries at France’s Veolia. “They are not thinking about global policy to reduce demand, so 10 per cent growth would be sustainable. If they don’t work on demand they will have to keep building.”

Soaring demand

The MEW predicted in 2012 that an additional 270MIGD of desalination capacity would be required to meet estimated water demand in 2020 of up to 715MIGD.

Demand [for water] will grow in leaps and bounds as new cities such as Al-Mutlaa are built

Kuwait-based consultant

“Demand is being driven by the residential areas being built, as there are no major [industrial] projects taking place except the New Refinery Project,” says a Kuwait-based consultant. “Demand will grow in leaps and bounds as new cities such as Al-Mutlaa are built.”

In 2012, the MEW predicted consumption growth would average 6 per cent a year. Under existing conditions, demand could reach 1,132MIGD by 2030. Along with rising electricity usage, this would imply Kuwait spending KD82.9bn a year on power and water production, or 10.6 per cent of GDP.

The MEW is well aware that current demand is “grossly wasteful” and says utility rate rises are inevitable. However, demand management policies have so far been limited to media campaigns. Smart meters are still in the testing phase, and subsidies are unlikely to be reviewed in the near future for political reasons.

Selected upcoming water projects
Project nameValue ($m)CapacityStatusProject owner
Umm al-Hayman wastewater treatment plant1,550700,000 cm/d (both phases)PrequalificationKAPP
Al-Zour North IWPP: phase 2 941100MIGDPrequalificationKAPP
Doha desalination plant: phase 150360MIGD*Bids under evaluationMEW
Al-Zour North IWPP: phase 347085MIGDStudyKAPP
Doha desalination plant: phase 243250MIGD*Prequalification completeMEW
North Kuwait water centre332naBids under evaluationKOC
Al-Khiran IWPP: phase 1 332125MIGDPrequalificationKAPP
Sabah al-Salem University district cooling plant27336,000 tonnes of refrigerationDesigns completeKuwait University
*=Estimated; cm/d=Cubic metres a day; IWPP=Independent water and power project; KAPP=Kuwait Authority for Partnership Projects; KOC=Kuwait Oil Company; MEW=Ministry of Electricity & Water; MIGD=Million imperial gallons a day; na=Not available. Source: MEED Projects

Mashaan al-Otaibi, undersecretary for planning and development at the MEW, told Kuwait News Agency in March that the combined production of Kuwait’s desalination plants is about 530MIGD. This is set to be increased to 900MIGD over seven years. Kuwait also plans to increase potable water storage reservoirs to 5,000 million imperial gallons.

Five major desalination projects are in the tendering and execution phases.

Al-Zour North is Kuwait’s first independent water and power project (IWPP). The $2bn development deal was awarded to a consortium of the UK/French GDF Suez, Japan’s Sumitomo Corporation and the local Abdullah Hamad al-Sagar & Brothers in late 2013. It owns 40 per cent of the project company, with 10 per cent held by Kuwait’s sovereign wealth funds. The other 50 per cent was floated on the country’s stock exchange.

South Korea’s Hyundai Heavy Industries and France’s Sidem, part of the Veolia Group, won a $1.4bn engineering, procurement and construction contract for the power plant and desalination parts of the project respectively. When it comes online in late 2016, it will produce 107MIGD of water.

IWPP delays

The tendering of the IWPP took more than four years as a result of bureaucratic delays within the Partnerships Technical Bureau (PTB) and political opposition from Kuwait’s parliament.

This led to multiple legislative changes and the restructuring of the PTB. With the reforms now complete, the renamed Kuwait Authority for Partnership Projects (KAPP) has resumed work after a year’s hiatus. It should now have more authority and streamlined procedures to tender megaprojects.

“The new regulations give us more confidence to work in Kuwait,” says Veolia’s Joseph. “These regulations and the organisation of procurement are based on more transparent procedures.”

Subsidies cannot be [reformed] in the short term, so there is pressure to meet public needs and increasing demand

Nayef al-Haddad, KAPP

Prequalification documents are under evaluation for the second phase of the Al-Zour North IWPP and the Al-Khiran IWPP.

Al-Zour North 2 will have a desalination capacity of 100MIGD and use multi-effect distillation technology with gas turbines. The Al-Khiran IWPP will have a capacity of 125MIGD and use low-sulphur fuel oil. The desalination technology has not yet been determined. Both projects are due to be commissioned in 2019, with future phases envisaged at a later date.

Developers have expressed concerns over KAPP’s capacity to tender several major projects simultaneously, as it is now starting to do, and it may have to prioritise one IWPP to meet projected demand. But it is under pressure to contract new capacity fast.

Pressure mounting

“Subsidies cannot be [reformed] in the short term, so there is pressure to meet public needs and increasing demand,” says Nayef al-Haddad, an engineering specialist at KAPP. “We at KAPP, among other public authorities, are facing a lot of challenges from other agencies to meet our obligations and release tenders.”

The deadline for proposals on several projects will be in late 2015, with Al-Zour North 2 slightly ahead of Al-Khiran.

“Al-Zour North 2 is a simpler project in terms of technology, whereas Al-Khiran is more complicated, and the fact that it is a greenfield project will [mean it will] take longer,” says the consultant. “If they feel under pressure they will tender Al-Zour North 2 first as in theory it will be online quicker.

“If they have breathing space, Al-Khiran will be first - there are no fuel demand problems because it’s liquid fuels.”

Tendering several projects at once will not just challenge KAPP. International developers will have to choose which build-own-operate projects to bid for in order to avoid overexposure.

But the biggest challenge for KAPP may be political. The first Al-Zour North IWPP was delayed for more than a year due to objections from parliament. The election of a less confrontational National Assembly in 2013 is no guarantee that a repeat will be avoided.

Abdulaziz al-Ibrahim was forced to resign as minster of power and water in March over a dispute with MPs, and the new minister, Ahmad al-Jassar, will be treading carefully.

Standalone plants

Due to the urgent need to increase water supply, the MEW has also decided to push ahead with the Doha desalination plant. The reverse osmosis (RO) facility will be split into two phases of 50MIGD each. Bids were submitted on 9 June for the first phase and it should come online in 2017. The same prequalification process also covered the second phase, although a tender for bids has not yet been issued.

With three major IWPPs in the execution and tendering phases, the MEW is unlikely to announce other, larger standalone RO projects unless water demand growth begins to fall out of kilter with electricity demand growth.

Furthermore, Kuwait experiences technical drawbacks with RO technology. Joseph says the flow of the Tigris and Euphrates rivers into the Gulf stirs up sediment in the water, putting constraints on the use of filter technology.

“So they will have to work on thermal,” says Joseph. “We expect Doha 2 to follow in two years’ time, depending on the price they get for Doha 1.”

The biggest problem is water losses… There are major gains to be made as the network is losing up to 60 per cent in parts

Kuwait-based consultant

Much of the new capacity will therefore be thermal, increasing the amount of oil consumed by the domestic market. The MEW estimated in 2012 that Kuwait would be burning 12.1 per cent of its 3 billion barrels a day oil production for water desalination and electricity generation in 2015, at a cost of KD2.7bn. This could climb as high as 21 per cent of oil production, at a cost of KD7.5bn a year, by 2030.

Aside from demand management, there are several strategies that Kuwait could employ to reduce its consumption of water and valuable fossil fuel resources. They include reducing network losses through rehabilitations and smart networks, and maximising treated sewage effluent (TSE) reuse.

“The biggest problem is water losses,” says the consultant. “The current undersecretary was previously assistant undersecretary for operations and maintenance of networks, so it will be interesting to see what he does. There are major gains to be made as the network is losing up to 60 per cent in parts.”

Kuwait has more than 947,000 cubic metres a day (cm/d) of wastewater capacity, but more than 200,000 cm/d of that is scheduled to be decommissioned when new capacity comes online.

The local Kharafi National is to expand the Sulaibiya wastewater treatment plant from 375,000 cm/d to 600,000 cm/d, using US-based GE’s RO membrane technology. Parsons is working on the designs, and the project should be completed in 2017. Kharafi’s special project vehicle, Utilities Development Corporation, won a 30-year build-own-transfer (BOT) contract for the plant in 2004.

Expanding capacity

The planned $1.6bn Umm al-Hayman plant, also intended to be a BOT project, will add 500,000 cm/d of sewage treatment capacity. A later expansion phase could bring it to 700,000 cm/d.

The PTB prequalified six developers in 2012 to execute the project, but the scheme was also caught up in the delays at the organisation. KAPP has restarted prequalification, with a 9 July deadline.

The Ministry of Public Works has been considering the development of a 425,000-cm/d plant at North Kabd, although these plans have not progressed. A 70,000-cm/d expansion of the existing 250,000-cm/d Kabd sewage treatment facility has also been suggested.

There are moves to use TSE in district cooling plants. However, marketing TSE will be a challenge if water rates remain at their current low levels.

For now, Kuwait appears to prefer a strategy of maintaining subsidies and capital expenditure rather than taking the politically risky move of raising consumer prices.

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