Red Sea water conveyor reaches crucial stage

07 June 2012

The Jordanian government is using public-private partnerships to fund an ambitious solution to its looming water crisis, the Red Sea-Dead Sea water conveyance project

In 2005, faced with a looming water crisis, Jordan, Israel and Palestine agreed to study the potential for a project to transfer water from the Red Sea to the Dead Sea. The project had the twin aims of stopping the decline of the water level of the Dead Sea and improving access to drinking water.

The Red Sea-Dead Sea water conveyance project has evolved considerably since then. Jordan is now going ahead with the project unilaterally and intends to include large-scale economic developments to follow the path of the new water conveyor.

However, the motivation to build the project remains the same. The long-term security and stability of the region depends on access to water. For Jordan, this is a national priority. The country’s population is growing and this has pushed up demand for water and agricultural produce.

Uneven distribution

Jordan’s per capita water availability is 145 cubic metres a year, which is just 15 per cent of the internationally recognised water poverty level. Some regions suffer more than others. Jerash, which is located north of the capital, receives only 71 litres a day for each person while Ma’an in the south has access to 230 litres per person a day.

At the same time, Jordan is keen to rebalance water levels between the two seas. The Dead Sea is declining rapidly and its water is getting saltier. The first water from the conveyor project is expected to reach the Dead Sea by 2018. At the same time, a brine discharge programme will commence to adjust the rising salt levels. Should the Red Sea-Dead Sea project fail to materialise, the government expects the Dead Sea to be completely drained by 2070.

About 70 per cent of the $2.45bn project cost … is expected to be covered by development banks and lenders

While the scheme is of national significance, its financial requirements are equally large. Jordan has decided to structure the project as a public-private partnership (PPP) and hopes to pay for it in part from revenue streams from the economic developments along the conveyor. This could prove difficult and the assistance of international development banks is likely to be crucial.

The water conveyor project will transport 2.15 billion cubic metres a year (cm/y) of water from the Red Sea north towards the Dead Sea. The scheme will also produce 930 million cm/y of desalinated water. The Dead Sea will receive about 1.22 billion cm/y as a result of the programme, with the remainder used by towns and cities along the way. Amman alone will receive 600 million cm/y.

Priority will be given to household needs and governorates where infrastructure already exists will have preference. Surplus water will be transferred to the other governorates according to need. The water produced under PPP contracts will be allocated according to the contract terms.

The project will entail the construction of large freshwater pipelines, 13 booster pumping stations, desalination facilities, seawater pipelines and hydropower stations. The booster stations will have a total horsepower of 838,600. The programme will require 410 kilometres of steel or concrete pipe with diameters of 0.7-2.7 metres.

Transporting water over long distances through varied terrain with the use of pumping stations makes the project expensive. However, there is also the potential to generate hydropower on the downhill sections of the project. The masterplan estimates that 180MW could be generated from three stations. Overall, the project is expected to be a net consumer of energy of about 250MW.

Cities planned

Desalinated water will be produced by two facilities with a combined capacity of 930 million cm/y. The plants will require 194,176 kilowatt hours of power and will be designed to recover 50 per cent of the energy.

The government plans to develop residential, commercial, leisure and industrial projects at sites along the water conveyor. Three new cities have been planned around the project at South Amman, South Dead Sea and North Aqaba.

The programme’s medium- and high-density developments will serve 500,000 people, through 100,000 residential units covering 1,600 hectares of land. Lakes and streams will be replenished from reclaimed water.

Gated communities for about 15,000 people covering 400 hectares of land will also be built. These will comprise 3,000 residential units and will be spread over five locations. Luxury resorts with golf courses, swimming pools and other outdoor activities will be developed at several sites. Five hotels will be built at every resort, each with about 300 rooms and spanning 25 hectares.

Commercial and industrial areas will cover 470 hectares of land. The sites will be used for making pipes and membranes, in addition to chlorine production facilities. About 14,000 residential units will accompany the industrial developments.

Finally, a university and medium-density residential areas will be built. These will serve 40,000 people over 110 hectares of land and will have 8,200 residential units.

The project sponsors carried out four initial studies, which were awarded in 2008. France’s Coyne et Bellier was selected for the feasibility study, while the US’ Environmental Resources Management was chosen for the environmental and social assessment, Italy’s Thetis for the Red Sea modelling study and three individual experts for the Dead Sea modelling study. The studies were financed by a multi-donor trust fund under the World Bank.

Ministry tender

In January 2011, the Water & Irrigation Ministry launched the tender for the project. A total of 74 companies submitted expressions of interest and 24 responded to the request for qualification. Six formal bids were submitted in January 2012. According to one of the advisers on the project, two bids have been shortlisted: Egypt’s Orascom Construction Industries and China’s Sinohydro.

The ministry initially hoped to announce the winning bidder in November 2011, then at the end of March 2012, but this has been pushed back. According to the ministry’s advisers, the project has only been delayed by a few months. The protracted tender process for such a large project, however, has resulted in the “demotivation of bidders”, according to one of the bidders.

The government intends to start work on the first phase of the development plan this year including the finalisation of operating agreements before starting work on the construction of the project. The ministry hopes for water conveyance to begin in 2018. Full commissioning of the first phase will happen in 2020 and the full water conveyor will be commissioned in 2035.

The Jordanian government plans to finance the project as a PPP scheme, with the state and private developers taking an equity stake in the project. The largest expected income sources for the project are water revenues, public improvement fees and land sales/leases.

About 70 per cent of the $2.45bn project cost, or $1.75bn, is expected to be covered by development banks and lenders. Equity from the sponsors is expected to amount to $368m, or 15 per cent of the total. Funds are expected to provide $319m, or 13 per cent of the total, while grants from donor countries will cover about 2 per cent of the costs, or $49m. Should there be any financial shortfall, the government is hoping to attract commercial lenders (including export credit agencies) for the remainder.

The bidders were asked to demonstrate financing capability in their proposals. “[We were asked to provide] proposals of equity investment and debt utilisation, and documentation for evidence of availability of working capital and maximum lines of credit,” says one of the bidders.

Tackling its looming water crisis is a priority for Jordan. The Red Sea-Dead Sea project is part of a larger process to deal with the issue. Other smaller projects are also under way. The Disi water conveyor project is under construction and is due to be completed by 2014-15. The project comprises a 325-kilometre pipeline that will pump more than 100 million cm/y of water from the Disi aquifer in Mudawarra to Amman. When complete, it will meet about 6 per cent of the country’s water needs. It will cost $1bn to build and is sponsored by Turkey’s Gama Holding and the US’ Energy Financial Services, which won the contract in 2007.

The project was paid for by Gama, the ministry and a $455m loan from the US’ Overseas Private Investment Corporation, the European Investment Bank and France’s Proparco. As the largest privately financed water supply project in Jordan before the Red Sea-Dead Sea project, the Disi scheme is a point of reference for the ministry.

On top of this, several wells at Hesban, with a total capacity of 10 million cubic metres, will be commissioned in 2013. Dams at Wehdeb and Wadi al-Arab and the East Ghore Canal will add a further 17 million cubic metres by 2014.

Crucial stage

The ministry also intends to rehabilitate existing water networks, reduce water losses, make the use of existing water resources more efficient and reduce subsidies. An offshoot of the Red Sea-Dead Sea project will look at non-revenue water. Jordan’s average per capita share of supplied water is 145 litres a day, but only 81 litres a day is billed.

As the ambitious Red Sea-Dead Sea project enters the final stage of the tender process, attention will turn to Jordan’s ability to secure funding for the scheme. As a large, complex and mixed-use PPP project, this next step is likely to be its most challenging.

Key fact

Desalinated water will be produced at two facilities with a combined capacity of 930 million cubic metres a year

Source: MEED

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