The region's water woes are most acutely felt in its rapidly growing urban centres. The Saudi capital, Riyadh, where the population has doubled to over 4 million in the past decade, is no exception. While water still flows to Riyadh, there are fears over the reliability of supply for the coming few years. With population growth of 8 per cent a year and water production figures unchanged since the early 1990s, the kingdom's capital is facing up to an arduous and expensive task.

A masterplan commissioned by the Riyadh Region Water & Sewage Authority (RRWSA) proposes investment of SR 32,903 million ($8,774 million) on water treatment and distribution and a further SR 18,277 million ($4,874 million) on wastewater collection and treatment over the next 18 years. The plan envisages the addition of more than 20,000 kilometres of water pipelines, several new pumping stations, and additional production capacity of 2 million cubic metres a day (cm/d) in four phases. In addition, it proposes the addition of 21,500 kilometres of wastewater pipelines and pumping stations and treatment capacity of 2.2 million cm/d.

The plan is ambitious, but it needs to be backed up at a national level by an increased water production capacity and improved transmission and distribution systems. The Saline Water Conversion Corporation (SWCC) has forecast that the capacity shortfall will reach 63 per cent by 2020 if no new capacity is added, based on a very conservative per capita consumption rate of 150 litres a day.

There is a level of demand elasticity, but it is uncertain how much. Over the last 10 years, water consumption in Riyadh has more than halved to 260 litres a day, a figure attributed to the falling levels of leakage and waste. Abdullah al-Hussayen, the governor of SWCC, in May told MEED that he believed some 60 per cent of water in the kingdom is lost to leakage or waste.

Reducing this level is clearly a priority. But it cannot solve the problem alone. 'We need to develop more water sources for the future,' says Khalid al-Bawardi, head of the RRWSA. Work is now going ahead on tapping more aquifers around Riyadh. The brackish water from those sources will be mixed with desalinated water piped from Jubail.

Desalination will play a major role. Government strategy for increased desalinated water production has focused on the participation of the private sector to build independent water and power plants (IWPPs). Tenders for the first IWPPs are expected to be released this year, and more are expected in 2003. There has already been progress made on the first of these, a proposed 2,000-MW IWPP to be built as part of core venture 3 in the gas initiative.

But efforts to accelerate the IWPP programme are being stymied by the lack of a proper regulatory environment and the absence of a central strategic body for the water sector. Decisions are made by seven regional water bodies in addition to SWCC and the Agriculture & Water Ministry. The government is now instigating a series of reforms designed to remedy these ills, and establish a more structured sector.

Top of the list is the creation of a dedicated water ministry to act as the central strategic body in the sector. Its first tasks will be to review water tariffs and establish a regulatory framework for private participation in the sector.

Although water will continue to be subsidised, there is a strong argument for raising tariffs. These now run from SR 0.1 a cubic metre (cm) for consumption of less than 50 cubic metres a day (cm/d) to SR 6/cm for consumption of more than 400 cm/d. At the lower end of the scale, the tariffs barely cover the cost of their own recovery. Sources at the existing Agriculture & Water Ministry say that new tariffs are expected to be three-five times higher than the existing rates.

The new ministry's other major task will be the creation of a regulatory structure for the sector. When it is set up, the new ministry will be entitled to act as a regulator itself, working with the power regulator ESRA on establishing the cost and price of water. The growing number of co-generation water and power plants means the two sectors are increasingly closely related. For SWCC in particular, co-ordination is pivotal.

The organisation is already preparing to sell electricity to Saudi Electricity Company after the power sector restructuring. Now, it is preparing to submit a paper, prepared by US consultant McKinsey & Company, proposing a model for its participation in a deregulated sector. The favoured model is similar to that used in Abu Dhabi, where the government authority teams up with the developer to carry out a project. The model can be used for both greenfield developments and the injection of private investment into existing sites.

Aside from production, there are indications that water distribution could be opened up to the private sector to help reduce levels of leakage and the collection of tariffs. SWCC governor Al-Hussayen says he believes the private sector could play a role in water distribution to increase efficiency.