As Saudi Arabia undertakes unprecedented economic and structural reforms, it is clear the man at the helm of the countrys water sector is committed to the cause.
I am a man of change, not a man who wants to continue business as usual, Abdulrahman al-Ibrahim, governor of the countrys desalination provider Saline Water Conversion Corporation (SWCC) and CEO of National Water Company (NWC), which is in charge of water distribution and wastewater services, tells MEED. If we continue business as usual, it will be for the fate of our water industry.
As the head of the worlds largest provider of desalinated water since 2011, Al-Ibrahim already had a challenging job. His remit became even more demanding earlier this year when he was also named CEO of NWC. While Al-Ibrahim is aware of the stiff task ahead to reform his organisation while ensuring adequate water supplies, he is optimistic about the future.
The demand for water in Saudi Arabia is soaring, there is a shortage of cash and [changing] our business itself are some of the multiple challenges. But we are of the notion that there are multiple opportunities behind every challenge.
Consumption of potable water in Saudi Arabia continues to grow at a rampant rate, and with 60 per cent of demand met by desalinated water, SWCC will play the key role in ensuring water is available 24 hours a day.
The population is growing rapidly, and the demand for water will soar even higher, says Al-Ibrahim. The 5.1 million cubic metres a day (cm/d) we are now producing needs to go up to 7.3 million cm/d by 2020, so we need another 2.2 million cm/d to come online by 2020. In less than five years, we need to grow by about 40 per cent.
The benefits of handing procurement responsibility to the private sector are clear
About 40 per cent of the kingdoms current water supply comes from SWCC plants, with the remaining 20 per cent coming from plants operated by private developers under the independent water and power project (IWPP) model. While four major IWPP contracts were awarded between 2005 and 2007, the kingdoms utilities had moved back to favour standard engineering, procurement and construction (EPC) contracts as the price of oil rose steadily to more than $100 a barrel.
However, as has been directed for all of the major state-run industries under Vision 2030, the private sector will play the primary role in developing desalination plants moving forward.
The projects planned to meet the demand require a very heavy cost in terms of capex [capital expenditure], says Al-Ibrahim. While EPC has previously been used, the kingdom has announced we need the private sector to play a vital role in the development of Saudi Arabia, and therefore we need to develop PPP [public-private partnership] schemes that are brilliant and state of the art.
The SWCC chief says the benefits of handing procurement responsibility to the private sector are clear.
For the past 45 years we were able to procure 5.1 million cm/d of [desalination] capacity, he says. Since 2006, the private sector was able to procure more than 2 million cm/d in less than 5 years from the inception of the IWPP programme. We see a great opportunity for cooperation with the private sector.
Ultimately the government is targeting for water production, from desalination to aquifers or dams, to be under the private sector. Ultimately, EPC as a tool for [water] production will be very minimal.
The SWCC head says EPC contracts will likely only be tendered for water transmission or distribution projects, schemes which are generally not attractive to the private sector.
Under the new drive for utilising the private developer market, the Water Electricity Company (WEC), a joint venture between state power provider Saudi Electricity Company (SEC) and SWCC created in 2003 to oversee the previous IWPP programme, will play a key role.
WEC will be positioned to be a major offtaker for the water sector, so we [SWCC] can have an independent company. This will allow producers of water to compete irrelevant of the owner, like us, or the buyer, says Al-Ibrahim.
While the move towards the IWPP model for procurement of projects should be a relatively smooth transition, this will just form a part of the kingdoms plans to fully privatise its utilities sectors. Al-Ibrahim says the reforms to the way SWCC operates and the countrys water sector is structured will be wide-ranging and comprehensive.
We look at privatisation as a vehicle for achieving an ultimate goal. Privatisation is not a goal, it is a need, says Al-Ibrahim.
We are shooting for a glory 2017 where we can have a roadmap for the privatisation of Saudi Arabia
Although the privatisation of the kingdoms desalination sector has been discussed for several years, the launch of Vision 2030 has expedited the process. SWCC is now working with advisers and the relevant ministries to establish a framework for the privatisation of the desalination sector. While the desalination company is likely to be unbundled into different production and transmission companies, Al-Ibrahim says it will not necessarily be done in the same way as SEC, its electricity counterpart, which is working towards privatising the countrys power sector.
The environment of SEC is completely different, we cannot copy and paste what is happening in the electricity sector into the water sector, he says. We are currently evaluating it and doing the best we can to come up with a plan so we can attract national, regional and international investors for the benefit of our industry.
Al-Ibrahim says it is too early to reveal more specific details on what the privatisation framework will look like, but says the plan should be ready next year.
I think the timeline goes beyond the scope of our desalination sector, he says. We are shooting for a glory 2017 where we can have a roadmap for the privatisation of Saudi Arabia.
While the details of the privatisation plan are still being debated, Al-Ibrahim is clear that privatisation will include both existing and future plants and operations.
We will never be able to escape from the existing asset we will never be able to look at greenfield projects without looking at the brownfield or existing asset, he says. We have invested very heavily in the existing water infrastructure. However, the ability to utilise the asset ourselves at this time is less than our ambitious vision.
In addition to overseeing the privatisation of the water sector, another key aspect to SWCCs reforms will be ensuring the most efficient technologies are employed. This includes a sizeable shift towards reverse osmosis (RO) technology from traditional thermal desalination plants, which currently account for about 76 per cent of Saudi desalination.
The industry is evolving and technology is evolving rapidly, says Al-Ibrahim. We need to catch up with the technology and grab the opportunity as fast as we can. We are migrating heavily from thermal to less energy-intensive membrane technology, which will reduce the footprint of oil requirement.
SWCC is planning for all of the desalination plants on the western Red Sea coast, including the proposed 600,000-cm/d Rabigh 6 plant, and the smaller satellite facilities planned in the northern areas of the kingdom to incorporate RO technology.
If anyone wants their programme adopted within SWCC, it will have to have efficiency as part of the agenda
For the other major plants on the East coast, such as Jubail, planned on a mega scale, we will go with hybrid combination to ensure we maintain the highest reliability, says Al-Ibrahim. If you have a 1 million-cm/d plant, you need a reliable source.
The desalination company is also looking at the next generation of desalination technologies, which Al-Ibrahim says may not be affordable today, but will be affordable tomorrow.
The kingdom has already started working on some of the first solar-powered desalination facilities in the region. The rise of RO and the sharp fall in cost of solar energy pave the way for renewable energy to play a sizeable role in producing desalinated water.
At SWCC, we need to invest more in terms of renewables technology for desalination, says Al-Ibrahim. We have done three streams in parallel with each other. We have done our own exercise to collaborate with our own local and international technology firms, and have also collaborated with the King Abdullah University of Science & Technology (KAUST) to erect a 60,000-cm/d plant to be run using photovoltaic (PV) solar panels at Al-Khafji. We are also collaborating with KA-Care [King Abdullah City for Atomic & Renewable Energy] to explore the potential for smaller satellite plants that may use solar or wind energy.
The drive for efficiency is vital if SWCC is to meet its ambitious target of doubling capacity by 2030 using the same quota of oil it is currently using. Al-Ibrahim says improving efficiency across the board is vital if the firm is to develop a sustainable and affordable water sector.
We need to enhance not only fuel efficiency and plant efficiency, but also cost efficiency, people efficiency and financial efficiency everything, he says. If anyone wants their programme adopted within SWCC, it will have to have efficiency as part of the agenda.
Improving efficiency also forms the central pillar of Al-Ibrahims strategy under his newly acquired role as CEO of NWC. The company was established in 2008 to address failings in the kingdoms water distribution and wastewater sectors, which suffered from service interruptions and low connection rates. A key part of NWCs founding strategy was to work with the private sector to improve water and wastewater distribution services. However, the company has struggled to meet many of its targets.
From inception, NWC intended to enrol the private sector with us, but what happened is that we [NWC] ended up growing more than the private sector, says Al-Ibrahim. We need to rationalise and control our growth, so we allow more healthy competition within the private sector. We should continue enlarging NWC to make it a major player in the distribution sector. We need to develop better tools to allow the private sector to join hands.
In addition to expanding NWCs distribution network coverage to more regions in the kingdom, the company is planning how to evolve and improve the running of the countrys networks. One of NWCs first acts on taking over the running of the Riyadh and Jeddah wastewater and water systems in 2008 was to award six-year management contracts to private operators, including Frances Veolia and Frances Suez Environment.
We started historically with management contracts, but how we are managing these cities changed drastically, says Al-Ibrahim. So later on, those contracts turned into technical assistance deals. Now we are evaluating the eight-year history of collaboration. We will never be able to run those cities [Riyadh and Jeddah] alone, we will need international expertise. But how we should do that collaboration is the big question to answer by 2017.
As with the planned desalination plant development programme, NWC will also focus on utilising PPP models to develop sewage treatment plants. We are looking at BOO [build-own-operate] or BOT [build-own-transfer], says Al-Ibrahim.
Details of two new sewage treatment plants to be developed under the BOO or BOT model in North Jeddah and the north of Taif will be announced at the upcoming Water Investment Forum, which will be held in Riyadh on 27-28 November. Al-Ibrahim says the forum is an event not to be missed for any company or investor interested in the kingdoms water and wastewater sectors.
There are jewels within the water sector, which we will announce, he says. We need to bring in experts and investors to announce the vast and rich opportunities coming ahead. We will provide the right enablers to ensure their investment will play a vital role in the development of the private sector.