The race to boost water supplies

17 July 2014

The GCC faces a huge challenge in building enough desalination capacity to meet water demand, with Oman and Riyadh already having experienced shortages

Provision of water will remain a key priority for GCC governments in the coming five years, as demand for this vital resource continues to grow at rapid pace.

The desalination capacity requirement for the GCC is expected to reach 6,057 million imperial gallons a day (MIGD) by 2020, 37 per cent higher than the current installed capacity of 3,824MIGD, according to the latest data from MEED’s research division MEED Insight.

As a result, desalination will be one of the most active segments of the GCC projects sector, with governments well aware that their populations and industries expect and depend on uninterrupted water supplies. Robust economic growth and relative political stability will ensure the region remains a focal point for international water companies.

“The Middle East will be one of our top three target markets in the coming years,” says Xavier Joseph, CEO for Gulf countries at France’s Veolia. “We are looking at all countries in the Middle East and North Africa, but the GCC remains important as there are no political issues.”

Urgent requirements

While the GCC states share many geopolitical and economic characteristics, the challenges facing their water sectors vary quite significantly. While Dubai currently has an extremely healthy reserve margin of 37 per cent, Oman has a deficit of 20 per cent supply at peak periods, therefore, implementing new desalination projects is an urgent requirement.

Saudi Arabia, the GCC’s most populous country and world’s largest producer of desalinated water, will continue to be the region’s biggest spender on water supply projects until 2020. The kingdom will account for 40 per cent of the additional 2,233MIGD of desalination capacity required over this period.

“The potential in Saudi Arabia is huge,” says Joseph. “It’s a big country – 30 million people – and has growing industries. It is very important for our plans and we have created a dedicated organisation to target this country.”

In July 2013, Veolia was awarded a $310m deal to build a desalination plant with a capacity of 39MIGD at Jubail Industrial City to feed the Sadara petrochemical complex. This was one of the last major desalination contracts signed in the kingdom, with the $1.3bn-worth of water project deals awarded in 2013 down significantly from the $2.5bn inked in 2012, according to data from regional projects tracker MEED Projects.

The shortages in 2012 show that Riyadh needs to take its water programme seriously

Regional water consultant

With demand for water expected to continue to grow steadily, Riyadh knows it will need to ramp up investment in the sector. While the country currently has a comfortable reserve margin of 22 per cent, the rapid rate of population growth and the development of major industrial schemes such as the Saudi Arabian Mining Company’s (Maaden) Waad al-Shamaal phosphates city project in the North can quickly diminish reserves.

The precarious nature of the kingdom’s water market was evident in 2012 when Riyadh suffered from significant shortages of potable water, forcing the government to fast-track an emergency groundwater supply project to meet demand. While the commissioning of the 220MIGD Ras al-Khair desalination plant in April has substantially boosted the capital’s water supplies, the shortage provided a stark warning to those in charge of the country’s water sector. 

“The shortages in 2012 show that Riyadh needs to take its water programme seriously,” says a regional water consultant. “If it doesn’t keep building capacity, it could face major problems in the next few years, as demand is still climbing.”

Budget allocations

To stave off the threat of another short-term supply shortfall, Riyadh allocated SR61bn ($16.3bn)for spending on water, agriculture and related infrastructure in its 2014 budget, with much of this directed at desalination facilities and water supply networks.

The main desalination provider, Saline Water Conversion Corporation (SWCC), which recently commissioned the world’s largest desalination plant at Ras al-Khair, has set aside SR16.6bn for projects in 2014.

In April, SWCC invited companies to submit bids for the contract to expand the 85MIGD desalination component of the Shoaiba 2 plant, located just south of Jeddah.

The work will involve fitting a multi-effect distillation expansion unit to increase the capacity of the plant by 16MIGD. Other projects in the pipeline include the 2MIGD facilities at Duba and Haql and the much larger 130MIGD Rabigh phase 4 scheme, which is under study.

Kuwait is also set to invest heavily in its water sector in the coming years, with the Ministry of Electricity & Water (MEW) forecasting that it will require an additional 270MIGD of desalination capacity by 2022.

Capacity delays

Following the long-awaited approval of Kuwait’s first independent water and power project (IWPP) in December last year, which will have a desalination capacity of 107MIGD, the MEW is moving forward with a number of other IWPPs and engineering, procurement and construction (EPC) water projects.

The ministry has invited developers to submit expressions of interest (EoI) for the Al-Zour North 2 IWPP and the Al-Khiran IWPP, which are proposed to have capacities of 102MIGD and 105MIGD respectively.

While the technology for the IWPPs has not been finalised, the MEW also plans to tender some RO desalination projects as EPC contracts to compensate for delays in the capacity-building programme.

In early July, the MEW prequalified contractors to bid on the planned 50MIGD Doha phase 1 project, and is planning to issue tenders in the third quarter. The ministry will tender the 50MIGD second phase of the Doha scheme in the first quarter of 2015.

While Kuwait promises to offer opportunities for both the developer and EPC markets, clients will need to reduce problems with bureaucracy and slow decision-making if they are to meet the country’s growing water requirements. These issues continue to blight progress with vital infrastructure schemes.

Oman is the country most in need of additional desalination capacity, with a current shortfall during peak periods.

As with its electricity sector, the sultanate has suffered from water shortages in recent years due to a spike in demand and a delay in the commissioning of new projects.

Oman Power & Water Procurement Company (OPWP) is the single buyer of power and water for from privately developed projects in the sultanate. It estimates that demand for water in the main interconnected system will grow by 6 per cent annually until 2020, with demand in the Salalah Zone expected to grow at an even faster pace of 8 per cent a year.

As a result, OPWP is aiming to increase desalination capacity from the current 147MIGD to 286MIGD by 2020. In its latest seven-year statement, covering 2014-20, the company set out plans to issue tenders for four independent water projects (IWPs) before the end of 2014, which combined will add 116MIGD of capacity.

These include the 44MIGD Qurrayat IWP, to be located just south of Muscat, for which OPWP has invited seven prequalified groups to submit proposals in August.

The sultanate is also pushing ahead with plans to boost its industrial desalination capacity, with Majis Industrial Services having invited expressions of interest in a desalination plant at its Sohar Industrial Port Area in June. The 7MIGD, RO facility will provide water for future purified terephthalic acid and polyethylene terephthalate facilities.

The largest desalination project under bid evaluation in the GCC is the Facility D IWPP in Qatar. In May, four developers submitted bids for the estimated $4bn project, which will have a desalination capacity of 130MIGD.

Qatar’s General Electricity & Water Corporation (Kahramaa) also plans to develop a 45MIGD IWP at Ras Laffan Industrial City to meet rising industrial demand. The utility received prequalification entries in July 2013, but is understood to be waiting until a decision is made on Facility D.

Infrastructure improvements

While ensuring capacity targets are met will remain the core focus of the GCC water sector until 2020, those in the industry say state utilities can also boost supply by investing in existing infrastructure to improve the efficiency of production and transmission facilities.

“It is also time for [the power and water sector] to start thinking about the improvement of current infrastructure,” says Joseph.

“For example, an aim should be the improvement in the efficiency of water networks – there are leakage rates of 30-40 per cent in some areas of the region. If addressed, this could result in major economic and environmental savings.”

Joseph also highlights effective reuse of wastewater as a way to alleviate the strain on desalination capacity.

“When you are not using wastewater for irrigation, golf courses and landscaping, it means you are wasting desalinated water for these uses – you are burning oil or gas and wasting money. If you build the right wastewater plants and networks you will save water and money – it’s simple,” he says. 

Key fact

Saudi Arabia will account for 40 per cent of the extra 2,233MIGD of desalination capacity required in the GCC to 2020

Source: MEED

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