Abstract
Saudi Arabia is the third largest consumer of water per capita in the world,
yet with scarce groundwater to
tap. The country has been plagued by
shortages in recent years and with consumption from a rising
population
and growing economy set to soar, the government has needed to act quickly to
stave off
potential disaster and civil unrest.
Desalination forms the
backbone of the government’s water strategy. Some 30 desalination plants
have
already been built by the state, but these have barely been able to
keep pace with rising demand.
Building on a master plan drawn up in 2002,
some US$6bn a year has been committed by the kingdom to
bolstering the
water sector over the next two decades. This was regarded as too big a task
for state-owned
utilities alone, so, for the first time in Saudi
infrastructure outside the hydrocarbons sector, the
programme involves
massive input from the domestic and international private sector.
The
kingdom’s regulatory system for the power and water sectors was
overhauled to make it more
investor-friendly and to enable the creation of
bodies such as the Water and Electricity Company (WEC)
and the National
Water Company (NWC) to manage the transition and provide state partners for
investors
The main vehicles are independent power and water projects
(IWPPs) in which the private sector can take
stakes of up to 60%. Over
US$15bn worth of IWPPs have now been sanctioned. They are set to add over
1bn cubic metres per day (m3/day) to the nation’s water supply and
nearly 10GW of power capacity.
The first of these IWPPs, the US$2.45bn
Shuaibah facility, sought funding in 2004 and – after initial
mistrust among foreign investors then unfamiliar with the Saudi market –
eventually received financing
from a Saudi-Malaysian consortium. The
success of this financing paved the way for a number of other
IWPPs to
successfully seek funding, as international capital markets gained confidence
in Saudi Arabia.
Shuaibah became operational in February 2009. Five
others, currently under construction or seeking
funding, should follow in
the next two or three years, built by consortiums featuring high-profile
international engineering firms. Another four projects could emerge by 2016,
if the government’s
blueprint is followed through.
Saudi
Arabia’s leaky water supply and wastewater pipeline network is also
receiving massive investment,
mainly through public private partnerships
(PPPs). French companies are setting the pace among foreign
investors in
this area.
Wastewater treatment is also being opened up to the private
sector in a separate programme.
Mindful of the expense involved in all
this and the need to conserve water, Saudi Arabia is poised to
abandon its
traditional policy of subsidising water consumption and impose big price
increases on
consumers used to paying next to nothing. The government will
hope that improvements to water supply
already being experienced by
consumers in major cities will help ease public disquiet over the move.
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