Saudi Arabia : the Water is the New Gold

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Top Saudi businessmen have expressed support for the Saudi government’s project to determine the cost of investment in the water sector as well as approximate revenues.
In an interview with the Saudi Press Agency (SPA), Mansour Al-Mushaiti, undersecretary of water and agriculture for planning and development, said that the project aims to determine water production costs more accurately.
Al-Mushaiti also said that the project aims to determine the expected revenues from water projects being undertaken in the Kingdom.
Abdullah Al-Meleihi, chairman of Al-Ramez International Group, said the government has appointed EY (formerly Ernst & Young) to conduct a study regarding estimates on costs in investment and profits from the water sector.
EY is one of the “Big Four” accounting firms and provides assurance (including financial audit), tax, consulting and advisory services to companies.
He said that the project comes within the ministry’s efforts at privatization aimed at raising the level of water services to the beneficiaries in the future.
The project will estimate the costs of delivering water from the source to the consumer.
He noted that the Saudi government had approved SR92 billion ($24.5 billion) support for water, environment and agriculture to help meet the goals under the Saudi Vision 2030 economic plan.
Yasser Al-Harbi, vice chairman of Apral International Group, said that the government is making the right move in enlisting the services of EY to determine the cost of investment.

The task of providing new sources of potable water for the Kingdom’s growing population and expanding industry has become a matter of national importance.

Water consumption has exceeded 8 million cubic meters per day (m3/d), and is expected to reach 20 million m3/d by 2020.

Saudi Arabia is the largest country in the world without running surface water and has been dependent on desalinated water since the 1950s.

With daily water consumption at more than 300 liters per capita, Saudi Arabia has one of the highest levels of water consumption per capital in the world.

To meet rising demand, the Kingdom developed Independent Water and Power Projects (IWPPs) in 2002 with the issuance of an official resolution establishing a framework for private sector participation through build-own-operate and build-own-operate-transfer schemes.

The three core IWPPs are Shuaiba III, Jubail III (Marafiq), and Shuqaiq II.

The Jubail III and Shuaiba III IWPPs started production in April and August 2009, respectively, and the Shuqaiq II IWWP was completed in late 2010.

In 2014, a $7.2 billion Ras Al-Khair desalination plant opened, adding 1 million m3/d to the national supply.

The plant is operated by the Saline Water Conversion Corporation (SWCC), a government-run organization responsible for approximately 60 percent of desalination in the Kingdom. SWCC currently operates 17 of the 28 total desalination plants in Saudi Arabia, with a total water capacity of 4.6 million m3/d.

One of its desalination plants, expected to be operational by the end of this year, is Yanbu III, which will provide an additional 550,000 m3/d to 1.8 million residents in the industrial city of Yanbu and people in Madinah. In February 2015, Black & Veatch, a leading member of the U.S.-Saudi Arabian Business Council (USSABC), announced it had been selected as the engineering and design consultant for SWCC’s Jeddah IV desalination project, a 400,000 m3/d plant designed to augment drinking water supply to the city of Jeddah.

Saudi Arabia’s desalination plants use a number of different processes.

According to the Electricity and Co-Generation Regulatory Authority, 64 percent of desalination capacity relies on the multi-stage flash process (MSF), while 20 percent uses reverse osmosis (RO) and 16 percent is produced using multi-effect distillation (MED). SWCC’s output relies on all three technologies, with 47.8 percent of its input to national capacity relying on MSF, 2.2 percent using MED and 9.5 percent based on RO.

This year, SWCC announced plans to invest about $80 billion by 2025 in an effort to increase desalinated water production to 8.5 million m3/d.

In addition, the National Water Company (NWC) has invested nearly $6.7 billion on more than 300 water projects in the fields of service, infrastructure development and water treatment in Makkah, Riyadh, Taif and Jeddah.

As of 2015, the company has implemented 174 of these projects with a total cost of $5.25 billion, while 127 projects remain in the contract signing stage.

However, desalination alone may not be able to provide for future demand, which is growing at 7 to 8 percent annually.

Saudi Arabia has taken a number of measures to reduce consumption by increasing efficiency, eliminating waste, and ending unsustainable practices.

The use of ground water to irrigate crops beginning in the 1970s nearly depleted Saudi Arabia’s aquifers, so in 2010, the Saudi Government announced it would discourage agricultural water use by ending subsidies for water-intensive crops by 2016.

And late last year, new tariffs were implemented for water and sanitary drainage services for consumers in the government, industrial, and commercial sectors.

New solutions to water issues are also being developed to complement increased desalination capacity and better conservation efforts.

In January 2009, King Abdullah City for Science and Technology (KACST) officially launched the Initiative to Desalinate Water Using Solar Energy.

As a part of the program, KACST cooperated with IBM to develop nanotechnology to use solar energy in the operation of desalination plants.

At the end of 2011, SWCC announced a similar agreement with Japanese company Hitachi Zosen Corporation to conduct research on using solar power for desalination purposes.

In March 2012, SWCC also signed a memorandum of understanding (MOU) with USSABC member The Dow Chemical Corporation to jointly pursue research and development in desalination technologies.

The MOU follows Dow’s July 2011 plans to invest in a manufacturing facility for reverse osmosis elements in the Kingdom.

Furthermore, in 2015, Advanced Water Technology (AWT), a subsidiary of TAQNIA, a technology development and investment company, announced it would be working with Abengoa, a Spanish global technology firm, to develop the world’s first large desalination plant powered by solar energy.

The new $130 million plant is designed to deliver 60,000 m3/d to the city of Al Khafji and is expected to become operational in 2017.

Both the desalination facility and the photovoltaic (PV) plant at Al Khafji are on sites owned by KACST, which will own the facilities once they have been completed.

These capital investments provide opportunities for U.S. businesses that can help Saudi Arabia overcome its water challenges with new technologies and innovative techniques.

The Kingdom aims to reuse over 65 percent of its water by 2020 and over 90 percent by 2040 by transforming its existing and planned wastewater treatment assets into source water suppliers across most industrial sectors sectors.

Valued at over $4.3 billion by Global Water Intelligence, the Kingdom’s water reuse market is estimated as the third largest in the world.

As a result of aging distribution systems, Saudi Arabia loses between 20 and 30 percent of its water (around 1 million m3/d) before it even reaches customers. As of 2013, Saudi Arabia’s leakage rate was one of the highest in the world.

In 2007, the Kingdom launched a program to address the leakage and reduce the loss to 5 percent by replacing municipal distribution systems.

NWC announced the application of modern monitoring devices and technology, including radar beams, audio devices, and helium gas to monitor leaks in the networks.

In 2014, the company disclosed that it had saved more than 433 million m3 of water from 2009-2014 worth $690 million.

NWC has also been working on improving Saudi Arabia’s wastewater infrastructure. Since widespread flooding in Jeddah in 2009 revealed the lack of a sufficient sewage network in the city, foreign companies have been selected to manage water and wastewater networks in three of the Kingdom’s largest cities.

French companies Veolia Water, Suez Environment, and Saur are NWC’s strategic partners in Riyadh, Jeddah, and Makkah and Taif, respectively.

NWC had planned to award similar water management contracts for the cities of Madinah and Dammam, but after a policy review, it will now issue operations and maintenance contracts that will run for longer periods than the management contracts.

As a result of private sector involvement, the number of new wastewater connections made annually in Riyadh and Jeddah has grown from 20,700 in 2010 to more than 38,000.

In 2013, the $273 million plant at Jeddah’s King Abdul Aziz International Airport began operation with a capacity of 0.5 million m3/d.

The plant features a biogas heat-to-power unit with an annual capacity of 8 megawatts. In total, NWC has allocated approximately $1.5 billion to future wastewater treatment plants and $2 billion for wastewater pipe mains nationwide.

NWC also aims to build and expand its wastewater treatment plants in Riyadh, Jeddah, Makkah and Taif in the next years adding 2 million m3/d in capacity.

In 2015, the Ministry of Water and Electricity, now the Ministry of Environment, Water and Agriculture, signed more than 75 water and sewage projects worth more than $425 million to be implemented in various regions of the Kingdom.

The Saline Water Conversion Corporation (SWCC) has several water treatment plants across Saudi Arabia.

 

 

 

 

 

The projects included the first phase of the sewage networks in Houta Bani Tameem region in Riyadh, costing $26.4 million, setting up of water purification plant at the Wadi Tandaha dam in the Asir Province at a cost of $21.2 million, and the first phase of the sewage treatment plant in Mikhwa, costing $13.7 million.

More recently in March 2016, the Ministry signed a new series of contracts worth $142.4 million for water and sewage projects to be implemented throughout the Kingdom.

Increased capacity for sewage treatment has also provided a new solution to the Kingdom’s water shortage.

In 2013, Saudi Arabia reused less than 20 percent of its treated sewage effluent (TSE), a strong alternative to desalinated water in non-potable applications.

In comparison, Bahrain and Qatar have demonstrated 100 percent reuse of TSE for agriculture and industrial purposes. While Saudi Arabia has a much larger and more broadly-distributed amount of TSE, the country is beginning to operate more strategically in using this water.

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TSE sales in the Kingdom have risen from a negligible amount in 2008 to approximately 0.5 million m3/d in 2013.

Saudi Arabia aims to become the Gulf Cooperation Council’s largest TSE market, with a target of increasing reuse to 1.9 million m3/d by 2020.

NWC is now moving ahead with plans to partially privatize its water and wastewater assets and is seeking technical, legal, and financial consultants on its TSE program.

Under the plans, NWC is looking to sell its assets to the private sector through the establishment of two special purpose vehicles. While NWC will remain a significant shareholder in the treatment plants, a private sector firm will assume operation and maintenance activities.

This decision mirrors similar plans being undertaken by SWCC to privatize its desalination business in order to invite private sector efficiency and experience to the Kingdom’s water sector.

As part of Saudi Arabia’s National Transformation Plan’s (NTP) strategic objectives, the Kingdom aims to increase the proportion of desalinated water produced by private operators from 16 to 52 percent by 2020.

Two of 16 strategic objectives set for the Ministry of Environment, Water and Agriculture refer to desalination.

The objective on organizational development and privatization also challenges the Ministry to increase the share of treated water produced by private operators from zero to 20 percent, and to extend water and sewage services to 70 per cent of cities, up from 42 per cent, by 2020.

Rising demand and large government projects have made Saudi Arabia’s water and wastewater sector an attractive market for U.S. companies offering engineering services for the desalination and wastewater industries. Another need is equity financing for new water works projects.

Although the Saudi Government is leading the investment drive in the sector, local private sector companies are looking for foreign technology partners and lenders to help bid on new contracts and build additional plants.

The private sector contributes 2 million m3/d to SWCC’s production via the Water and Electricity Company, the purchasing agent of SWCC and the Saudi Electricity Company, and investment incentives exist for companies that want to help contribute to further growth in the industry.

In total, the Ministry estimates that there are $107 billion worth of investment opportunities in the water and wastewater sectors over the next 10 or more years.

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