What oil? Saudi Arabia major player in world's water market
Saudi Arabia has solidified its place as a major player in the world water market as the pressure on the existing water system continues to mount, prompting large investment from Saudi government, BMI said in its Saudi Arabia Water Report Q4 2013.
In addition to the basic provision of water services to the public, an expansionary economic policy, active construction sector and water intensive operational developments in the oil and gas industry create an increased urgency.
Backed by a multi-billion dollar infrastructure expenditure program, the Kingdom is ploughing resources into its water sector and prioritising contractor awards across the key desalination, wastewater and network areas. The Minister of Water and Electricity, Abdullah Al-Hussayen, announced in January 2013 that the government allocated $6.4 billion for water and sanitation projects in 2013 alone and committed over $66 billion to long-term capital investments over the next 10 years.
The most favourable aspect of the Saudi landscape is the abundance of liquidity and the willingness of key projects sponsors and utilities to furnish this on what is a critical economic sector, in a country where water resources are highly restricted yet demand continues to grow.
Projects worth around $1 billion have been ordered since Saudi Arabia decided to push ahead with its IWPP program. They are set to add over 1 billion m3/d to the nation's water supply and nearly 10 gigawatts (GW) of power capacity. These have made Saudi Arabia a hotspot for international engineering firms and foreign investment.
PPPs have been established for a number of cities with international and domestic companies, typically under six- or seven-year contracts, which cover water distribution and wastewater collection. Wastewater treatment is being handled through a separate program. These contracts are also designed to limit the loss of water in the system, defined as non-revenue water. Saudi Arabia has one of the largest infrastructure project pipelines, with around $400 billion.
The construction industry is going to be one of the hardest hit by this policy, with contractors estimating that 80 percent of construction projects will face delays as a direct consequence of the labor shortages.
The industry accounts for around 45 percent of the total private sector workforce, with 3.5 million officially employed - not including those without proper documentation. Whilst the Saudi officials have put the quota for national employees in the industry at 5 percent, which is low compared to financial companies having a quota close to 49 percent, the numbers of employees affected are much higher in the construction industry.
In response to the dual demand for power and water, Independent Water and Power Projects (IWPPs) have been key to tackling demand in the Gulf states. Saudi Arabia has three IWPPs and has planned several more of these projects, which are envisaged to add 15,000MW to the country's generating capacity at a cost of $15 billion. In terms of IWPPs, there are three core projects: the Shuaiba IWPP, the Jubail IWPP and the Ras Al Zour IWPP. The latter project, Ras Al Zour, which is expected to have 850-1,150MW of electricity generating capacity and production capacity of 1mn cubic metres (Mcm) of desalinated water per day, ran into trouble in 2009, with the government eventually taking the project under its jurisdiction, transferring it from an IWPP to an EPC contract. The project has since been retendered on an EPC basis, with separate contracts for the water and power units. Equally, NWC have kept to their promise to diversify the market.
The awarding of the $3.01 billion contract to build a the Yanbu III facility and water desalination plant in to a mixed consortium of Saudi Arabian engineering company Al-Toukhi Company, South Korean conglomerate Samsung Engineering and Chinese state-owned electricity utility Shanghai Electric indicates that shared national and international benefit in the market growth will continue.
- Investment Mounts in Saudi Arabia’s Infrastructure Industry
- Korean firms to build major gas plant in Saudi Arabia
- The world oil market vis-a-vis Saudi Arabia's 'hard-headedness': where to?
- With $2.46 TRILLION to be spent on oil, gas, and water projects, what will the future Middle East look like?
- Majority of Saudi industrial investments directed to chemical plants