$73Bn Needed For Arab Water Desalination Projects Up To 2030

VOL. XLV

No 25

24-June-2002

ENERGY FINANCE

$73Bn Needed For Arab Water Desalination Projects Up To 2030

The Arab states will need to invest an estimated $73bn in water desalination plants during the next three decades up to 2030 in order to meet rising demand for domestic, industrial and agricultural water, according to a paper entitled “The Rationalization of Energy Utilization in Desalination Plants” presented by Dr. 'Abd al-Karim Sadik of the Kuwait Fund for Arab Economic Development (KFAED) at the 7^th Arab Energy Conference, held in Cairo on 11-14 May. Desalination capacity in the Arab region in 1999 stood at over 12.5mn cu ms/day of which 90% was in the Arab Gulf region namely, the UAE, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait. Based on projects to be implemented during the years 2000-06, estimated capacity will increase by 5% annually over the six-year period, or 4.56mn cu ms/day. Of this additional capacity, 87% would be forthcoming from MSF distillation plants, 9% from reverse osmosis, and the remainder from other production processes. Capital costs for these projects are estimated to range from $1,544 to $2,284 per cu m depending on the process used, or an average of $1,660/cu m. On the basis of these estimates and assuming an increase in production capacity of 5% per year to meet rising demand, investment costs for the construction of new plants during the next three decades would be as follows:

Investment Estimates For Water Desalination Plants in The Arab States 2002-30

	2001	2002-10	2010-20	2020-30	Total End 2030
Production Capacity (Mn Cu Ms/Day)	13.8	21	34	58	58
Capital Expenditures ($/Cu M)		6	14	24	44
Capacity Increase (Mn Cu Ms/Day)		1,660	1,660	1,660	-
Total Investments ($Mn)		9,960	23,240	39,840	73,040

Hence, total capital investments needed to increase capacity over the next three decades would amount to $73bn, or an annual average of $2.6bn over the next 28 years, without taking into consideration additional costs for the maintenance and upgrading of existing plants. Financing for desalination plants in the majority of Arab countries has mainly been provided from state budgets, and partly from foreign loans.

With the changing strategies for development during the last two decades, and reduced government funding, there has been increased dependence on securing external funds for water projects. A World Bank report shows that seven Arab states − Algeria, Egypt, Jordan, Lebanon, Morocco, Tunisia and Yemen − had invested a total of $1.5bn/year on development of water resources over a three-year period during the first half of the 1990s, of which 67% was assistance provided by development agencies. However, developing countries as well as the Arab states have recently turned to the private sector for additional funding. In view of the large investments needed for increased water supplies, the participation of the private sector is now recognized by the Arab states, not only for its financial capabilities, but also for its administrative and technical expertise in the water sector. In order to make participation by the private sector more attractive, and to secure additional funding, the present very low retail price of water supplies in the Arab states has to be increased, despite the political, social and economic repercussions involved, according to Dr Sadik.