World Water Crisis (LIFE)

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Massive Water Grid Planned for Middle East and Saudi Arabia contemplates discontinuing wheat production.

Kuwait's Markaz: Water - Crucial for sustainability of growth
http://www.menafn.com/qn_news_story_s.asp?StoryId=1093280488
MENAFN Press - 02/11/2009
(MENAFN Press) Kuwait Financial Centre “Markaz” has released its latest strategic report focusing on the water
sector in the GCC. The authors of the report M.R. Raghu and Amrith Mukkamala state that the GCC region has a
two fold issue in its hands. On one hand, the natural water resources are close to zero and on the other the water
consumption rates in the GCC region are one of the highest in the world.
The fresh water resources available in the region are lower than 1% of the total available global fresh water.
However, the region is home for 5% of the world’s population. Coupled with this the population growth is one of
the highest in the world. For GCC as a whole, the annual population growth rate between 1990 – 2009 was at 3%.
This is in comparison to a 1.8% growth rate in India and a 0.8% growth rate in China.
Demand & Supply: The low water availability in the GCC region can be mainly attributed to severe desertification
of land. The only source of fresh water in the region is the various acquifiers which are non-rechargeable in
nature. This has resulted in the GCC countries having the lowest levels of renewable water resources in the world
at an average of 0.6 Km3/ Year.
As the fresh water availability is low, the proportion of freshwater withdrawal to total renewable water resources
stands out with values over 100% in all the GCC countries, except Oman, indicating that more water is withdrawn
than the quantity annually renewed on a long-term basis, thus depleting the freshwater resources. At a country
level, Kuwait has the highest rate at 2075%, meaning that large use is made of fossil groundwater.
Sources of Supply: The very low availability of fresh water and its high depletion rate coupled with a rapid increase
in population resulted in a focus towards augmenting supplies. Supplies are enhanced by way of developing
groundwater, desalination and waster water treatment.
Developing ground water: All GCC countries have a limited number of large deep acquifiers. These contain nonrenewable
supplies of fossil water. These fossil waters have two limitations: finite lifetime and quality limitations.
In the past, there has been significant deterioration of fossil water due to an increase in exploration activities for
oil, breach of sea water and natural evaporation. World Bank estimates that this water resource availability will
shrink by half of its current size by 2030.
Currently, Saudi Arabia is the only country with large ground water resources. The overall ground water resources
in Saudi Arabia is at 22.46 Bn Cubic meter, which forms 82% of the overall fresh water resources in the GCC
region. The total fresh water resources in the GCC form 88% of the total water resources. The rest is produced
from Desalination and re-used waste water.
Desalination: Even though a costly process, currently desalination seems to be the only practical solution available
for GCC countries to increase supplies of water. GCC governments turned to desalination in a big way to meet the
growing demand for drinking water. The six GCC countries collectively spent more than US$40 bn over the last 25
years to expand desalination capacities.
The GCC region has 50% of the world’s desalination capacity. Saudi Arabia leads the world in terms of total
desalination capacity at 5.01 Mn Cubic meter per day. Due to the substantial amounts of investment (approx cost
of a 25 Mn Gallon per day plant costs $100 Mn), there has been an increase in private sector participation in
almost countries in the GCC (at varying degrees). The private sector participation has been by the way of setting
up independent water and power project (IWPP) companies that combines power and water production.
Waste water treatment: The current extent of waster water treatment for re-use is low at 17% of the total water
produced. Currently, the extent of waste water recycling is varying across the six countries. In Saudi Arabia, waste
water recycling is at approximately 5% of the total water. However, Qatar and Kuwait recycle upto 50-55% of the
total water.
Use of water: Due to extreme dryness of ground soil, a significant amount of water is required for agricultural
purposes in the GCC region. It is estimated that 85% of water requirement in the region is for agricultural
purposes. This extreme usage of water towards agriculture in decertified soil can be attributed to the government’s
ambition towards food security and food self-sufficiency objective of the governments.
However, in the recent past, there has been a change in the attitude of governments in the region. Saudi Arabia is
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currently re-thinking on its agricultural policy. In a bid to curb overall demand, Saudi Arabia announced in 2008
that it was abandoning its 30-year program to grow wheat – which depletes much-needed groundwater resources.
The government will cut wheat purchases from local farmers by 12.5% a year, in order to achieve full import
reliance by 2016. This move is expected to reduce the strain on the supply side of water in the GCC region.
Investments in the water sector: The total quantum of investments in the water segment is estimated at USD
51.23 Bn between 2002 – 2015. This includes projects completed, currently under execution and future planned
projects. Bulk of this investment is split between future projects and current work in progress. The financial crisis
has impacted 11 projects negatively with an aggregate value of USD 2.8 Bn.
In terms of geographies, the highest amounts of investments are being made in Qatar at USD 13.72 Bn, this forms
31% of the total investments in the water segment in the GCC region. The total amount of investments in Qatar
inclusive of the completed projects since 2002 is at USD 15.31 Bn. UAE is a closest second with a total investment
of USD 11.13 Bn, almost equally split between projects in progress and future planned projects. Of this amount,
USD 2.21 Bn worth of projects has witnessed cancellations. UAE has witnessed the highest value of projects
getting cancelled in the recent past.
GCC water grid is the only project being planned at a GCC level. The shareholders of this project are the
governments of all the six GCC countries. The total cost of the project is estimated at USD 4 Bn and is scheduled
to be completed in 2012. The plan is to build a pan-GCC water network to enable the six GCC states to trade
potable water in both normal and emergency situations.
The project includes a 1,324 Km water pipeline from Sohar in Oman to Khafji in the Divided Zone. Connected to
the respective national water networks of each of the GCC states, the pipeline will allow national water authorities
to obtain between 23-40 per cent of their daily total potable water demand from the grid in emergency situations,
such as war, desalination plant breakdowns and coastal oil spills.

The plan also includes three supranational desalination plants, located in Sohar, Sila in the western part of the
UAE, and Khafji to supply the potable water for the network. Each plant will use reverse osmosis technology and
have a capacity of 60.5 Mn gallons a day. The Khafji plant will also include a power element.
Challenges
Financial Crisis: An estimated USD 2.84 Bn worth of water and waste projects in the GCC region have been put on
hold or delayed till date. Of this, 78% of the projects are from UAE at USD 2.21 Bn. Majority of these projects
have been put on hold or delayed due to reasons such as poor market conditions or delay in arrangement of
finance.
Cost Escalations: There have been significant cost escalations from the budgeted values historically. For example,
the King Abdullah Economic City: Desalination and MBR plant was originally estimated to cost USD 50 Mn. This has
currently been increased to USD 75 Mn, a 50% escalation in cost. Such cost escalations in the current financial
crisis is expected to lead to more projects getting delayed.
Reversal in population growth: The United Arab Emirates, which witnessed a 5.7% CAGR growth in its population
from 1990 to 2008 is all set to record its largest decline in growth rate for 2009 at -4%. According to IIF estimates
the population of UAE is set to reduce from 4.69 Mn to 4.48 Mn in 2009.
Also, Qatar which was witnessing a rapid growth in population with a CAGR of 7% from 1990 to 2008 and a
significantly high growth of 18% in 2008 is expected to witness a slowdown in growth rates to 3% in 2009 and
2010 respectively. Such a reversal in population growth rates have resulted in most of the developers re-analyzing
the viability of large city projects. E.g Nakheel.
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