Importance & Demand
Saudi Arabia is the largest country in the world without running surface water and has one of the highest rates of water consumption in the world. Providing new sources of potable water for the Kingdom’s growing population and expanding industry has long been a matter of national importance to the desert country. With daily water consumption at 263 liters per capita (in 2019), total water consumption has exceeded 8 million cubic meters per day (m3/d) and is forecast to reach 12.3 million m3/d by 2040. The country has relied on desalinated water since the 1950s and has since come to be the leading desalinated water producer in the world, with 7.6 million m3 produced daily accounting for 22 percent of global production. As of 2019, 60 percent of the country’s water comes from desalination, with nonrenewable groundwater (less than 40 percent) taking most of the remaining share and reclaimed wastewater surface water and surface water supplies supplying the rest. The Kingdom’s overall water demand stands at an estimated 25.29 billion m3 annually but is projected to grow slightly to 25.79 billion m3 by 2025.
Although the Saudi government has ensured that more than 97 percent of its population has reliable access to potable water, the challenge of increased consumption and decreased supply has remained a priority of the Kingdom’s development goals. As of October 2020, the Kingdom had a total of 33 desalination plants in 17 locations run by the Saline Water Conversion Corporation (SWCC), a government-run organization responsible for approximately 69 percent of desalination in the Kingdom (5.6 million m3/d) and 20 percent of worldwide desalination.
Major Desalination Projects
To meet rising demand, the Kingdom began the development of 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 were initially Shuaibah III (built in partnership with Bechtel), Jubail III, and Shuqaiq II. The Jubail III and Shuaibah III IWPPs started production in April and August 2009, respectively, and the Shuqaiq II IWWP was completed in late 2010. Expansions for most desalination projects are already planned or underway; these include the $600 million Shuqaiq III expansion, awarded to Spanish firm Acciona, S.A. and planned for completion in Q4 2021 with the capability to supply nearly 2 million people with an output of 450,000 m3/d. Acciona was additionally chosen in 2018 as the lead contractor for the Al-Khobar I desalination plant, which will supply 350,000 people per day at a construction cost of over $240 million. Al-Khobar I began operations in September 2020 and will eventually produce 210,000 m3/d of water.
In 2015, the SWCC began operations at the $7.2 billion Ras Al-Khair desalination plant, adding more than 1 million m3/d to the national supply. The project also includes a 2,400 MW power plant, making it the world’s largest hybrid water desalination plant and the first of its kind built to such a scale. In addition, Saudi Arabia boasts the largest overall desalination plant in the world in its east-coast city of Jubail, with an output capacity of 1.4 million m3/d.
The SWCC’s most recently completed major desalination project is Yanbu III, which began operations in November 2020 at a cost of $1.3 billion. The hybrid power/desalination plant generates 3.1GW and provides 550,000 m3/d to 1.8 million residents in Madinah and the industrial city of Yanbu. The Saudi Water Partnership Company (SWPC, formerly called the Water and Electricity Company), a purchasing agent of the SWCC and the Saudi Electricity Company, is overseeing a new expansion project to the Yanbu desalination facilities; Yanbu IV will add an additional 450,000 m3/d water output at a cost of $850 million and will include a 20MW solar photovoltaic facility. In February 2015, Black & Veatch announced its selection as the engineering and design consultant for SWCC’s Shuaibah IV desalination project, a $500 million, 400,000 m3/d plant planned for completion in May 2021 and designed to augment drinking water supply to the city of Jeddah.
In late 2018, ACWA Power was chosen by the Saudi Ministry of Environment, Water and Agriculture (MEWA) to partner with the Saudi Brothers Commercial Company to develop the Rabigh 3 IWP, a reverse osmosis desalination plant with an output capacity of 600,000 m3/d (expandable to 1,200,000 m3/d). The $600 million project, expected to start operations in the first quarter of 2022, will supply water to Jeddah, Makkah, Taif, and villages in the surrounding area. ACWA Power will retain a 70 percent ownership stake upon completion of the project. The SWPC has further plans to develop Rabigh 4 (a $600 million expansion with capacity of 900,000 m3/d) and Rabigh 5 (a $400 million expansion with capacity of 400,000 m3/d).
New solutions to water issues are also being developed to complement increased desalination capacity and better conservation efforts. Today, the country is leading the world in revolutionizing the desalination industry with its innovations in solar-powered desalination plants. 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 collaborated 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 with The Dow Chemical Company to jointly pursue research and development in desalination technologies, following Dow Chemical’s plans announced in 2011 to invest in a manufacturing facility for reverse osmosis elements in the Kingdom.
Continuing KACST’s efforts towards water sufficiency, in 2018 Advanced Water Technology (AWT, a subsidiary of KACST’s commercial entity TAQNIA) completed the world’s first large-scale water desalination plant powered solely by solar energy. The $130 million, 15MW plant, located in the northeastern city of Al Khafji, serves 100,000 people with a peak production capacity of 60,000 m3/d using the techniques developed by the KACST/IBM collaboration at KACST’s Joint Center for Nanotechnology Research. As of 2018, the Kingdom’s solar-powered desalination plants save an estimated 1.5 million barrels per day of oil, with the added benefit of reducing the effects of price hikes. These capital investments provide opportunities for U.S. businesses that can help Saudi Arabia overcome its water challenges with new technologies and innovative techniques.
Desalination Investments and Initiatives
Saudi Arabia’s desalination plants use a number of different processes. According to the Saudi government body that regulates electricity and water generation industry, the Electricity and Co-Generation Regulatory Authority, as of 2018, 64 percent of the Kingdom’s desalinated water is produced by the multi-stage flash process (MSF), 20 percent is produced via reverse osmosis (RO), and 16 percent is produced using multi-effect distillation (MED). In 2016, SWCC announced plans to invest about $80 billion to increase desalinated water production to 8.5 million m3/d by 2025. Furthermore, in 2017, the SWCC produced an additional 1.4 million m3 of desalinated water in 13 months using existing facilities, an output nearly equal to that of a newly built desalination plant worth $3.5 billion without any additional capital costs.
In addition, the National Water Company (NWC), a Saudi joint stock company fully owned by the Public Investment Fund, has invested nearly $6.7 billion more than 300 water projects over the last decade in the fields of service, infrastructure development and water treatment in Makkah, Riyadh, Taif and Jeddah, and recently announced investment opportunities worth billions more over the next five years. The private sector contributes 2 million m3/d to SWCC’s production via the SWPC, and investment incentives exist for companies that want to help contribute to further growth in the industry. In estimates from 2016, MEWA calculated that there were $107 billion worth of investment opportunities in the water and wastewater sectors available through the end of 2025.
Improving Efficiency and Reducing Waste in Water Transmission
However, desalination alone may not be able to provide for future demand, which has been growing approximately 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 and set the country on an unsustainable path regarding the rate at which its natural water resources replenish. This led the Saudi Government to end subsidies in 2016 for water-intensive crops in order to discourage agricultural water use. The Kingdom now imports most of its food and has completely halted agricultural production of wheat and other cereals. However, the agricultural sector has shifted to other water intensive crops, meaning the sector still accounts for approximately 83 percent of the country’s water consumption, with industry using four percent and residential/domestic accounting for the remainder.
In early 2016, new tariffs were implemented for water and sanitary drainage services for consumers in the government, industrial, and commercial sectors. These sectors are required to pay a significantly higher tariff rate than the residential tariffs introduced in 2016, which mainly impact only the very largest of water consumers in the Kingdom and do not apply to water sold via tanker trucks.
In March 2019, the Kingdom launched a National Transformation Plan initiative called the National Program for Water Conservation (also called Qatrah, which is Arabic for “droplet”), aiming to meet Vision 2030’s objective to preserve the country’s non-renewable water resources. Qatrah’s goal, with the cooperation of the NWC, is to reduce the country’s average daily per capita water consumption 24 percent by 2021 and 43 percent by 2030, or from 263 liters per capita per day in 2019 to 150 liters by 2030. The initiative engages with the private and public sectors through programs to reduce consumption and plug water leaks with updated infrastructure and leak detection technology; in addition, it requires cooperation at the individual level through conservation awareness programs to reduce wasteful consumption.
As a result of aging distribution systems and inefficient usage (both pre- and post-meter), Saudi Arabia can lose up to 40 percent of its transmitted water on any given day (25 percent in urban areas), one of the highest water loss rates in the world. In 2007, the Kingdom launched a program to address leakages 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. To further reduce leakage and waste, the Kingdom aims to reuse over 90 percent of its water by 2040 (currently 65 percent, approximately) by transforming its existing and planned wastewater treatment assets into source water suppliers across most industrial sectors. Ultimately, the MEWA plans to reduce losses to 15 percent by 2030.
Wastewater: Government and Private Sector Solutions
Saudi Arabia has 204 wastewater treatment plants (as of 2019), with much of the treated non-potable wastewater finding useful purposes as “grey water,” watering green spaces in cities, irrigating crops, or reused in industry. Valued at $4.69 billion by Gulf State Analytics, the Kingdom’s water reuse market is estimated as the third largest in the world after China and the U.S. Treated and repurposed wastewater is cheaper on average to produce than desalinated water; for this reason, the Kingdom considers it a vital source of water for certain uses and has set a goal to achieve 100 percent reuse of treated urban wastewater by 2025.
In 2015, MEWA (at the time called the Ministry of Water and Electricity) signed more than 75 water and sewage projects worth more than $425 million to be implemented in various regions of the Kingdom, following up in 2016 by awarding $142 million more in sewerage projects. Furthermore, at the 2015 Water Arabia conference in Al-Khobar, the Saudi government committed $66 billion to long-term capital investments in water and sanitation projects through 2025.
In 2012, the NWC made plans to involve the private sector in $23 billion of capital wastewater treatment and reuse infrastructure projects through 2030, in line with the Kingdom’s broader privatization goals. As a result of private sector involvement, the number of new wastewater connections made annually in Riyadh and Jeddah grew from 20,700 in 2010 to more than 38,000 in 2016. The NWC also worked to build and expand its wastewater treatment plants in Riyadh, Jeddah, Makkah and Taif since 2016, adding 2 million m3/d in capacity. Despite the economic challenges the Kingdom faced in 2020, the SWPC was able to close a deal to build the country’s first independent sewage treatment plant (ISTP). The $245 million project, managed by a private sector consortium led by Dubai-based Metito Group under a 25-year build-own-operate-transfer contract, will be built to process up to 350,000 m3/d of wastewater from Dammam and will serve as a model for future private sector wastewater initiatives. The Kingdom has set a goal to increase national wastewater treatment processing capacity to 8.4 million m3/d by 2023 in order to meet rising demand and appears to be on-track, with 3.2 million m3/d under construction or under tendering to be added to the country’s current treatment capacity of 5.6 million m3/d. By 2030, the total amount of collected wastewater will reach 10.3 million m3/d after the addition of 11 large-scale and 150 small-scale plants (defined as under 25,000 m3/d treatment capacity) the SWPC estimates will be needed to meet rising demand.
Increased capacity for sewage treatment has also provided a new solution to the Kingdom’s water shortage. Saudi Arabia aims to become the Gulf Cooperation Council’s largest market for treated sewage effluent (TSE), a water reuse method that is a strong alternative to using desalinated water in non-potable applications. To that end, the Kingdom has set a target of increasing TSE reuse to 70 percent (nearly 4 million m3/day) by 2030 under the Kingdom’s National Water Strategy.
Government Initiatives and Privatization
As part of Saudi Arabia’s strategic objectives in its National Transformation Plan and Vision 2030 program, the Kingdom aims to increase the proportion of desalinated water owned and produced by private operators. Announced in late 2019, this government initiative aimed to generate up to $11 billion in non-oil revenue and create 12,000 private sector jobs by the end of 2020, although this timeframe was pushed back by the 2020 pandemic’s economic effects. The eventual goal of Vision 2030’s water sector privatization is to raise as much as $200 billion (not including Saudi Aramco’s IPO) through privatization and private-public partnerships.
To further Vision 2030’s objectives on privatization in the water sector, MEWA created the National Water Strategy. One of its pillars is the privatization model outlining the separation of the water production assets from the transmission assets to further the Vision 2030 goal of a 65 percent increase in GDP contribution from the private sector over the next decade. The initiatives intend to strengthen competition, improve the quality of provided services, further economic development, and remove obstacles to investment within the water and wastewater sectors. The National Water Strategy has set goals for nationwide wastewater coverage to grow from 65 percent in 2020 to 95-100 percent by 2030, with strategic partners taking over responsibility of 100 percent of treated water production by 2030 as well. In 2018, the Saudi government reported its efforts under Vision 2030 had achieved a number of goals, including rehabilitating agricultural terraces in the Kingdom’s south to improve the efficiency of water use and promote less water-intensive crops; improving the efficiency of desalinated water production; and improving the country’s billing and tracking of water usage by installing over a million linked high-precision electronic meters.
In November 2020, MEWA announced the establishment of the Water Transmission and Technologies Company (WTTCO) to support the Kingdom’s water privatization and restructuring program. The WTTCO will manage and maintain over 5,200 miles (8,400 km) of water transmission, distribution, and storage systems that transmit more than 7 million m3/d of desalinated water, while adding more than 2,100 miles (3,500 km) of new transmission lines capable of distributing more than 4 million m3/d. The government-run entity is also tasked with implementing Vision 2030’s goals of higher efficiency, reduced waste, decreased operating costs, and enhanced innovation within the water sector. The WTTCO will furthermore seek more than $16 billion of private sector investment in water transmission technologies and strategic storage systems.
The NWC is now moving ahead with plans to partially privatize its water and wastewater assets and has acquired technical, legal, and financial consultants on its TSE program. Under the 2030 National Water Strategy, the NWC is opening opportunities for private firms to help develop 114 sewage treatment plants with a total processing capacity of 5.1 million m3/d, with the first phase tendering offers for 15 sewage treatment plants accounting for nearly half of country’s treatment capacity (2.5 million m3/d). The contracts cover rehabilitation, operational improvements, and capacity increases, with additional contracts in the pipeline for 2021 and beyond. While NWC will remain a significant shareholder in the treatment plants, one or more private sector firms will assume operation and maintenance activities. The first set of contracts to be offered by the NWC for operating its water distribution assets, six in total, will run for a period of between three and seven years, with long term goals to transfer these contracts into concession arrangements lasting 25 to 30 years.
These decisions mirror the Saudi government’s recent approval of the SWCC’s plans to privatize its operations – one of Vision 2030’s reform goals – in order to invite private sector efficiency and experience to the Kingdom’s water sector. As of January 2021, the SWCC had prequalified seven interested parties out of a pool of 37 for the forthcoming privatization of its largest asset, the Ras Al-Khair plant. The winning bidder/consortium will acquire a 60 percent stake, along with managerial and operational control, for an estimated book value of $3.3 to $3.5 billion. The SWCC has already begun its plans to privatize 11 desalination plants with a total capacity of 4.3 million m3/d and nine sewage treatment plants with a combined capacity of 1.1 million m3/d.
The Future of Saudi Arabia’s Water
Rising demand, large government projects, and the government’s nascent privatization efforts 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. 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 while the government seeks to attract outside investment.
Saudi Arabia, although facing significant water challenges, is rising to the occasion through its diverse set of development goals established under Vision 2030. The country aims to meet its goals through a careful mix of privatization, technological advancements, infrastructure construction, and regulatory reforms. The innovations developed by the Kingdom’s industry leaders and research institutions will help the Kingdom not only achieve their own goals, but also assist the rest of the world in meeting this century’s new water challenges.