The Kingdom’s largest bank NCB said on Tuesday that Saudi Arabia needs to step up efforts to prevent a possible water supply shortage caused by a rapid growth in its population, steady expansion in the industrial sector and low water tariffs,
NCB said that the population in the world’s largest oil exporter has grown at an average three per cent annually over the past two decades and is expected to maintain that pace over the next five years.
While water consumption over the same period has fallen by approximately 1.5 per cent annually, the demand for desalinated water has increased by more than double that of the population growth, at 6.27 per cent, it said in a study.
“The water-power nexus is a time-sensitive challenge faced by countries worldwide, with especially grave consequences for countries in the MENA region and especially Saudi Arabia,” said the study, sent to Emirates 24/7.
The Kingdom’s rapidly rising population, expansionary fiscal policies and large investments in social and physical infrastructure, have exerted pressure on the existing water networks…..the accelerated pace of water consumption relative to that of population is attributed to the low utility rates faced by the public, as the water sector is heavily subsidized by the government.”
The study said average water tariffs in Saudi Arabia are the lowest within the Gulf Cooperation Council countries and among the lowest in the world.
The tariff structure for water provided by the government is based on block tariffs for consumption, ranging from SR0.15 to SR6 per m3/month.
“As the Saudi population is estimated to reach 31.69 million in 2015, additional pressure will be placed on energy intensive desalination plants for potable water,” NCB said.
“Furthermore, the abundance of oil and gas reserves provides the Kingdom with both a comparative advantage in energy costs and funding sources….this acts as a driver in the project market, increasing the share of industrial water consumption.”
NCB’s figures showed that in 2012, contracts in the water sector amounted to a total of SR8.9 billion, and those in the waste water sector totalled SR2.6 billion.
Active players in the Kingdom’s water sector include the Ministry of Water and Electricity the National Water Company, and the Saline Water Conversion Company.
Participants from the private sector include independent power/ water/ steam producers (IPPs, IWPPs and IWSPPs), as well as smaller scattered private companies
The report noted that Saudi Arabia has been categorized as a country with absolute water scarcity necessitating the implementation of cost-reflective utility prices, the development of renewable energy sources and undertaking conservationist initiatives. Given that the agricultural sector commands the largest share of water consumption, the cabinet approved a decision in 2007 to rationalize the use of water.
The decision removes the incentives for wheat production— which is to be phased out by 2016 –and fodder production, and establishes mechanisms for better control and protection of water. “Consequently, greater desalination and wastewater treatment capacity will be required over the upcoming years to sustain the Kingdom’s level of economic development,” NCB said.