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Desalination spend on the rise in race against water crisis

Gulf climate tech Acciona
A desalination plant in Saudi Arabia: The Gulf has a comparative advantage in such technologies, in which they can increase exports
  • Desalination capacity in Middle East expected to double by 2030
  • Saudi Arabia is world’s largest desalination market
  • Mena projects account for 48 percent of global desalination

The UAE’s minister of climate change and the environment is clear about the importance of desalination, the process of removing salt from seawater.

Speaking at the United Nations Water Conference in New York last week, Mariam bint Mohammed Almheiri quoted the country’s founder, the late Sheikh Zayed Al Nahyan, when she declared: “Water is not simply a commodity; it is our lifeblood.”

The UAE is among the Gulf countries leading a global battle, worth billions of dollars every year, to fix one of the world’s biggest challenges – water scarcity.

Hundreds of desalination plants dot its coastlines to help plug the gap between demand and supply of fresh water.

French thinktank the Institute of International Relations (IFRI) expects desalination capacity in Middle Eastern countries to almost double by the end of the decade. 

Saudi Arabia, the world’s largest desalination market, which accounts for around a fifth of global capacity, is forecast to increase capacity from 5.6 million cubic metres (m3) per day in 2022 to 8.5 million m3 in 2025. 

The same holds for the UAE, Kuwait, Bahrain and Israel, where the production of desalinated water will more than double by 2030, the IFRI says.

Spanish infrastructure and energy giant Acciona recently ramped up production at Al Khobar II in the east of Saudi Arabia. It says the plant will provide 630,000 m3 of potable water per day, enough to meet the needs of three million people.  

Saudi-based Acwa Power said it added 2.4 million m3 per day of water desalination capacity in 2022, the largest in a calendar year in the company’s history. In 2023 it expects to add at least three more projects to increase its capacity by up to 15 percent.

Saudi Arabia is the world’s third-largest consumer of water per capita, following the United States and Canada. The kingdom has set ambitious targets that include slashing usage by nearly 43 percent by 2030. 

By the same year, the gap between global demand for and supply of fresh water is expected to reach 40 percent, a 2022 report by Morgan Stanley found. The World Bank believes water scarcity in some regions could impact GDP growth by up to 11.5 percent by 2050.

“The world is facing an exponential water scarcity crisis due to rapidly increasing demand,” Kashif Rana, chief portfolio management officer at Acwa Power, said.

“In the Middle East especially, low rainfall is placing additional pressure on water infrastructure. Enhancing capacity is a significant milestone not only for us, but for our industry.”

Saudi Arabia’s Acwa increased its desalination capacity by more than 2 million cubic metres per day in 2022. Image: Acwa Power

The urgency for GCC desalination was also highlighted when the Arab Water Council convened the Arab Water Convention in Dubai in February.

Council president Dr Mahmoud Abu-Zeid stressed: “More than half of the renewable water resources in the region originate from outside its borders, a fact that intensifies tensions and threatens stability and peaceful living.”

Investment across the Middle East and North Africa currently accounts for 48 percent of global desalination projects. Experts say further investment should be expected this year and beyond.

“The need and appetite for investment in water is always there,” Walid Rassi, managing director/project manager at Elements 2H2, a Dubai-based consultancy and member of the Mena Clean Energy Business Council, said.

“For the water-stressed areas in the Mena region, desalination projects and entities always draw investments.

“Furthermore, the GCC is seeing significant population and economic growth over the past period, driving this need and that investment.

“One has only to look at the recent GCC-based utilities IPOs in entities that deal with desalination to realise the appetite is there.”

Analysts at Fitch Solutions agree. “Water infrastructure project activity, particularly regarding desalination, will remain a key investment hotspot across Mena in the long term,” they said.

According to the World Bank, Mena is the world’s most water-stressed region. This, coupled with a robust population growth outlook, will keep the water supply under constant pressure.

Fitch analysts say GCC desalination markets are expected to continue to outpace the rest of the Mena region in the construction of infrastructure, largely because of their ability to afford the “prohibitive cost and highly capital-intensive” nature of desalination plants. 

But Egypt also has ambitious plans for plants of more than 2 million m3 per day capacity within five years, while Jordan is gathering momentum with its own projects.

Kuwait, Qatar and Bahrain are also engaging in new independent water and power projects, with capacity of hundreds of thousands of cubic metres per day while Oman is upgrading existing water supply infrastructure and the Levant area is also adding significant daily capacity.

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