Desalination in Saudi Arabia: An attractive investment opportunity
Saudi private-sector companies and their global counterparts operating in the desalination, water treatment and renewable energy sectors have benefitted from a win-win partnership in major desalination projects initiated by the Saudi government over the past few decades. The future looks even more promising as further investment opportunities present themselves.
Since its initial launch in 1928 by King Abdul Aziz, the desalination industry in Saudi Arabia has evolved significantly. At the outset, machinery was brought in for seawater distillation, providing a much-needed supply of fresh water for Jeddah residents as well as for Hajj and Umrah pilgrims arriving in Jeddah by sea.
Saudi Arabia ranks among the top five countries in the world in terms of water scarcity. In order to meet this challenge, substantial investment has been made in seawater desalination, water distribution and wastewater treatment. Today, about 50 percent of the country’s drinking water comes from desalination, 40 percent from the mining of non-renewable groundwater, and only 10 percent from surface water in the mountainous regions, particularly the southwest.
Thanks to heavy investment in water desalination, Saudi Arabia now leads the world in the production and consumption of desalinated water. This thriving sector counts 31 desalination plants in 17 locations, operated and managed by more than 10,000 employees. Several more desalination plants are under construction with a budget of SR91 billion ($24.3 billion) through 2020.
In 2017, the Saline Water Conversion Corp. (SWCC) — the Saudi government corporation in charge of seawater desalination — produced a record 1.4 million additional cubic meters of desalinated water in 13 months, almost equivalent to the construction of a new desalination plant worth SR13 billion, without any additional capital costs. The SWCC was recognized by the Guinness Book of World Records as the largest water desalination company in the world, with a daily production capacity of 5 million cubic meters.
The idea of privatizing the SWCC, which falls under the Saudi Vision 2030 reform plan, has been a topic of debate for several years. The state-owned company, which is responsible for almost 60 percent of desalination in the Kingdom, has been making changes to its structure and operations to facilitate the transition for some time.
The Electricity and Cogeneration Regulatory Authority foresees an investment of SR300 billion required for desalination projects in the Kingdom over the next two decades. This scale of investment — necessary for the growth and development of this vital sector — presents highly attractive investment opportunities both for the Saudi private sector and global companies in the field of water desalination, water treatment and renewable energy.
• Basil M.K. Al-Ghalayini is the Chairman and CEO of BMG Financial Group.