The Kingdom of Saudi Arabia is the largest of the GCC countries. The country has the largest population at 30.77 million. The country has 16% of all proven oil reserves in the world. Even as the country attempts to diversify its economy, almost 80% of the budget revenues, 90% of export earnings and almost 45% of the GDP is accounted for by hydrocarbons. Despite having aquifers like Saq, Wajid, Tabuk, Dhurma, Dammam, and others, the water here is highly brackish. With a declining level of precipitation, the country derives 70% of its urban water supply from desalination. A conscious move away from reliance on hydrocarbons has put an increased stress on water availability, as industries, businesses and the population increases, which requires an increase in the current desalination capacities. As of 2015, the desalination market in Saudi Arabia was worth USD X.X billion. The market size is expected to grow at an XX.X% CAGR from 2016 to 2022.
The depleting natural precipitation and ground-water levels and increasing population are the major drivers of the sector in the region. A continued effort at increasing diversification of government income from hydrocarbons is another factor that has led to an increase in construction projects, industries, manufacturing plants, etc., leading to more demand for fresh water. Moreover, the government is supporting and encouraging the establishment of desalination plants to meet the nation’s demands.
Restraints and Challenges
The biggest challenge of desalination is the cost. As per a study, the cost of desalinated water per meter cube was USD 1.04, 0.95 and 0.82 for MSF, MED, and RO, assuming a fuel cost of USD 1.5/ GJ. Moreover, energy accounts for approximately three-fourths of the supply cost of desalination. Transportation cost is also added to the overall cost, making desalination a very costly process. Another negative impact of desalination is on the environment with the treatment of brackish water leading to pollution of fresh water resources and soil. Discharge of salt on coastal or marine ecosystems also has a negative impact.
As suggested by the ECRA reports, USD 80 billion is expected to be spent on desalination projects in Saudi Arabia over the next two decades, presenting a lot of attractive opportunities for private sector involvement. Private sector investment in building as well as financing desalination plants are conducted through purchasing of their services (such investors and technology transferring builders are called IWPPs or Independent Water and Power Producers) by WEC, or the Water and Energy Corporation, an off-taker for desalinated water produced by private operators. The purchase is made for Power and Water Agreements (PWAs), signed for a period of 2 decades.
About the Market
PESTLE Analysis (Overview): Macro market factors pertinent to this region
Market Definition: Main as well as associated/ancillary components constituting the market
Key Findings of the Study: Top headlines about market trends & numbers
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