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  1. 1. Providing Water and Electricity in a Growing Economy — The Perspective of the Saudi Saline Water Conversion CorporationUS - Saudi Business Opportunities Forum, Atlanta - USADecember, 2011
  2. 2. ‫ﺑﺴﻢ ﺍﷲ ﺍﻟﺮﲪﻦ ﺍﻟﺮﺣﻴﻢ‬In the name of God, Most Gracious, Most Merciful ٢
  3. 3. The water sector in Saudi Arabia faces the dual challenge of highwater demand and depleting non-renewable water resources Main Challenges in the Saudi Water Sector High Demand for Water Depleting Natural Water Resources High municipal water consumption, More than 60% of the total water consumed estimated at 250 liters per capita per day (not just municipal) comes from depleting due to a lack of awareness vis-à-vis water ancient water aquifers scarcity issues and limited price signaling Groundwater abstraction rates are High rural usage (agriculture accounts for unsustainable, estimated to be 10 times more than 80% of the total water consumed) higher than yearly replenishment rates High water demand growth, estimated at The quality of surface and ground water is 2.1% annually for 2010-2014, driven by: deteriorating due to pollution and the – Population growth overexploitation of resources – Increasing urbanization – Industrialization and economic growth ٣
  4. 4. SWCC was established in 1974 with a main purpose to supportnatural water resources by means of seawater desalination Overview of SWCC Establishment and Purpose Late King Abdulaziz ordered the first 2 desalination units with a capacity of 300 1928 m3/day (80,000 gallons) for Jeddah to serve the Pilgrims and Jeddah population. The present SWCC is established by Royal Decree. Its main purpose of SWCC is to 1974 support natural water resources by means of seawater desalination in addition to electric power generation depending on technical and economic conditionsVision Pioneering the Seawater Desalination Production and Transmission To Meet the Kingdom’s Desalination Water Demand and Contribute to Economic andMission Social Growth through Effective Investment in Human and Physical Asset Resources ٤
  5. 5. SWCC is engaged in water production and transmission, powergeneration, and R&D in desalination N Desalinated Seawater Production W E Main activity: Planning, construction, operation and maintenance of seawater desalination plants S Process: Production of water either through dual or single purpose plants (MSF, MED, RO) LF I AL-KHAFIJI Existing assets: 27 plants in 16 locations with 3.3M HAQL ZU m3/day installed water capacity AL UA AL-JUBAIL M AJ DUBA M IR Water Transmission SI BURAIDAH DA U AL-KHOBAR SU H AL AL WAJH Main activity: Planning, construction, operation and ALQAT UMLUJ maintenance of water transmission pipelines SHUQRA RIYADH HAFUF Existing assets: More than 5,000 km of pipelines, MADINA MUNAWARA 29 pumping stations, 158 storage tanks (capacity: 9M YANBU m3) and 17 blending stations ِAl-AZIZIALarge Plants RABIGH MAKKAH MUKARAMA Power Generation JEEDAH TAIF Main activity: Planning, construction, operation andSatellite Plants Al-SHOAIBA Al-LEETH maintenance of electrical power plantsRegional Reservoirs Al-QUNFIDHAH Process: Dual purpose plantsWater Transmission Al-BIRK KHAMIS MUSHAYAT Existing assets: 12 cogeneration plants with around ABHASystems AL-SHUQAIQ 5,000MW of power generation capacity FARASAN Research and Development R&D Institute: Largest Middle East R&D center pioneering in seawater desalination technologies Training Center: Ensures continuous transfer of knowledge to the sector ٥
  6. 6. Saudi Arabia is currently the largest producer of desalinated waterin the world, accounting for 18% of total production KSA Desalination Share KSA Desalination Share in the World (2010) in the GCC (2010) OM AN BAHRAIN 1.38% 1.32% KSA QATAR SPAIN 18.00% KSA 3.39% 7.64% 41% UAE 33% UAE OTHERS 16.66% 27.36% OMAN 3% KUWAIT KUWAIT BAHRAIN QATAR 13% USA 6.46% 3% 17.80% 7% ٦
  7. 7. The Saudi Government is committed to expand desalination tomeet national demand for water and electricity The Share of Desalination in the Kingdom Cogeneration is Adopted as a Strategy forMunicipal Water Supply is Expected to Rise Increasing Desalination Capacity Efficiently 2010 2025 Cogeneration plants combine water production and power generation which KSA maximizes economic efficiency when large Population (In 27.2 34(1) investments in both power and water Millions) supply are required to meet local demand In 2011, Royal Decree M/45 stipulated that Water Demand the adoption of cogeneration is (In Million 6.8(2) 8.5(2) compulsory in desalination projects and m3/day) coastal electricity generation projects, except in cases where there is proof of economic unfeasibility or no demand for Desalination 53% 63% power or water Share in Water (3.3 Million (5.2 Million Cogeneration currently accounts for around in KSA m3/day) m3/day) 20% of electricity generation in KSA (1): Assuming an average annual growth rate of 1.5% (2): Consumption rate per capita is 250 liters/day ٧
  8. 8. SWCC is focusing on five key dimensions to meet water andelectricity demands and ensure effectiveness and sustainability1 Integrated resource planning2 Timely expansion of desalination capacity3 Private sector participation in the Saudi desalination sector4 Restructuring and commercialization5 Innovation and global collaboration ٨
  9. 9. 1 Integrated resource planning for water and power maximizes value for the economy Integrated Resource Planning Matrix of Resource Planning Approaches Integrated Resource Planning (IRP) High Integrated Resource The main aim of IRP is to maximize economic Planning (IRP) efficiency while guaranteeing supply reliability Demand and supply-Effectiveness and Flexibility An integrated planning for water resources is side required, notably desalination and groundwater Engagement of all (balancing cost, national interest, availability) stakeholders Minimum costs An integrated planning for the water and electricity sectors is required so that the timing, location and size of cogeneration facilities is optimized (taking into account interrelation Traditional Least-Cost between demand and supply) Resource Planning Resource Planning Reliability of Lowest cost A prime example is the case of Ras-Al-Kheir supply, taking options to meet plant in KSA where the SWCC cogeneration demand for demand plant was expanded by 1,350MW to include granted the industrial power needs of a local Low manufacturer, which was planning to build its Low High own plant Efficiency ٩
  10. 10. 2SWCC is currently constructing major plants and pipelines – RasAl-khair is the largest cogeneration project of its kind in the world SWCC Plants & Pipelines – Under Construction Water Capacity Power Capacity Plant Expected Date (m3/day) (Megawatts) Jeddah - RO 240,000 - 2012 Ras Al-Kheir 1,025,000 2,400 2013 / 2014 Capacity Length Pipeline Expected Date (m3/day) (Kilometers) Ras Al-Kheir / Riyadh 1,000,000 900 2013 Ras Al-Kheir / Hafr El 160,000 350 2013 Batn Al-Laith 9,000 6 2103 Mekkah / Taef / Jeddah 790,000 344 2013 / 2014 Shuqaiq (Phase 2) 565,000 913 2014 Farasan 9,000 2 2014 Total Cost of Projects Under Construction: 16.8 Billion Saudi Riyals USD 4.48 Billion ١٠
  11. 11. 2 SWCC is also tendering several projects including a largecogeneration plant and transmission system in Yanbu SWCC Plants & Pipelines – Under Tendering Capacity Power Capacity Plants Expected Date (m3/day) (Megawatts) Rabigh 3 9,000 - 2013 Haql 3 9,000 - 2013 Dhuba 4 9,000 - 2013 Yanbu 3 550,000 2,500 2014 Capacity Length Pipeline Expected Date (m3/day) (Kilometers) Yanbu - Madina (Ph 3) 560,000 597 2015 Rabigh - Khulais 5,000 19 2015 ١١
  12. 12. 2 SWCC’s expected future capacities includes commissioningseven large plants by 2024 SWCC Plants & Pipelines – Proposed Future Capacities Water Power Plant Expected Date (m3/day) (Megawatts) Shuqaiq 3 175,000 175 2015 Khobar 4 250,000 250 2017 Jubail 4 320,000 320 2017 Shoaiba 4 650,000 665 2019 Yanbu 4 300,000 307 2021 Yanbu 5 100,000 102 2023 Khobar 5 220,000 220 2024 ١٢
  13. 13. 2 Total Capital and Operational Investments until 2020 Desalination Sector Capex and Opex (2010 – 2020) – USD Million 17,453 Transmission 5,802 Power and 6,811 water 11,651 2,422 Water 2,337 Transmission 2,051 Power CAPEX OPEX Total = US$ 24.3 Billion (SR 91 Billion)Note: 1) Assuming constant ground and water supply ١٣Source: Technical Advisor Estimation Report
  14. 14. 3KSA has committed to increase private sector participation in keygovernment assets to achieve the following strategic objectives Sectors Covered by KSA Privatization Program Government’s Strategic Objectives Water and wastewater Enhance competitiveness of national economy Desalination Encourage/increase private sector participation Telecommunications Air Transportation and related services Expand the ownership of productive assets by Railways Saudi nationals Highways Encourage investment of domestic and foreign Airport Services capital in KSA Postal Services Create employment opportunities for nationals Wheat Mills and storage facilities Provide quality services in a cost effective Port Services manner Industrial Cities Services Government’s shares in Public companies Reduce the burden on the government budget Government’s shares in the Arabic and Islamic Increase government revenues common investment companies Government Hotels Sports Clubs Municipal Services Education Services Social Services Agricultural Services Health ServicesSource: Governmental Decree Number 60 of 1/4/1418 H and Number 175 of 27/6/1424 H, ١٤Supreme Economic Council Resolution 5/23
  15. 15. 3 Action to date: 2 Independent Water Power Producers launched Project Name Project Information Status Estimated total cost: USD 2.69B Commercial Operations started by Total Capacity: 1,030,000 m3/day February 2009 Shoaiba III (West Coast) 60% owned by the private sector 20 years Build, Own, Operate (BOO) scheme Estimated total cost: USD 1.87B Commissioning started by end of April Total Capacity: 212,000 m3/day 2009 Shuqaiq II (West Coast) 60% owned by the private sector Project started operating in December 20 years BOO scheme 2010 ١٥
  16. 16. 3The strategy for Private Sector Participation in SWCC wasapproved in 2008 and offers several investment opportunities Strategy for Private Sector Participation in SWCC Significant investment opportunities for private sector Incorporate as government-owned holding company and then possibly float on stock SWCC Holding exchange Yanbu RaK Satellite Khafji Shoaiba Shuqaiq Khobar Jubail ProdCo ProdCo ProdCo ProdCo ProdCo ProdCo ProdCo ProdCo Old Trans- Trans- Old Duba-4 / Productio Other Leith-1 mission mission Production R&DT, … Yanbu- Haql-3 Farasan-2 Shoaiba- n Plants Ras Al- Khafji-2 Shuqaiq-1 Khobar-3 Jubail RO Plants 1,2,RO Wajh-3 Qunfutha-1 1,2 Kheir* Rabigh-2 Khafji-3 Shuqaiq-3 Khobar-4 Jubail-4 Yanbu-3* Wajh-4 Shoaiba-4 Umlujj-3 Azizia-2 Old Production Plants: Jeddah-3, 4, RO1 and RO2, Jubail-1, 2 A and 2 B, Birk-1, Haql-2, Khobar-2, Rabigh-1+TR1, Wajh-2+TR1-3, Farasan-1+TR1, Umlujj-2, Duba- 3, Azizia-1 Introduce PSP in value creating priority assets, following “IWPP model” abc Existing / Built by SWCC abc To be Implemented by PPP Public Public/Private Partial Ownership Ownership Ownership Full Ownership*) Due to the present economic situation and the difficulties in ensuring financing, Yanbu -3 and Ras Al-Kheir are tendered as an EPC contract by SWCC ١٦
  17. 17. 4 SWCC has embarked on a long and ambitious privatization,commercialization and restructuring program Phases of the SWCC Restructuring & Privatization Program (Completed) (Completed) (On-going) From 8/2004 to 8/2006 From 1/2007 to 7/2008 Started in 1/2009 Long Term 24 Months 18 Months ≈5 Years PHASE I PHASE II PHASE III PHASE IV Preparation Steps Execution of Holding Company and Detailing Approvals Privatization & Privatization Studies Restructuring Prepare a report on the Submit Privatization Organization detailing, HR Introduce private sector requirements to develop Strategy and Restructuring Readiness and BPR participation in the Holding SWCC’s privatization Plan reports and conduct IT strategy and implementation Company, either through strategy and organization stakeholder presentations Rollout of the new organization management contract(s) or restructuring Obtain approval from the structure and processes through an Initial Public Develop and detail SWCC Board of Directors Commercial agreements offering (IPO) privatization options and and Supreme Economic development and enactment Transform Transmission select the preferred option Council – issuance of the Submission of the documentation Business Units into a Develop privatization and SEC resolution no. 2/29 required for the Royal Decree company then introduce restructuring plan (29/6/1429H) Creation of the Holding Company private sector either Finalize all preparations for and Production Companies through an IPO or through the launch of the execution long term strategic Introduction, through a phased phase partnership (Optional) approached, of private sector participation in Production companies ١٧
  18. 18. 5 SWCC plays a key role in innovation and global collaboration inthe desalination industry Glance of SWCC Innovation and Collaboration Brief Overview of Our Research Institute Examples of Achievements in Innovation and Collaboration SWCC established its Research Institute in 6 patents in desalination technologies. 1987 at Al-Jubail, KSA, as part of the Saudi Example: American Cooperation Agreement – Patented, in the USA, a process using The Institute focuses on applied research in nano-filtration (NF) membranes to chemistry, corrosion, environment, reverse eliminate scaling and fouling, increasing osmosis and thermal desalination production by 33% and decreasing energy usage by 30% The Institute has state-of-art labs and pilot 12 awards and several accreditations such desalination plants as ISO9001 It provides consulting, testing and Collaboration with several universities and troubleshooting services to local and main players in the global desalination regional customers industry The strategy of the Institute focuses on Consultant on a 30,000 m3-a-day solar- promoting global collaboration to drive powered desalination plant that will be the advancements in desalination technology largest in the world ١٨
  19. 19. SummaryThe Saudi Water Sector is growing, benefiting from the full support of the governmentto meet the strategic aims of supply security and reliability, production efficiency andprivate sector participationThe water sector presents real opportunities for private sector participation – Potentiallocal and international investors can look for a reasonable return, flexible paymentterms, well defined risk allocation, clearly defined responsibilities & obligations of bothparties (stakeholders & the private sector), through a fair and a transparent biddingprocessThe Saline Water Conversion Corporation is committed to national and globalcollaboration and private sector participation in the desalination sector – Private sectorlocal and international participation in the desalination sector benefits the broadestrange of players: investors, financing institutions, operators, EPC contractors,equipment and materials providers etc. ١٩
  20. 20. ٢٠