The Gulf Cooperation Council (GCC) region’s water sector is moving more and more towards sustainability and environment-friendly technologies.
Focus on improving the water supply is constantly at the forefront of the policy-making process in the Gulf Cooperation Council (GCC). The demand for water is increasing rapidly. However; the economic slowdown has reduced the influx of expat population in the region, which has slightly reduced the demand for water as well.
Bulk of the water usage in the region is in the agricultural sector for irrigation use as depicted in Chart 1, and a large portion of this demand is met by desalination, which is an expensive option for Governments in the GCC.
Under the current economic environment, policy makers are trying to identify and implement less capital intensive options to meet this demand, like recycling and reuse of water for non-potable purposes, such as irrigation. Additionally, the desirability of desalination plants is shrinking due to rising oil prices thereby increasing the cost stress on a water supply process that consumes large amounts of energy.
The Middle East alone has over 60% of the world’s total desalination plants and a major reason for this is low-cost energy, which is due to energy subsidies.
Another key trend is the penetration of membrane desalination in the GCC market. Acceptance of membrane-based desalination technology is only going to increase as large number of integrated water and power projects are being launched in the region. Key technologies and processes that will drive the market for water and wastewater segment and the revenues for manufacturers and equipment manufacturers are listed in Table 1.
Key Drivers for Growth
The water and wastewater treatment market is impacted by various market forces, amongst them the most influencing factors are:
Increase in the demand for water: Most countries in the GCC have experienced or are undergoing rapid urbanisation. Countries like Saudi Arabia, Qatar, and Kuwait are actively developing their infrastructure and moving towards smart cities. Increase in population is only one of the aspects of this growth, which will eventually lead to higher water demand. Currently, most countries in the GCC have higher per capita water demand as compared to that of developed countries.
Inevitable rise in water tariff: Except Oman, all other countries in the GCC have very low and subsidised water rates, this is an unsustainable trend for Governments in the region, since a large amount of water requirement is met through an energy and cost-intensive desalination process. The water tariff is expected to go up and match prices in developed countries. This increase in water tariff makes it more lucrative for the private players to develop water treatment projects through Public Private Partnerships (PPP).
Extreme burden on the environment: A large amount of wastewater from the GCC is only treated to the secondary level and then discharged into the sea. Many municipal authorities in the region have embarked on plans to reduce their carbon footprint, and are now moving towards reducing water pollution and meeting standards that are followed in developed countries. Countries like Qatar, the United Arab Emirates (UAE), and Saudi Arabia have set up ambitious goals under their national policies to develop infrastructure, which will comply with global standards of water pollution.
Market dynamics and sector outlook
Overall, the global desalination capacity is expected to grow from 70 million m3/day at the beginning of 2011 to 130 million m3/day by the end of 2016, of this 50% of the capacity addition will be contributed by the GCC region. The market for water and wastewater equipment and services is expected to grow at Compound Annual Growth Rate (CAGR) of seven per cent per annum from 2012 to 2017 in the GCC.
Desalination provides two-thirds or more of the potable water used in the UAE, Kuwait, Qatar, and Bahrain and will continue to play a huge role in the GCC water development efforts.
Appropriate technology needs to be used to cater to water demand for various end-user sectors. Significant demand for irrigation can be met through treated wastewater, as more than 75% of water consumption is in the agricultural sector. Chart 2 shows the sector-wise water usage pattern in the GCC for 2012.
The desalination process also discharges salt back into the Arabian Gulf and other oceanic sources, jeopardising their marine life and introducing new environmental risks. On a per capita basis, Saudi Arabia and the UAE consume 91% and 83% more water than the global average, and about six times more water than the United Kingdom.
Governments in the GCC are also working towards reducing use of groundwater and water from desalination plants for irrigation. Hence, the potential for lower quality reused wastewater (which is sufficient for irrigation but not for public use) is larger than the potential for desalination.
A massive growth opportunity exists in the GCC for water and wastewater treatment equipment. Wastewater treatment and desalination plants are seeing a big boom in the GCC – an annual average increase of six per cent is expected in the demand for water.
The water market in the GCC is intensely competitive with over 100 participants, making it a price-sensitive market for less complex technologies. On the other hand, complex equipment with stringent quality requirements such as membrane technologies has much lower competition, since a few global players dominate the market.
On the Engineering, Construction and Procurement (EPC) business side, large companies like Metito, Veolia, ACWA, WETICO, Aquatech International, and Eagle Electromechanical hold a combined share of more than 50% of the overall market. The intensity of completion is expected to increase with multiple Asian water technology companies venturing into the GCC market.
The GCC is expected to provide many opportunities to private players in the water and wastewater sector through various PPP models, since Government investments alone may not suffice. Moreover, since the focus on green projects is also expected to intensify for infrastructure development, smart cities, and technology trends, global players will have enough space to highlight their abilities and technologies.
Water requirement of all three sectors: agriculture, domestic and industrial in the GCC, is set to grow from 35.0 billion m3 in 2010 to 49.0 m3 by 2020.
The sewage collection rate in the region is 52% of the total sewage generated; however, contribution of recycled water to total water withdrawal is between four and eight per cent. Increased focus on wastewater treatment, water distribution, and coverage will drive investments in the next five to seven years.
Desalination has been the key to overcome water shortages in the region. However, there would now be more focus on environment-friendly technologies with increased emphasis on wastewater recycling and reuse concepts.
Courtesy: Environmental and Building Technologies Practice, Frost & Sullivan. For more information, e-mail: email@example.comfirstname.lastname@example.org)
Category: Special Reports