Power and water crisis threatens Gulf

SUPPLY RISK: Water and power shortages threaten the economic growth of the GCC region, the report said. (Getty Images)

The GCC faces a $70 billion infrastructure bill or risks a power and water shortage crisis, according to a report by magazine the Middle East Economic Digest (Meed).

The report identifies a serious supply and demand imbalance caused by a lack of infrastructure investment earlier in the decade and warns the Gulf’s booming economies are likely to suffer if the situation is not quickly remedied.

“GCC utilities are facing the most challenging time in their history,” Angus Hindley, research director of Meed, said in a statement.

“With the Gulf experiencing record economic expansion and high population growth, demand for power and water has never been greater."

Although plans of “unprecedented” scale are currently in place to address the projected shortfall in capacity, Hindley pointed to a range of obstacles still confronting the region.

“...with contractors in short supply new build costs spiralling, and growing concerns over gas feedstock availability, utilities have enormous challenges to overcome in their quest to keep the lights on and the taps running,” he said.

An additional 60,000 megawatts of new power capacity, around 80% of currently installed capacity, will be required across the Gulf by 2015, according to the report, while desalination capacity will have to double to over 5,000 million gallons a day to meet projected demand for potable water.

The study “raises the spectre of power shortages across the region, and in particular in Dubai, Kuwait and parts of Saudi Arabia - despite the fact that the region has substantial oil and gas reserves”, said Hindley.

Dubai, undergoing the region’s highest profile construction boom, was identified as most at risk of an impending supply shortage with both power and desalination demand forecast to triple in size to 16,000 mw and 800 million gallons per day by 2015.

Hindley said four years of strong economic growth had fuelled a regional demand increase of 10% annually for electricity and 8% per year for desalination capacity.

“This, combined with a distinct lack of investment in the first half of the decade, has meant that reserve power capacity has fallen significantly across the Gulf, with the single exception of Abu Dhabi,” he said.

High population growth in the GCC, expected to soar 10% per year over the next decade, is expected to saddle the region with additional demand for water and power, heaping pressure on the current, aging infrastructure, Hindley said.

“Far more attention will have to be placed on demand supply management in the coming years,” he said.

“Conservation measures, such as energy efficient buildings, district cooling, metering and grid interconnections, are slowly moving up the agenda but will need to be pursued and enforced much more rigorously,"

According to the report, the supply crisis is likely to be exacerbated by the decommissioning of existing power and water plants that are approaching the end of their usable life.

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