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Mon 17 Mar 2008 12:13 PM

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Saudi to splash $60bn to meet water needs

Rapid economic growth straining supplies, with demand growing at 6% a year, minister says.

Saudi Arabia needs to spend around $60 billion over the next 20 years to meet the kingdom's water needs, a Saudi official said on Monday.

Rapid economic growth fuelled by record oil revenues is boosting demand for the desert kingdom's scarce water supplies. Saudi Arabia is the world's top oil exporter.

Water demand is growing at around 6% per year, Loay Al-Musallam, head of privatisation and deputy minister of planning and development at Saudi Arabia's Ministry of Water and Electricity said in a conference presentation.

"Around $60 billion will be allocated to the water sector over the next 20 years," he later told reporters.

Both the private and public sector would contribute to meeting the investment needs, he said.

Around $40 billion of the total would be capital expenditure, while the remaining $20 billion would pay for operational costs and maintenance, Al-Musallam added.

The total cost may be more, as the capital expenditure estimate was "conservative", Al-Musallam said.

A new national water company set up to operate water treatment plants, storage and distribution networks will be operational this month, he added.

The company will initially have capital of $6 billion, which the government plans to double in four years, he said.

For the first five years, the company will be fully government owned. After that, Saudi Arabia may sell shares in an initial public offering (IPO), Al-Musallam said.

The company has already awarded two contracts to international companies to manage water distribution in Jeddah and Riyadh, he said. He declined to give more details.

Three more contracts will be awarded later this year for Mecca, Medina and Greater Dammam. The five cities account for about 20% of Saudi water consumption, he said.

The kingdom's current water demand is around 5.7 million cubic metres per day and would reach 10 million cubic metres per day within the next 20 years, he said. (Reuters)

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