Global Talk: Mideast Faces Troubled Waters with Oil Bust

By Carlos David Mogollon

• Financing of water, wastewater and other infrastructure projects also made more difficult in economic downturn as credit crunch affects major efforts in power and desalination

These delays includes the $2.2 billion Addur Independent Water & Power Project (IWPP) in Bahrain, which includes a 48-MGD SWRO desalination plant in Phase 1 that was expected to be complete by summer 2010 and expanded to 100 MGD in Phase 2. It originally was to close on financing by Dec. 31, but this was postponed because costs on financing were dramatically higher when banks were approached by GDF Suez, which won the project in with a Kuwaiti consortium. Discussions were ongoing with the Bahraini government to renegotiate for more viable terms.

Bahrain Electricity & Water Authority officials were hopeful for Phase 1's timely completion since electricity demand in the region has been rising at an 8-10% clip per year. Word was, though, that expatriate foreign workers -- which make up a significant portion of the population in some Persian Gulf or Gulf Coast Countries (GCC), up to 85% -- were leaving at such a fast clip (about 2,000 a day from Dubai) due to the economic downturn that power demands could be down significantly over the next couple years anyway. And as backup there also may be excess capacity at the ALBA Power Plant [PDF] at a nearby aluminum smelter. Meanwhile, it was announced Feb. 2 that six bids ranging from $15.8 million to $22 million were received for a contract to install gas pipelines to supply the 1,200MW Addur power plant.

Separately, 15 groups were prequalified for a tender on the $1 billion Bahrain Wastewater Privatisation-Muharraq Sewage Treatment project (including a new 100K m³/d plant expanding to 150K m³/d in five years). Overseen by the Bahrain Ministry for Works, bids were to be opened at the end of January.

In the United Arab Emirates, the deadline for tenders on the $8.6 billion Hassyan Power & Desalination Project of the Dubai Electricity & Water Authority (DEWA) was delayed for a second time on Feb. 17. Initially Hassyan was to be bid last September, but that was postponed until April 30 with Phase 1 & 2 combined for a total capacity of 3,000 MW of power and 200 MGD of desalinated water. The February delay was for at least eight months due to "sufficient power surplus in Dubai."

Separately, on Feb. 22, DEWA signed a turnkey project agreement with Metito for design, construction and augmentation of the water at Station G in the Jebel Ali Power Complex, a contract worth $10.4 million. It's for supply and installation of a mixed bed demineralization plant that will process 2 x 90 m³/hr of high purity water.

In surveying other water and wastewater projects and related developments in the region, I came across a slew of articles that project a general slowdown in the water and wastewater market in the Middle East despite the pressing need. It's unsettling, considering that last November it was projected that as much as $120 billion would be spent over the next decade on water projects in the region.

In a panel discussion at the end of Power-Gen Middle East (PGME), it was pointed out by Andrew Treble, director and head of Project & Export Finance for HSBC, and Paddy Padmanathan, president and CEO of ACWA Power Projects, both in Saudi Arabia, that the ground had shifted. They noted that the world credit crunch meant that Middle Eastern countries, despite falling petroleum prices, may need to tap their own financial reserves from record surpluses of recent years to assist in funding infrastructure projects. In addition, instead of bidding out multi-billion mega projects, they may need to break them up into phases to make them more palatable to financial markets.

Many countries in the region were wary, though, of depleting their coffers too much until they had a better idea of what might happen to petroleum prices, which even though per barrel costs dropped significantly in 2008's second half still averaged $94 a barrel -- peaking at $147 a barrel in July. Analysts projected 2009's average would be about $60 per barrel and predicted trouble if it dropped below $50. As of March 11, they were fluctuating around $43 a barrel.

Lastly, another highlight of PGME was the signing of an agreement to take the event to Doha, Qatar, where it will be held Nov. 1-4, 2010. PGME has been in Bahrain for three of its eight years. WWI

Author's Note: Carlos David Mogollon is managing editor of Water & Wastewater International magazine. To send him a message, click here: [email protected]

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