«Managing Blue Gold New Perspectives on Water Security in the Levantine Middle East Mari Luomi (editor) Managing Blue Gold New Perspectives on Water ...»
279 R. Denga et al, ‘Integration of thermal energy and seawater desalination’, Energy Article in Press, Corrected Proof (2009); S. Lattemann et al., ‘Global Desalination Situation’, Sustainability Science and Engineering, 2 (2010), pp. 7-39 FIIA REPORT 25/2010 111 Environmental externalities, like brine disposal, are not usually considered in the cost calculation.280 The cost of desalinated water is typically 1-2 USD/m3. At the most modern plants, like the Ashkelon reverse osmosis plant in Israel, the cost of desalinated water can be around 0.5 USD/m³.281 One of the main development targets of desalination technologies is to reduce unit costs. This can be done by improving energy efficiency and recovery of energy. In the future, renewable energy solutions 282 and new technologies, such as nano-engineered and biomimetic membranes, may bring down the price. A new concern are the environmental costs, like low impact brine, a desalination byproduct, and disposal systems, which raise the price of desalinated water.
The United Nations Economic and Social Commission for Western Asia (ESCWA) has made full cost calculations for desalination in selected cities in the region.283 In the case of Amman and Damascus, the transport distances are long (270 and 180 km), and altitude differences considerable (890 and 680 m). The estimated costs (including capital, operation and transport costs) are about 2.6 USD/ m3 for Amman and 2.5 USD/m3 for Damascus. In comparison, the full cost in Gaza City on the seaside is clearly lower, 1.5 USD/m 3.284 As Table 4 shows, the desalination capacities of Jordan and Israel have grown significantly during the past decade, whereas the capacity increase in Lebanon and Syria has been slight.
280 ESCWA, Role of desalination in addressing water scarcity, ESCWA Water Development Report 3. E/ESCWA/SDPD/2009/4. (New York: United Nations, 2009).
281 Watertechnology.net, ‘Ashkelon Seawater Reverse Osmosis (SRWO) Desalination Plant, Israel’, http://www.water-technology.net/projects/israel/. Accessed 7 September 2010; The 2030 Water Resources Group, Charting Our Water Future.
282 Although the cost of, for example, solar power in many parts of the world is higher than that of fossil energy, it is expected to be more competitive in the future.
283 According to ESCWA (Role of Desalination), the data are quite varied because there are no standardized models for cost estimates.
284 ESCWA, Role of Desalination.
112 FIIA REPORT 25/2010 Table 4. Desalination capacity and increase from 2000 to 2008285
The need for private sector participation in desalination Private sector participation in water investments is sought by Middle Eastern countries mainly due to the expertise of the private sector and the lack of public sector funding. The water and sanitation sector has been chronically under-financed, which has resulted in water scarcity, inefficient use of water, and infrastructure deterioration. The Islamic Development Bank estimates that Arab countries may need to invest up to 200 billion USD in water-related infrastructure over the next decade. In order to plug this huge gap in financing in the short and medium term, access to repayable funds like private financing is critical.286 Project finance and public-private partnerships (PPPs) are already widely used in some parts of the MENA region: in particular, the Gulf states, Morocco and Israel have shown support for PPPs. Most PPP projects in the MENA region have been, and continue to be, in the power-generation and desalination sector. 287 In the case of desalination, private sector participation (PSP) is needed not only for raising funds for the capital-intensive plants, but also because the latter require specific high-tech knowledge.
Therefore, in the case of many current large projects, investments by private international water companies are desirable, or even necessary. So far, European water giants like Veolia Water, Suez 285 ESCWA, Role of Desalination.
286 OECD, Innovative Financing Mechanisms for the Water Sector (Paris: OECD Publishing, 2010).
287 Jennifer Deane, ‘Private sector participation in desalination in the Mediterranean Middle East (MME) - past, present and future’, Desalination 152:1-3 (2003), pp. 57-66.
FIIA REPORT 25/2010 113 Energy International and RWE, have been active players in Middle Eastern desalination markets. In many countries, popular solutions with regard to private sector participation in the desalination sector have been the BOT (Build, Own, Operate, Transfer) and BOO (Build, Own, Operate) or a similar approach. In practice, private sector participation in desalination projects has reduced the need for water subsidies and has increased transparency. 288 However, expectations for private sector participation in the Middle East have not always been fulfilled, in particular with regard to the anticipated growth in private investment flows. Among the reasons often listed are: complex civil service organization, the limited creditworthiness of the water sector, the shortcomings in the investment environment, poor risk management tools, regulatory capacity in the host countries, and difficulties in increasing tariffs to cover costs, as water may be viewed as a free commodity. 289
Private sector participation potential in Jordan, Lebanon,Syria and Israel
In light of the changing climatic and demographic conditions, water institutions must become more efficient, transparent and dynamic. Institutional reforms are of great importance, especially in Jordan, Lebanon and Syria, which have severe deficiencies in their water infrastructure and are facing huge investment needs due to water shortages in the near future. Also, international financial institutions, like the World Bank, are important sponsors in the region and they are eager to see more private sector participation so as to improve performance. Thus, the private sector is likely to play an increasingly important role in incoming water sector investments in these countries. The following sections describe how the administrations of Jordan, Lebanon, Syria and Israel support the participation of the private sector in water sector investments.
The prevailing PSP legislation and climate is also linked to possible 288 Jacques van Paassen et al. ‘Optiflux® - from innovation to realisation’, Desalination 178:1pp. 325-331.
289 OECD, Innovative Financing Mechanisms.
114 FIIA REPORT 25/2010 desalination investments, which are potentially one component of water infrastructure.
Jordan: water as a strategic challenge Jordan differs from the other Arab countries of the Levant in that it recognizes on a strategic level the economic value of water. Due to the extreme water scarcity and lack of funding, the measures taken so far have not solved the problems. Although most of the renewable water resources have already been taken into use, the distribution of household water, for example, still needs to be strongly regulated.
In Amman, households receive water for only a few hours a week.
This, coupled with the expected rapid growth in water demand, have forced Jordan to start planning new large-scale water supply improvement projects, which will be possible only with the support of international funding organizations and the development of PPP.
The planned future projects would multiply the country’s current desalination capacity and reduce reliance on underground water. 290 The water scarcity has been reflected in a relatively strong institutional and legal framework. In 1983, Jordan established the Water Authority, which is responsible for water supply, wastewater treatment and overall water resources planning.291 It also drafts national water master plans, on the basis of which the local authorities plan their measures. The National Water Strategy, launched in 2009, is one of the administrative measures which proves that Jordan has recognized the necessity of investing in water. The strategy includes an action plan for a total investment of 8.24 billion USD over a period of 15 years, which corresponds to more than 160% of the country’s GDP. The strategy also identifies a role for private sector participation (PSP).292 In the first instance, Jordan has been looking for supply-side measures to improve water management and water services. These include new water supplies through increased wastewater treatment 290 Arab Environment Watch., ‘Jordan spared water crisis this year, but in the future?’ (5 June 2009). http://www.arabenvironment.net/archive/2009/6/887658.html. Accessed on 15 September 2010.
291 Water Authority of Jordan, General Information, http://images.jordan.gov.jo/. Accessed on 15 August 2010.
292 Royal Commission for Water, Jordan’s Water Strategy 2008-2022.
FIIA REPORT 25/2010 115 and desalination capacity, and large-scale plans are underway to increase clean water production. However, the supply-oriented instruments are not sufficient, and one of the most significant demand-side measures would be the minimization of water losses, still about 50%, from the supply network.
Jordan’s experience in PPPs in the water sector began with major policy reforms in 1997, which endorsed the use of demand management strategies and public private partnerships. Jordan chose to begin the PPP process with management contracts. The first project was the management of Amman’s water supply, whereby a public bidding process was organized to select the private sector partner. The operations started in 1999.293 Jordan’s first BOT contract for wastewater treatment was the as-Samra plant in 2004, which has a capacity of 60 Mm3 per year.294 Another example of private sector participation is the new Karameh Dam desalination plant which was constructed on a BOT basis by a local company.295 The plant, which was brought into operation in May 2010, produces about one million cubic metres of drinking water per year, and in the second phase the capacity is set to rise to 4 million m3 per year.
PPP projects in Jordan have resulted in decreases in government expenditure, improvements in water utility performance, reductions in unaccounted-for water, increases in water revenues, and lower operating costs. Other benefits have included extensive staff training and the use of geographic information systems and information technology. Because of the encouraging experiences, future private sector participation is expected for operation and maintenance contracts for water and wastewater treatment plants as well as near-term megaprojects, which include The Disi Water Conveyance project, The Red-Dead Sea Canal project, and the desalination of seawater at the Red Sea port of Aqaba.
To attract private participation, Jordan is developing a new framework for private investment in infrastructure. The publicBayoumi Attia, ‘Public Private Partnerships, Managing water demand: Policies, practices and lessons from the Middle East’, IWA Publishing (2005), pp. 39-47.
294 Waterlink International, ‘95% energy self-sufficient waste water plant’ (2009). http:// www.waterlink-international.com. Acccessed on 9 July 2010.
295 Jordan Times, ‘Karameh Dam desalination plant eases Jordan Valley water woes’ (14 May 2010).
116 FIIA REPORT 25/2010 private partnership (PPP) law has been drafted and was submitted for review in 2010. The law covers the building, rehabilitation, financing, operation and maintenance of public infrastructure.296 One of the main aims is to encourage private sector initiatives by identifying the roles and responsibilities of stakeholders in defining procurement procedures and the general framework of contacts.
So far, most investments in the Jordanian water and sanitation sector have been financed through grants and soft loans from external public donors. In the coming 15-year period, the private sector is likely to play an increasingly important role. Thus, even if actual investments remain somewhat below those planned, the market outlook for Jordan’s water sector is becoming attractive.
Syria: slowly opening up The existing institutional framework conditions in Syria contribute to the ineffective and unsustainable management of water resources.
In addition, inadequate, unsafe and sometimes restricted data compound the challenges. Currently, Syria is collaborating with the German technical cooperation organization, GTZ, to develop its water sector institutions. The programme focuses on the implementation of integrated water resources management and on strengthening public administration through organizational and capacity development. 297 The government of Syria has long emphasized the supply side of water management. As a consequence, the country has been active in controlling surface flows by building new dams and creating multipurpose reservoirs. Irrigation schemes have also been devised and agricultural activities greatly expanded in order to achieve selfsufficiency and food security. However, water demand is rapidly increasing and easily mobilizable resources have already been exploited. In addition, Syria has suffered severe droughts since 2006 and, as a result, the long-term availability of water is in jeopardy.
Syria is planning several alternative solutions to the crisis, including the re-allocation of water from irrigation to household use, applying water-saving measures and locating new water supplies. Among the options for new water supplies are inter-basin 296 Jordan Times, ‘Private businesses to submit views on PPP draft law soon’ (7 July 2010).
297 GTZ, ‘Factsheet, Institutional Support to the Syrian Water Sector’ (2007). http://www2.
gtz.de/dokumente/bib/070658_2.pdf. Accessed 29 August 2010.
FIIA REPORT 25/2010 117 transfers from the Euphrates River or the Mediterranean coast and the desalination of available brackish water in the Eastern region. 298 However, in order to supply the capital, Damascus, the water would have to traverse the high lands, which would involve costly infrastructures.
The desalination of seawater and brackish water has long been considered a necessity in many arid and semi-arid regions of Syria.