Saudi needs to invest more in power, water - BSF

Saudi could face a power and water shortage.

Saudi Arabia needs to raise its investments in its power and water supply industries by a third to at least $266.7 billion through 2025 to meet rising domestic demand, Banque Saudi Fransi said.

Demand for water and power is growing around 8 percent annually in the most populous Gulf Arab country of 25 million.

The kingdom, which accumulated huge reserves during a six year oil price boom, wants to spend more than $400 billion over five years to upgrade infrastructure - airports, roads and power plants.

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The world's top oil exporter is expected to spend $79.9 billion alone on power generation, $53.3 billion on water desalination projects and $53.3 billion on sewerage, the Riyadh based bank said.

In a report the bank said: "In our perspective, this $186.6 billion is certainly a step in the right direction - but at least a third more in funding would be required to bolster capacity in a way that comfortably cushions demand."

The kingdom's power generation capacity stood at around 45,000 megawatts in 2009 and Saudi Electricity Co's capacity is seen rising to 70,000 megawatts by 2020.

Credit Agricole's Saudi affiliate said to strike a balance between power and water supply and demand Saudi Arabia would need to engage in more public-private partnerships.

The private sector is getting more involved in the power sector through independent power producer (IPP) projects. It is also overseeing the development of the water sector.

The bank said reforms of agriculture policies are needed to conserve water.

Saudi Arabia has urged companies to invest in farm projects abroad after abandoning a 30 year old programme for self sufficiency in wheat in 2008. The programme depleted the desert kingdom's scarce water supplies.

The decision forced many local agricultural companies growing wheat for the domestic market to explore alternatives to compensate for the drop in revenues.

Water resources have also been stretched with available water per capita dwindling by almost a quarter in the past decade, coinciding with greater industrial, agricultural, and personal use, the bank said. (Reuters)

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