Saudi Arabia - investment report
Experts from Frost & Sullivan analyse recent investment in KSA
Rapid economic growth has been envisaged in Saudi Arabia in this decade across sectors such as petrochemicals and plastics, power, water and wastewater, infrastructure, and metals and mining, a Frost & Sullivan reports.
This, in turn, is expected to lead to a significant increase in power generation in the country. With the private sector’s contribution in power generation expected to grow from 7.4 per cent to more than 17 per cent by 2020, total spend on power between 2011 and 2020 is pegged at around $100 billion.
This surge in power generation is expected to contribute towards an increase in spend on power transmission and distribution as well, especially looking at the regional interconnectivity needs and the demand for infrastructure from industrialisation and urbanisation.
Frost & Sullivan forecasts a cumulative investment of $30 billion on power T&D infrastructure in Saudi Arabia between 2011 and 2016. This is required to develop 4,500 to 5,000km of new network infrastructure, and to cater to an increase in customer base by a significant 26 per cent.
This would involve $8 to $10 billion being spent cumulatively on T&D lines, $7.5 to $8 billion on transformers, and approximately $5.5 to $6 billion on switchgears.
Frost & Sullivan recommends that Saudi Arabia’s robust and diversified power strategy can be empowered by developing local vendors for supplying components to transformer manufacturers. The region can look at developing local skill and expertise to tackle the issue of unemployment, thereby contributing towards Saudization.
“Some key challenges faced by the power T&D sector in Saudi Arabia today include the constant need of investments to meet peaking demand, lack of coordination between the stakeholders, insufficient focus on energy efficiency, need for technology adoption, lack of qualified manpower, and lack of finances especially for the highly-priced energy-efficient equipment,” says Frost & Sullivan Energy and Power Systems Industry Manager Abhay Bhargava.
The report recommends that the Saudi Arabian power sector should develop localised Saudi manufacturing enterprises, which would help address most equipment requirements of the power T&D market, thereby promoting national enterprises. A critical challenge to the development of the Saudi Arabian power market is the lack of a technically capable workforce.
To address this, the country needs to foster an environment that encourages joint ventures, with a focus on technology transfer and development of local talent.
In the water sector, the Dow Chemical company recently announced plans for significant investment in the Middle East and North Africa. With Saudi Arabia ranked third out of 17 in the world’s most water-stressed countries – and considered in ‘extreme risk’ – Frost & Sullivan also sees the Kingdom as a growth region.
The current market trends reinstate Saudi Arabia as the next big opportunity country for the waterindustry, and Dow’s investment in Saudi Water Technology is considered strategic especially since the Emirates water market is starting to look crowded.
The much anticipated advanced desalination and reverse osmosis (RO) technology will be the cornerstone in water treatment and will be reused to meet the region’s growing demand for water.