Desalination proves a lucrative industry in Abu Dhabi's utilities sector

Located in one of the driest parts of the planet and with demand for water growing at nearly 9.5% annually, Abu Dhabi’s water supply is a hugely important economic, social and security consideration. The Abu Dhabi government is therefore bringing in international partners to help meet the emirate’s demands.

Major Project

One of the world’s biggest desalination plants is set to take shape in Abu Dhabi in the coming years, coupling the emirate’s growing demand for water with its aim of attracting foreign investment, and harnessing technology and knowledge transfer. The planned desalination complex at Taweelah, 45 km north of Abu Dhabi City, is expected to reach a cost of around Dh2bn ($544.4m) and produce around 200m gallons of water per day, adding almost 20% to the emirate’s current production capacity of 960m gallons. “The Taweelah desalination plant will both replace some existing capacity and help meet new demand,” David Barlow, general manager of the Abu Dhabi branch of utilities company Summit Global Power, told OBG.

International Interest

The Department of Energy (DoE) announced in June 2018 that it had short-listed 25 bidders from around the world for the construction of the plant. The process was launched in January 2018 when tenders were invited for the development, financing and operation of the complex. Short-listed companies include Marubeni, Mitsubishi, Sumitomo and JGC of Japan; French companies Engie, Veolia and Suez; Saudi-based ACWA Power; ACCIONA Agua and Valoriza Agua of Spain; and Malaysian water and power producer Malakoff.

The interest of some of the world’s leading electrical power and engineering companies is indicative of the strength of interest in the project, and the attractions of Abu Dhabi as an investment destination for this sort of public-private partnership (PPP). The project is expected to be a catalyst for further foreign investment in desalination and utilities in the emirate. A winning bidder or consortium will be chosen and a water purchase and shareholder agreement signed in 2019. Construction is expected to take place in 2020-21 and commercial operations will commence in 2022. The selected partner will take a stake of up to 40% in the special purpose vehicle established to own and operate the plant, with the remaining 60% to be held directly or indirectly by the DoE.

Reverse Osmosis

The Taweelah desalination plant will be the fifth of its kind serving Abu Dhabi to utilise reverse osmosis (RO) technology. The four plants currently operating contribute around 13% of the emirate’s desalinated water production. This will rise to 30% once the new plant comes on-stream, according to local press reports. RO brings the significant benefit of being less energy-intensive than the thermal technology that has traditionally been used.

Decoupling

In addition to the size of the investment and the capacity that it will add to Abu Dhabi’s water supply, the plant will be the emirate’s first standalone desalination complex not directly linked to power production. Abu Dhabi’s range of independent water and power producers (IWPPs) made the interdependence of power and water a suitable model in the past; however, this is now changing due to shifting demand patterns and a changing energy mix. The decision to decouple power and water is likely to pave the way for a long-term utilities strategy, taking into account demand patterns and the changing nature of electricity supply. With Abu Dhabi’s first nuclear power plant coming on-stream in the coming years, growing amounts of power production capacity will already be decoupled from water production. Bringing substantial new water and power capacity would also entail wastefully running significant excess electrical generation capacity.

Growth Opportunities

The desalination segment is becoming one of the most attractive for investors seeking growth opportunities in Abu Dhabi. Demand for water is growing at 9.5% a year according to research by Paris-Sorbonne University Abu Dhabi, and per capita consumption is estimated at 590 litres a day, one of the highest levels in the world. Groundwater accounted for 80% of Abu Dhabi’s water supply a decade ago, and now accounts for around 65% of supply, desalination for 29%, and cleaned and reused water 7%, according to industry press. Desalinated supply will grow both in real terms and proportionally for the foreseeable future. The number of wells across the emirate has increased from 5500 to 72,000 over the past two decades, but the proportion of unproductive wells has risen from 10% to 25%. Research forecasts that the emirate’s desalination capacity will triple in the next 12 years.

Liwa Reserve

As part of its push for improved water capacity, in January 2018 the emirate completed construction of the Liwa reservoir. With a capacity of 5.6bn gallons and a pumping capacity of 100m gallons a day, it will provide Abu Dhabi’s population of 1m with approximately 180 litres of water per person for up to 90 days, officials have said. The facility is operated, managed and maintained by Abu Dhabi Water and Electricity Authority subsidiary Abu Dhabi Transmission and Despatch Company, with scientific support from the Environment Agency - Abu Dhabi. Other development partners include German development agency GIZ International, South Korean engineering and construction company POSCO, and the local Arabian Construction Company. The reservoir had an investment cost of around Dh1.6bn ($435.5m), took 15 years to complete and consists of 315 underground recovery wells in exhausted natural aquifers in the desert. The original supply of desalinated water was pumped over 22 months from the Shuweihat desalination plant, and is fed by gravity via semi-perforated underground pipes. It is connected to the Zayed City water distribution network in Abu Dhabi city by 160 km of pipelines, tested to ensure that they can withstand water pressure for 50 years. The desalinated water has to be stored underground rather than in open reservoirs due to climate conditions and the risk of contamination. Replenishing aquifers allow the storage of vast quantities of water without the wholesale construction of man-made underground reservoirs or above-ground tanks. The reservoir will strengthen Abu Dhabi’s water security, significantly increasing the length of time the emirate can manage a shut-down of desalination facilities caused by technical problems or unforeseen events such as natural disasters or terrorism. Desalination plants may also increasingly need maintenance to prevent the formation of algae blooms, known as “red tide”, which are expected to become more common as sea temperatures continue to rise.

The Liwa reserve is expected to be followed by further developments for the water segment in the emirate and the wider region. For example, a second project is expected to take shape in Al Ain, which will geographically diversify Abu Dhabi’s water reserves.