01/04/2009
Credit crunch could lead to regional water shortage
Dubai, UAE March 30th 2009 – Reluctance by financial institutions to back long-term water infrastructure projects is threatening the region’s supply of drinking water. UAE is one of the world’s biggest users of desalinated water – between1.8 and 2.1 billion m3 every day and is dependent on new capacity expansion to ensure the demand is met. But lack of financing in the wake of the global financial meltdown means that contractors are faced with cancelling or postponing new projects. This emerged as the key point of discussion at Arabian Power and Water Summit being held at the Emirates Palace hotel in Abu Dhabi over March 30-31.
Nick Powell, president, water solutions, at Aqualyng, the Dubai-headquartered global desalination company, told delegates that obtaining financing at the right cost and duration is one of the biggest obstacles to the implementation of new projects in the Middle East. “The availability of long-term financing would make it easier for us to contribute in project development across the region, but lending institutions are afraid to give loans with duration of more than three to five years,” he said.
“As a developer you put a lot of money into the project development phase and currently there is a risk that quite a few projects are being postponed or terminated” Nick added.
Desalination contributes more than 85 per cent of the UAE’s drinking water, but with inflation eroding margins, a lack of contracting capacity and rising demand, the Middle East power and water sector was struggling to deliver its promises – even before global credit crunch hit the project finance sector and introduced unprecedented uncertainty to the Gulf projects market.
“Aqualyng is committed to the UAE and the Middle East, and I would say that the current marketplace is very good for companies willing to invest and take chances,” said Powell. “It is an opportunity to take opportunities while other companies are more reluctant. However, governments could help attract investment by following the Norwegian model called Innovation Norway example – a governmental institution that has now been granted funds to help Norwegian companies working internationally.”
Aqualyng has been a leader in new technologies used in the desalination process, which has changed drastically over the last three decades. Better efficiency levels have led to 70 per cent reduction in energy consumption, due largely to improvements in reverse osmosis membrane technology that have greatly reduced operational cost.
The Middle East desalination market is projected to generate expenditure of about $95 billion between 2005-2015, of which around $48 billion will be applied new capacity, and the membrane process, particularly reverse osmosis, will continue to take market share from thermal desalination. About 59 per cent of the total new-build capacity will be membrane based.
This reflects growth of the market outside the Gulf region (traditional heartland of the thermal process), as well as increased use of RO technology in the Gulf.
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