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Saudi Arabia Table of Contents

Saudi Arabia


Most of Saudi Arabia's electric power-generating capacity was built during the 1970s and 1980s. Nonetheless, after the establishment of the first municipal power plant in 1950, the development of the industry occurred largely in the private sector. By 1980 about ninety-five private companies supplied electric service, leading to a totally decentralized system. Voltages and cycles differed between towns and even within towns, preventing consumers from standardizing equipment and appliances. Consumers suffered from chronic power failures, voltage fluctuations, and poor repair service. Hospitals and large plants often had their own generators. Planners estimated that only 54 percent of the potential demand for electricity had been met in 1978.

In the early 1970s, the government embarked on a twofold plan to organize the sector and to stimulate further investment. The system relied on private sector participation with strong government oversight and planning. Early attempts to standardize the system called for all new generators to be 60 hertz with distribution voltages of 127 and 220 volts. In 1976 the first of a series of regional companies, Saudi Consolidated Electric Company (Sceco), was formed for the eastern region (Sceco-East). Ownership of the regional companies, which amalgamated their facilities under Sceco, remained locally held. The government had some equity participation, but the regional companies retained administrative autonomy. The government requested Aramco to manage Sceco-East because of its large share of generating facilities and its management expertise. Regional companies for the central and southern parts of the country were formed in 1979; Sceco-West was established in 1981. The goal was to link the generators in a region and to improve planning and service. Eventually the regional companies would be tied together to form a nationwide grid. The government-owned General Electricity Corporation, which served rural areas, participated in the regional companies in areas where it was active.

In addition, the government provided the private sector direct financial assistance for building and operating generating plants and distribution facilities under the Electric Utility Lending Program, administered by the Saudi Industrial Development Fund (SIDF). The government provided consumption subsidies by paying producers to sell their power below cost. The government also gave the producer an implicit fuel subsidy on gas. Direct subsidies to the sector peaked at SR2.75 billion in fiscal year 1984-85 but fell in 1989 to SR210 million. Following a 1992 government decree, subsidies were expected to rise again because electricity charges to users were halved.

After the early 1960s, generating capacity expanded rapidly. By 1979 generating capacity amounted to 4,214 megawatts. By 1990 this capacity had quadrupled to 16,549 megawatts. Between 1975 and 1979, consumption of electricity increased 37 percent yearly while the number of consumers rose 16 percent yearly. During the 1980s, the consumption growth rate slowed to 23.8 percent annually, with the number of consumers rising annually by 17 percent. From 872,054 subscribers in 1980--representing 4 million people--subscribers reached 2.4 million in 1990. Industry usage averaged 28.3 percent of electricity consumed, although in the Eastern Province, given the location of country's major industrial complexes, industry demand accounted for more than 60 percent of electric consumption. Industrial users in the other regions consumed less than 5 percent of total electricity generated.

Water consumption also rose rapidly during the 1970s and 1980s, both by traditional sectors and by newly established urban and industrial users. In the early 1980s, a national water plan was formulated when particularly serious problems were encountered. Lack of sewage treatment was contaminating groundwater from wells in the Eastern Province, and overpumping from wells in the central region near Riyadh drastically lowered the water table. However, few substantive changes in water supply have been instituted, leading to a continued depletion of water resources. Saudi Arabia's water was supplied from three different sources: surface water (about 10 percent), underground aquifers (more than 80 percent), and desalination plants (5 percent). The nonrenewable sources continued to provide the bulk of water to users and were being depleted at an alarming rate. Efforts to supplement the available water supply have concentrated on building desalination plants. In 1980 fourteen plants were in operation with a combined capacity of 65 million cubic meters per year. Eight more plants were constructed during the decade taking total capacity to more than 600 million cubic meters per year. By the end of the 1980s, output from these plants was approximately 500 million cubic meters per year.

Between 1980 and 1985, water consumption more than tripled from 190 million cubic meters to 574 million cubic meters. The consumption increase continued in the latter half of the decade with water usage rising to 900 million cubic meters in 1990. Agriculture was the prime water user, accounting for 85 percent; its rate of consumption quadrupled from 1980 to 1985. Although data are lacking for the late 1980s and early 1990s, it appeared that usage continued to grow but at a slightly slower rate. The government's policy of providing water free to the sector, combined with new water-intensive methods of farming have been the main factors for this growth of water consumption.

The idea of importing water into Saudi Arabia was first presented in the early 1970s when Denmark's Royal Greenland Company was commissioned to perform a study on the feasibility of towing icebergs. The conclusion reached was that no technical problems were insurmountable, but that the cost was prohibitive. In the late 1980s, the Turkish government proposed a plan whereby two pipelines from Turkey would bring water (at a cost of about US$1 per cubic meter compared with US$5 to US$6 per cubic meter for producing desalinated water) to both the Eastern Province and the Hijaz. Security concerns have prevented the Saudis from moving further on these plans, however.

Data as of December 1992

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Saudi Arabia Table of Contents