The GCC could be facing a power and water crisis because of its strong economic growth combined with a lack of investment earlier in the decade.

The cost of improving the situation could be $50 billion for electricity and $20 billion in desalination plants between now and 2015, according to a report published yesterday.

Meed, the Middle East business intelligence service, has launched an in-depth report, 'Power and Water in the GCC: The Struggle to Keep Supplies Ahead of Demand'.

The report, collated from six months of research into the GCC utilities, provides critical analysis of supply and demand and projected investment levels; examines the increasing role of the private sector; spotlights the search for alternative energy; and gives a country-by-country assessment of the power and desalination sector.

'The report shows that the GCC utility sector is entering a critical phase,' said Meed research editor Angus Hindley.

'Four years of strong economic growth has fuelled demand by around 10 per cent a year for electricity and 8 per cent a year for desalination.

'This, combined with a distinct lack of investment in the first half of the decade, has meant that reserve power capacity has fallen significantly across the Gulf, with the single exception of Abu Dhabi.

'This raises the spectre of power shortages across the region, and in particular in Dubai, Kuwait and parts of Saudi Arabia - despite the fact that the region has substantial oil and gas reserves,' he said.

With little or no prospect of regional economic slowdown, the GCC is facing an unprecedented capacity building programme.

According to Meed, an estimated 60,000 MW of new capacity, representing 80 per cent of current installed capacity, will be required by 2015, while desalination capacity will have to double to over 5,000 million gallons a day to meet projected demand.

The actual new capacity requirements is expected to be higher given that utilities will need to start decommissioning old installations.

In relative terms, Dubai faces the biggest new-build programme, with both power and desalination capacity forecast to triple in size to 16,000 MW and 800 million gallons a day by 2015.

Based on last year's unit costs, the GCC power sector will require about $50 billion of investment in new power generating capacity and $20 billion in desalination by 2015.

The most pressing issue facing the GCC utility market is obtaining new and competitively priced gas allocations, according to the report.

The increase in competition for the feedstock is forcing utilities to consider new technology and alternative energy production, such as coal, nuclear and solar for the first time.

Rising generation costs will increase pressure for a hike in customer tariffs, which are currently well below the cost of production and distribution in virtually all GCC states.

With governments unlikely to sanction any increase in living costs on their own populations, non-national consumers are expected to bear the brunt of the increases, the report said.-TradeArabia News Service