CLSA Asia Pacific Markets, one of Asia's biggest equity brokers, estimates that total world water demand will hit 6.9 billion cubic m/year by 2030, equivalent to 119 million barrels of daily demand.

At those levels, water demand will have surged by around 53% from this year, according to CLSA research. The total water market would by then be significantly bigger than the world oil market -- which the US' Energy Information Administration recently estimated will have reached 107 million b/d of consumption by 2030, some 24% bigger than today.

Ed Slade, director of investment banking at CLSA, told a water seminar organized by Singapore Exchange that the biggest opportunities in the water market would come not from trading, but rather from the huge investments that are likely to be made in building water pipelines, reservoirs and treatment plants.

The biggest growth area in infrastructure is likely to be in Asia, the region that will account for the great majority of demand growth for both water and oil.

Slade estimates that Asian water demand would rise from about 2.8 trillion cu m this year to 4.6 trillion cu meters in 20 years' time, a surge of 64% in regional water demand that will strain the infrastructure of many countries.

Most new demand in Asia will come agricultural expansions, rather than home water demand, he added.

NO ROOM FOR TRADE TO FILL THE GAP

There will be gaps in some countries' ability to meet their own water demand, but speakers at the seminar generally gave a cold shoulder to the ability of trade to help move water from plentiful places to countries that might otherwise run dry.

"Water is not being traded. There are some attempts at trading water rights," said Sam Ong, chief financial office with Singapore-listed water giant Hyflux. The company was, somewhat ironically, founded as a trading company called Hydrochem in 1989.

Hydroflux's market capitalization has surged from S$54 million ($38 million) in 2001 to around S$1.6 billion this year, as it has focused its attention squarely on developing water treatment, reclamation and other infrastructure projects, illustrating the point that the water industry is likely to remain based on infrastructure investments, with little room for trading, for the decades to come.

Ong said problems with physical delivery of water, as well as complex legal issues surrounding sovereign claims to water rights, had complicated efforts to trade water -- though he advocated for the creation of a market trading in "water footprints," along the broad lines of emissions trading schemes that have been developed around the world to provide economic incentives to reduce emissions.

A market in water footprints, which could provide similar cash incentives to reduce water consumption, "should be part and parcel of what we do," said Ong.

ESSENTIAL COMMODITIES GIVE TRADING A COLD SHOULDER

Supply of essential commodities like electricity and water are seen by many as human rights issues to be tackled by governments, rather than price-driven conundrums to be tackled by free markets. Dealing in such commodities can arouse more suspicion than excitement in the public imagination.

Discussing the challenge of providing water to all who need it, speakers at the event were placing their bets on giant infrastructure projects backed by government partners with guaranteed tariffs for supply, rather than free market solutions.

"People can well argue that there is no lack of clean drinking water, but there is a big challenge in making it available at an affordable rate," said Ong.

A tour around the stands on display at Singapore International Water Week suggested that most in the industry are on the side of state-endorsed, project-based solutions. Of the 100 or more stalls displaying various services in the water sector, all but a few were offering water infrastructure solutions.

As for the stalls not offering project work, they were generally staffed by companies offering magazines and directories to chronicle the growth of a capital-intensive effort to meet the challenges that lie ahead.

--Dave Ernsberger, dave_ernsberger@platts.com