GULF PROJECTS MARKET: Defying the doubters
Observers of the global economy may be forgiven for thinking that market jitters about the global credit crunch mean a slowdown is in sight for the GCC projects market. Indeed, in the past few weeks there have been signs of a slowdown.
Last week, MEED revealed that US oil major ConocoPhillips is pulling out of the project to build a new refinery in Fujairah and, together with Saudi Aramco, is reviewing its involvement in a second, in Yanbu in Saudi Arabia, blaming rising construction costs.
At the same time, data from MEED projects, which tracks project activity in the Gulf, shows a fall of 0.5 per cent in the past month. This could be a sign of things to come, or just the consequences of a summer slowdown.
But the Gulf's projects sector has shown itself to be surprisingly robust, and has defied previous predictions of a downturn, most notably at the start of 2007, when many analysts predicted a fall in oil prices. The projects sector has grown by 42 per cent over the past year, the highest annual rate since records were first compiled in 2004.
As of 16 September, the amount of projects announced, under way or recently completed in the six GCC states totalled $1.5 trillion - more than double the combined GDP of the GCC.
Leading the pack is the UAE, where there are more than $662,000 million worth of projects. The federation, and Dubai in particular, has led the project boom in the Gulf with grandiose multi-billion-dollar projects such as Palm Jumeirah and Dubailand.
Given its head start, the UAE might have been expected to have passed its peak in project activity. However, the opposite seems to be true. Over the past year, its projects sector has risen by 78 per cent, faster than any other Gulf country.
The UAE figures have been boosted by Abu Dhabi, which after a slow start has announced several massive real estate projects, such as the $60,000 million Yas and Saadiyat island developments. 'The capital has taken a much more measured approach to development than Dubai, which prefers to build first, plan second,' says one Dubai-based contractor.
Despite Abu Dhabi's emergence, it is still Dubai that is forcing the pace as it tries to diversify its economy and keep real estate and commercial development ahead of its rapidly growing population. The emirate's ruler, Shaikh Mohammed bin Rashid al-Maktoum, says what has been achieved so far is only 10 per cent of his vision for Dubai.
The vast majority of investment in the emirate is funded by the liquidity created by the oil boom. Less than 5 per cent of Dubai's GDP comes from oil production, but if the oil price were to slump, Dubai would feel the pinch as much as anywhere.
Saudi Arabia's projects sector is also growing rapidly. Since September 2006, the projects market has grown by 28 per cent, to $363,000 million. Given its immense oil wealth, growing population and demands for massive infrastructure development, this is expected to grow.
Sectors to watch include power and water, as Riyadh aims to double electricity generating and wastewater treatment capacity by 2020. Downstream industry will also gather pace as the kingdom tries to develop more labour-intensive businesses. Oil and gas will remain at the forefront, however, with Aramco planning to spend at least $80,000 million by 2012 to boost output.
Kuwait and Qatar have equally buoyant project markets, growing by 19 per cent and 21 per cent in the past 12 months to reach $252,000 million and $142,000 million respectively. However, while neither suffers from a shortage of funds, their prospects for growth are more mixed.
Doha has placed a moratorium on development of gas reserves from its giant North field, meaning that additional upstream and downstream hydrocarbons activity will be limited. Qatar's relatively small population also means that infrastructure developments will be on a smaller scale.
Despite hu
Observers of the global economy may be forgiven for thinking that market jitters about the global credit crunch mean a slowdown is in sight for the GCC projects market. Indeed, in the past few weeks there have been signs of a slowdown.
Last week, MEED revealed that US oil major ConocoPhillips is pulling out of the project to build a new refinery in Fujairah and, together with Saudi Aramco, is reviewing its involvement in a second, in Yanbu in Saudi Arabia, blaming rising construction costs. At the same time, data from MEED projects, which tracks project activity in the Gulf, shows a fall of 0.5 per cent in the past month. This could be a sign of things to come, or just the consequences of a summer slowdown. But the Gulf's projects sector has shown itself to be surprisingly robust, and has defied previous predictions of a downturn, most notably at the start of 2007, when many analysts predicted a fall in oil prices. The projects sector has grown by 42 per cent over the past year, the highest annual rate since records were first compiled in 2004. As of 16 September, the amount of projects announced, under way or recently completed in the six GCC states totalled $1.5 trillion - more than double the combined GDP of the GCC. Leading the pack is the UAE, where there are more than $662,000 million worth of projects. The federation, and Dubai in particular, has led the project boom in the Gulf with grandiose multi-billion-dollar projects such as Palm Jumeirah and Dubailand. Given its head start, the UAE might have been expected to have passed its peak in project activity. However, the opposite seems to be true. Over the past year, its projects sector has risen by 78 per cent, faster than any other Gulf country. The UAE figures have been boosted by Abu Dhabi, which after a slow start has announced several massive real estate projects, such as the $60,000 million Yas and Saadiyat island developments. 'The capital has taken a much more measured approach to development than Dubai, which prefers to build first, plan second,' says one Dubai-based contractor. Despite Abu Dhabi's emergence, it is still Dubai that is forcing the pace as it tries to diversify its economy and keep real estate and commercial development ahead of its rapidly growing population. The emirate's ruler, Shaikh Mohammed bin Rashid al-Maktoum, says what has been achieved so far is only 10 per cent of his vision for Dubai. The vast majority of investment in the emirate is funded by the liquidity created by the oil boom. Less than 5 per cent of Dubai's GDP comes from oil production, but if the oil price were to slump, Dubai would feel the pinch as much as anywhere. Saudi Arabia's projects sector is also growing rapidly. Since September 2006, the projects market has grown by 28 per cent, to $363,000 million. Given its immense oil wealth, growing population and demands for massive infrastructure development, this is expected to grow. Sectors to watch include power and water, as Riyadh aims to double electricity generating and wastewater treatment capacity by 2020. Downstream industry will also gather pace as the kingdom tries to develop more labour-intensive businesses. Oil and gas will remain at the forefront, however, with Aramco planning to spend at least $80,000 million by 2012 to boost output. Kuwait and Qatar have equally buoyant project markets, growing by 19 per cent and 21 per cent in the past 12 months to reach $252,000 million and $142,000 million respectively. However, while neither suffers from a shortage of funds, their prospects for growth are more mixed. Doha has placed a moratorium on development of gas reserves from its giant North field, meaning that additional upstream and downstream hydrocarbons activity will be limited. Qatar's relatively small population also means that infrastructure developments will be on a smaller scale. Despite huThis content is only available to full MEED package subscribers (MEED magazine and MEED.com).
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