TAKING stock of Middle East construction markets at the end of the third quarter suggests that 1997 will go down as another good year for the industry. Regional economies are expanding at a respectable rate and oil prices are steady, although they have fallen by about $1.20 a barrel from last year's average in the year to the end of September.

Last year's higher earnings have stimulated spending in the oil-producing countries, particularly on oil, gas and petrochemical developments. Spending on infrastructure seems relatively subdued by comparison, as more governments wrestle with the various options for turning power and water, roads, ports and airports over to private investment.

The regional record for implementing build-own-operate (BOT) projects in their various permutations is not impressive, but the formula continues to command attention. One hazard of this approach is the legal and regulatory minefield that has to be crossed before the developers can be sure of their investment. With regional populations still growing rapidly, however, recurrent spending commitments are rising and capital spending continues to be squeezed, leaving governments with no obvious alternative.

At least one gratifying aspect of present conditions is the generalised boom in international business as consultants and contractors focus more intently on overseas opportunities. The Middle East may not be as fashionable as Hong Kong, India or Latin America but it attracts the attention of all the leading firms, as any bid list for a major project will testify.

The Saudi Petrochemical Company (Yanpet) has made the largest contract awards this year in the region, for the $2,500 million expansion of its olefins complex, known as Yanpet 2. A joint venture of Saudi Basic Industries Corporation and Mobil Yanbu Petrochemical Company, Yanpet is getting an ethylene cracker from ABB Lummus Crest of the US, an ethylene glycol plant from Toyo Engineering Corporation of Japan and its polyethylene and polypropylene units from Mitsubishi Heavy Industries (MHI). A consortium of 11 regional and international banks is arranging a $2,322 million loan for the project.

The continuing expansion of the Saudi petrochemicals sector accounted for the second largest contract awarded this year, by the Saudi Chevron Petrochemical Company, the first completely private petrochemical venture in the kingdom. Japan's Chiyoda Corporation took the estimated $650 million deal to build a benzene and cyclohexane complex in Jubail for the joint venture which unites Chevron Chemical with the Saudi Industrial Venture Capital Group.

Italy's Snamprogetti has cleaned up in Abu Dhabi where it was awarded contracts this summer by Abu Dhabi National Oil Company (ADNOC) worth $900 million. They are for two 140,000-barrel-a-day (b/d) condensate processing trains at the Ruwais refinery and for production facilities and pipelines on the Asab gas development.

In Kuwait, South Korea's Daelim Industrial Company won the gathering centre contract on the Rawdatain oilfield for $128 million. In Iran, Canada's Bow Valley Energy has signed for the development of the Balal oil field, while Maersk Oil has let several contracts for its offshore oil development in Qatar.

Not that developments in oil, gas and petrochemicals are confined to the Gulf states. Egypt has seen a flurry of both upstream and downstream deals this year: Brown & Root of the US took the engineering, procurement and construction (EPC) contract for the Obeiyed gas field for $169 million and Samsung Engineering Corporation of South Korea won a $207 million EPC contract for the Khalda Petroleum Company's gas developments in the Western Desert.

Earlier this year the local Petrojet won a $200 million subcontract on the Midor refinery project in Alexandria and will execute the work as a build-lease-transfer (BLT) scheme through a special company. Japan's Toyo Engineering Corporation also won the $229 million contract for Egypt's first ethylene plant, for the newly-formed Sidi Krier Petrochemicals Company (Sidpec). Several contracts have been let in Algeria for various enhanced oil recovery schemes.

Traditionally, the power sector has made the greatest call on state funds in the developing world and the prodigious growth in electricity demand in the Middle East makes it a critical investment area. Saudi Arabia alone is talking of an investment of $12,800 million by 2000. Only two major awards for new generating capacity have been made this year - one to a group led by ABB Asea Brown Boveri for the Hidd power and desalination plant in Bahrain and the other to MHI for the Al-Zara station in Syria - with the bulk of recent spending devoted to transmission and interconnections.

The apparent slowdown in the sector can be explained by the complexity of moving from a state-led approach to the independent power project (IPP). £Although Saudi Arabia is preparing the ground for the 1,750-MW Shuaiba project to be done as an IPP using a BOT variant, progress has been slow.

Despite the apparent enthusiasm in Saudi Arabia, there have been setbacks for IPPs elsewhere. Having pioneered the concept at Manah, Oman is reconsidering most of its other BOT power plans. Bahrain abandoned BOT altogether when it awarded the $485 million Hidd contract to ABB on conventional terms.

In contrast, Tunisia has chosen Community Energy Associates of the US as the build-own-operate (BOO) developer for the 300-450-MW Rades power plant. Egypt was also due to receive BOOT offers - the first of several in prospect - for the 650-MW Sidi Krier station in mid-October.

Saudi Arabia has staged a comeback as a major building market this year with the start of work on several large projects. Saudi Binladin Group won the biggest and most prestigious development - the $253 million Al- Faisaliyah complex in Riyadh for the King Faisal Foundation (see page 44).

The company also won a $51 million award for new buildings at Umm al- Qura university; the new national museum project in Riyadh went to Saudi Oger for $139 million. Binladin is also expanding in Egypt where it is extending the runway at Cairo airport and working on an $83 million property development.

Two strategic port developments in Oman and Yemen have been awarded as both race to offer facilities for the next generation of giant container ships. South Korea's Hyundai Engineering & Construction Company took a $150 million contract for the first phase of the Aden port development; in Oman, Boskalis Westminster is dredging the port at Raysut, near Salalah, and Wimpey of the UK with Archirodon Construction (Overseas) will do the onshore work with local partners in a deal worth $93 million.

The other large transport contracts are for metro systems in Turkey and a highway in Pakistan. Siemens of Germany has a $311 million contract for the first stage of the Bursa metro system. France's Cegelec, with two Turkish companies, took the mechanical and electrical works for the first stage of the Istanbul metro. Turkey's Bayinder has been awarded the $500 million contract for a six-lane highway to link Peshawar and the Pakistani capital, Islamabad, but faces the unenviable task of raising half of the funds for the project, which will be repaid by the government on completion.

Cement, steel, sugar and salt feature among the products that will emerge from new industrial construction schemes commissioned in the past nine months. New fertiliser schemes in Oman and Saudi Arabia account for the two biggest contracts, priced at $830 million and $300 million respectively.

For contract details, see pages 44-45