Countries fast-track transport schemes

05 February 2013

Governments target increased transport investment as they seek to diversify their economies

Transport investment continues to be a priority for governments across the Middle East as current ports and airports are stretched to capacity.

The GCC’s drive to become a hub for global transport and trade is encouraging further investment, as are government initiatives to diversify their economies away from the oil and gas sector.

Momentum behind the various rail projects in the region has increased as governments seek to invest in urban light transit, following the success of Dubai’s metro network. 

Efforts to implement the planned GCC railway continued with varying degrees of success in 2012, with some lines tendered and bids submitted, while others were delayed and retendered.

However, instability in North Africa hampered the development of transport projects in that region last year, with limited investment in Libya, and Egypt struggling with a lack of financing options. The ongoing conflict in Syria also affected the transport sector and particularly the aviation industry. Regional carriers were forced to halt or reduce flights into and out of the country, and have suffered a decline in passenger volumes.

The $7bn Khalifa port in Abu Dhabi opened in September to support domestic non-oil [growth]

In 2013, rail appears to harbour the greatest potential after a year of delays meant last year’s predicted boom failed to materialise. Several port projects have been completed, further expansion schemes are under way and new contract awards are expected. Airport operators in the Gulf are expanding their passenger and freight capacity as the region positions itself as a global aviation hub. Runways have been commissioned and are now completed or under way, so most
contract opportunities will be associated with the construction of passenger terminals.

Port development

Since the shock of heavy overcapacity and falling trade volumes in 2008 and 2009, the region’s ports and shipping sector has rebounded. In 2012, activity in the sector was healthy and this looks set to continue in 2013.

Many GCC countries will continue expanding their ports, raising their capacity and upgrading facilities to cater for bigger vessels favoured by shipping companies for their economy of scale. Larger ships began passing through the GCC in 2012 and the region’s ports will continue to develop their channels, cranes and terminals to accommodate them in 2013.

The port expansion has been driven not only by rebounding global trade, but also a diversification drive by GCC governments away from hydrocarbons. Non-oil sectors such as petrochemicals and metals will require access to large port facilities to import raw materials and export their output.

The much-anticipated $7bn Khalifa port in Abu Dhabi opened in September, with the intention of supporting the emirate’s domestic non-oil economic development. The facility, based in Taweelah, replaces the 40-year-old Mina Zayed port in Abu Dhabi’s city centre.

The new facility offers a capacity of 2.5 million twenty-foot equivalent units (TEUs), compared to about 700,000 TEUs at Mina Zayed, and is equipped with technologically advanced equipment meaning the majority of the port’s operations are automated. Furthermore, it is a deep-water port, allowing some of the world’s largest ships to dock.

The port has the facility to expand its capacity in the future depending on demand, potentially rising to 5 million TEUs in the coming years. The first stage of this expansion would be the installation of additional cranes. 

In Dubai, DP World, the operator of Dubai’s Jebel Ali port, has awarded contracts to further increase its capacity. Jebel Ali already offers significantly more capacity than the new Khalifa port, and it is hoped its growth will further cement its dominance of the region’s trans-shipment business.

In September, DP World awarded a $190m contract to a joint venture of Japan’s Toa and France’s Soletanche Bachy to design, construct and commission Terminal 3. The new terminal will add four million TEUs to the port’s current capacity of 15 million TEUs and will open in 2014.

Earlier in the year, DP World awarded Greece’s Archirodon Construction a contract to expand Terminal 2 at Jebel Ali port. The expansion will increase capacity by 1 million TEUs and is due to be completed in the first quarter of 2013.

There are also several new ports being constructed elsewhere in the region. New Doha Port in Qatar is expected to award contracts for a commercial terminal and infrastructure in the second quarter of 2013, as well as ship-to-shore and stacking cranes.

Bids were submitted in November on a large construction contract to build a container terminal at the port, with the award due by the end of 2012. In March, a joint venture of Athens-based Consolidated Contractors Company (CCC) and the local Teyseer Contracting was awarded one of the largest port contracts of the year for $1.2bn of dredging works.

Airport expansion

Airports across the GCC reported rising passenger and cargo traffic in 2012. The Canada-based International Air Transport Association (Iata) expects that in 2013 the Middle East will have the third-fastest regional growth rate for passenger numbers, at 6.6 per cent, and will be the fastest growing for freight, at 4.9 per cent.

The region’s airlines, such as Dubai’s Emirates, Abu Dhabi’s Etihad Airways and Qatar Airways, all expanded their networks during 2012, signing codeshares or making equity investments. In April 2013, Australia’s Qantas will relocate its hub for European flights from Singapore to Dubai. The agreement, signed with Emirates in September, further strengthens Dubai as a global travel hub. Elsewhere in the region, airport operators have been tendering the construction of new terminals and runways.

Abu Dhabi Airports Company (Adac) awarded one of the largest airport contracts in 2012 for the construction of Abu Dhabi International airport’s midfield terminal. The $2.9bn contract was awarded to a consortium comprising Turkey’s TAV, CCC and the UAE’s ArabtecConstruction in June. It covers the construction of a 700,000-square-metre terminal, due to open in 2017.

Dubai International airport continued to see rising passenger volumes during 2012, with a 10.5 per cent year-on-year increase in the 12 months to May, according to Canada’s Airports Council International. About 57 million people will use the airport in total in 2012.

To counter the increasing congestion, work has continued on developing Dubai World Central’s Al-Maktoum airport. The airport has been open for cargo traffic since the completion of phase 1 in June 2010 and it saw triple-digit growth in cargo throughput in the third quarter of 2012 compared to the same period last year.

Phase 1 of New Doha International Airport will open to passengers in the second half of 2013. It was scheduled for 12 December 2012, but the project continued to run behind schedule and over budget. A further $2bn was invested in early 2012, bringing total costs to $17.5bn.

Other airport contracts tendered in 2012 include the construction of Terminal 5 at Riyadh’s King Khalid International airport. The scheme is intended to increase capacity from 6 million passengers to 13 million. Seven consortiums were invited to bid in November, and contracts are expected to be announced next year. A joint venture of TAV and the local Al-Arrab Contracting Company was the low bidder.

Kuwait also planned to tender the first construction package for its planned KD900m ($3.2bn) terminal at Kuwait International airport by the end of 2012. Prequalification opened in April 2012.

A boom in rail awards was anticipated in 2012 and although some significant agreements were negotiated, a number of contract awards were pushed into 2013.

There has been movement on metro projects in the region, with bids on tunnelling packages and two stations for the Doha metro due to be awarded in the second quarter of 2013. The planned metro system will play an integral role in supporting Qatar’s football World Cup 2022 plans by providing transport links between the stadiums and the airport.

Kuwait slowdown

The Kuwait metro project, being built on a public-private partnership (PPP) basis, is running slightly behind schedule. The first package, covering the rolling stock, will not be tendered until early 2013. More than 60 expressions of interest in the rolling stock package were submitted in June. 

The Riyadh metro in Saudi Arabia also issued tenders for five construction deals, with bidders given a closing date of 1 December 2012. This deadline was then extended to 5 January 2013.

The end of 2012 saw plans for a metro in Abu Dhabi back on track after financing issues and cuts to the emirate’s Department of Transport’s budget at the end of 2011 slowed its progress.

By the final quarter of the year, the metro project had moved into phase two, which covers the award of the study and preliminary design contract. This was won by a consortium of US consultancies Aecom and Parsons Brinckerhoff, and Germany’s DB International. Contracts on phase one were awarded in 2010 to the same consortium. Phase three will involve the final contract documentation and construction tender award.

In Egypt, post-revolution turmoil has hampered the expansion of Cairo’s third metro line. The highly anticipated tender for phase 3 of metro line 3 had been due before the end of 2012. However, as yet, none has been released. With a September agreement of E940m ($1.2bn) of funding from the EU and the French Development Agency, the tender should proceed once Cairo’s political climate improves.

Although Egypt’s expanding metro system was not initially affected by the revolution, the country’s economic situation has hampered efforts to raise financing to support the metro project.

GCC rail

During 2012, regional governments continued to pursue the goal of establishing a GCC-wide rail network. Awards for phase two of the UAE’s Etihad Rail project are expected to be announced in the first quarter of 2013. The second phase was tendered as five packages, four covering various sections of the rail network and one covering a systems contract.

Bids on civil works packages A and B covering the design and build of a 137-kilometre line between Ruwais and Ghweifat and a 190km line between Liwa Junction and Al-Ain were submitted in November.

Construction of phase one of the Etihad Rail has already started and involves the building of a rail line to transport granulated sulphur from Abu Dhabi’s gas fields to the Port of Ruwais. The rail network will eventually form part of a wider GCC railway, once neighbouring countries bring their rail projects online.

A planned railway in Oman will provide another important segment of the GCC rail network, with a line planned to connect to the UAE railway at Al-Ain and link to Oman’s port and industrial zone at Sohar, and on to Muscat, possibly connecting to the port of Salalah in the south of Oman.

However, the tender for the country’s rail network has been impacted by a number of delays, with the transport ministry announcing in September that contracts for phase one would be retendered. No tenders have been issued yet, although it is expected that the same consortiums prequalified for the initial bid will be approached again.

The development of the GCC Railway has faced a number of challenges during 2012, including discussions on routes the line should follow, issues surrounding the ownership of land required by the railway, and delays with some tendering processes. However, the momentum behind the scheme is being maintained and the first half of 2013 should see some key contracts being awarded.  

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