With about $1.8tn of projects planned or underway, the construction and oil and gas industries together account for about 58 per cent of all projects planned or underway in the GCC.
Projects are not evenly split between the two segments however, with the civil engineering and building projects that make up the construction and infrastructure sector accounting for close to $1.6tn of all projects planned or underway, about 88 per cent by value. The oil and gas industry can claim a relatively meagre $168bn of projects planned or underway in the GCC. We take a closer look at the major players in both markets.
Oil and gas
As the world’s leading crude oil exporter, Saudi Aramco is the largest oil and gas project client in the region, awarding more than $33.2bn of project contracts in the five-year period from July 2013 to June 2018. In 2017, it retained its top position among GCC oil companies, awarding $7.1bn-worth of major contracts. Of this, upstream projects totalled just over $4bn.
Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), has been slowly taking over the development of major infrastructure projects. The PIF has also emerged as the primary driver of the strategic real estate development programme across the kingdom, including the $500bn Neom city project announced at the Future Investment Initiative organised in Riyadh in October 2017.
Saudi Arabia’s most active client in the construction and transportation sectors with regard to ongoing projects is the Interior Ministry, which is building security compounds and residential complexes around the kingdom. More than $28.5bn-worth of contracts awarded by the ministry are currently under execution.
The second most active client is the Arriyadh Development Authority (ADA), which manages the Riyadh Metro project and bus rapid transit (BRT) system. ADA has about $24bn-worth of contracts under execution, mainly in the transport sector.
Oil and gas
Kuwait’s key clients are all subsidiaries of state-owned Kuwait Petroleum Corporation (KPC). Its two refiners, Kuwait National Petroleum Company (KNPC) and the newly formed Kuwait Integrated Petroleum Industries Company (KIPIC), are in the region’s top three project clients, after awarding more than $12bn each over the past few years.
Kuwait Oil Company (KOC), the state’s upstream operator, sits in fourth place with just over $11.8bn of awards.
Due to a lack of private development, the construction and transportation sector in Kuwait is dominated by four government clients: the Ministry of Public Works (MPW), Kuwait University, the Health Ministry and the Public Authority for Housing Welfare (PAHW). These four clients account for about 72 per cent of the value of contracts under execution in Kuwait.
The biggest contracts awarded in 2017-18 relate to PAHW’s housing programme, the Directorate General of Civil Aviation’s (DGCA) airport expansion programme, and MPW’s roads building programme.
The relaunch of the public-private partnership (PPP) programme may result in more openings for foreign companies, but unless a major scheme comes along, it is difficult to see a substantial increase in private construction activity in the short term.
Oil and gas
The UAE’s oil operations are split across a number of companies, but are dominated by subsidiaries of Abu Dhabi National Oil Company (Adnoc). Its offshore division is the region’s fifth-biggest client, with $9.5bn in contracts awarded since 2013. Adnoc Onshore is also working hard to develop its resources as the emirate of Abu Dhabi pushes to meet its long-planned target of boosting its crude oil production capacity up to 3.5 million b/d by the end of 2018.
The UAE’s biggest construction client is Dubai developer Emaar Properties, which has an estimated $6bn of projects underway. This is a considerable increase on 2015, when the company had $3.6bn of projects under execution.
Second is Dubai’s Roads & Transport Authority (RTA), which jumped up the rankings thanks to the $2.9bn award in 2015 for the Route 2020 metro link that will connect to the Dubai Expo site. It maintained its position with a number of 2017 awards on the Expo 2020 development and Jewel of the Creek development at the Port Saeed area in central Dubai, plus contract awards for road infrastructure improvements.
Dubai’s Nakheel jumped up the ranking from seventh position in 2016 to third in 2017, driven by the $1.14bn contract awarded for the construction of Deira Mall as part of its Deira Island project. Other schemes include the extension of Ibn Battuta Mall and the construction of Palm Gateway.
The two biggest Abu Dhabi construction clients are Abu Dhabi General Services Company (Musanada) and Abu Dhabi Airports Company.
Oil and gas
Bahrain Petroleum Company (Bapco), normally the smallest spender in the region, leapt into the contractor awards table after signing a $4.2bn deal with a joint venture of France’s Technip and Samsung Engineering of South Korea for the long-planned expansion and modernisation of its 267,000 b/d Sitra refinery.
With the discovery of the new shale field Khaleej al-Bahrain in 2018, Bapco could be set for more oil and gas project awards. However, the size of the find is yet to be fully determined and it is unlikely to fuel a resurgence of Bahrain’s projects sector.
Manama’s real estate sector was hit hard by the 2008 global financial crisis, which was followed by the 2011 political protests, making finance extremely difficult to obtain. At the same time, sales and rental prices continued to decline. As a result, phasing, financing and delivery of existing projects has been scaled back. Developing other income streams is now more important than ever, and tourism is one of the main potential growth areas identified by Manama.
In terms of active clients, Bahrain Airport Company (BAC) has the largest portfolio of projects, mainly due to the $1.1bn-worth megaproject for the Airport Modernisation Programme awarded in 2016. Next is Bahrain’s Housing Ministry, which has the second-biggest portfolio of work underway, with schemes all over the country as well as megaprojects such as the East Sitra housing project.
Other major clients include Gulf Holding Company, Diyar al-Muharraq, Gulf Finance House and Bahrain Defence Force, among others.
Oil and gas
One notable absentee from the top 10 list of GCC oil and gas clients is Qatar Petroleum (QP). Qatar has cemented its place as the world’s largest liquefied natural gas (LNG) exporter for years, and has imposed a moratorium on new projects on its giant North Field over the past decade.
The state energy company awarded just $1.25bn in the period, including $657m last year alone. This includes a $450m deal with US offshore contractor
McDermott for new wellhead platforms at the Bul Hanine oil field.
However, with the moratorium lifted last year, and a raft of new gas projects planned, QP aims to boost its LNG production capacity to 110 million tonnes a year (t/y), up from 77 million t/y currently, and the projects market should see a new boom.
Qatar’s Public Works Authority (Ashghal), with $23.9bn of contracts awarded since 2013, is the country’s biggest projects sponsor. Ashghal is responsible for executing a vast programme of highways, roads and drainage projects, and other infrastructure schemes.
Qatar Rail Company is the second-biggest construction client in Qatar, with $20.1bn-worth of contracts under execution, including the Doha Metro and Lusail Light Rail Transit (LRT) projects. The Lusail LRT is expected to be completed by the end of 2020, whereas the Doha Metro project is expected to be finished by the first quarter of 2026.
Msheireb Properties is one of the leading clients in Qatar by virtue of it being part of the Qatar Foundation for Education, Science & Community Development, and also the owner of the $6.3bn Msheireb Downtown Doha project currently under execution.
Oil and gas
Oman’s top oil and gas project clients include Duqm Refinery & Petrochemical industries (DRPIC) a 50:50 joint venture between state-owned Oman Oil Company and Kuwait Petroleum International, and Petroleum Development Oman. Expected to be operational by 2022, the Duqm refinery project will operate with a refining capacity of 230,000 b/d when it is completed.
Thanks to a series of awards on the Muscat and Salalah International Airport Expansion in recent years, Oman Airports Management Company (OAMC) is the biggest construction client in Oman in terms of contracts under execution. The second-biggest client is the Transportation & Communication Ministry, which awarded a series of contracts over the past four years for the Batinah and Al-Sharqiyah Expressways and other road projects, totalling about $2.9bn.
MEED’s data shows that there is not much difference in spending by top oil and gas and construction clients. The construction industry, however, dwarfs oil and gas in the number of clients and number of projects, but is less strategic. Oil and gas has fewer clients and projects, but they are bigger and technically more complex.
There are 2,035 construction and infrastructure clients in the region, compared with just 86 oil and gas players. In the 2013-18 period, 7,880 construction and infrastructure contracts were awarded. In comparison, only 372 oil and gas projects were awarded in the same period. The average value of oil and gas project contract awards for the period stood at $347m, compared with construction and infrastructure awards’ $56m. The average value of construction contract awards in the same period stood at $46m.
This article is extracted from a report produced by MEED and Mashreq titled Transforming Construction: Lessons from Oil & Gas. Click here to download the report