GCC oil and gas spending hits four-year high in 2014

15 December 2014

Kuwait leads spending as Saudi Arabia has weakest year for contracts since 2004

Contract awards in the GCC oil and gas sector have reached a four-year high in 2014, with a surge in Kuwaiti spending offsetting a slower year for other major producers.

The six-country bloc awarded $34.8bn-worth of engineering, procurement and construction (EPC) contracts in the year to 15 December, compared with $24bn in 2013 – an increase of 31 per cent.

The value is about the same as the total for 2010 and significantly higher than spending in a range of $24bn-26bn a year for the 2011-13 three-year period.

With the oil price dropping more than 40 per cent in the second half of 2014, it remains unclear whether there will be a slowdown in project spending in 2015 and beyond, with a period of lower crude prices anticipated.

Kuwait was by far the year’s biggest spender on oil and gas projects, with a total of $16.4bn of EPC contracts awarded. This is largely from the $12bn-worth of EPC contracts awarded in April on its Clean Fuels Project (CFP) to upgrade the country’s refineries.

Kuwait only made $10bn of awards in the previous five-year combined, despite being among the GCC’s top three oil producers. In 2014, the country also awarded three contracts totalling $2.3bn on three gas-gathering centres and a $946m deal on an effluent water treatment and injection plant, both for Kuwait Oil Company (KOC).

The second-biggest EPC market for oil and gas in the GCC in 2014 was the UAE, which awarded about $9bn. Although a 22 per cent drop from a strong 2013, the UAE had another year of strong spending.

Major awards in Abu Dhabi included $2.7bn on the offshore Nasr full field development and $3.7bn-worth of contracts on the third phase of expansion of the onshore North East Bab fields. The latter included a $2.25bn award in December to Italy’s Tecnimont to expand production facilities at the Al-Dabbiya field.

Saudi Arabia, the region’s largest crude producer and historically the strongest EPC market, awarded just $6.2bn – the kingdom’s lowest annual spending since 2004. Major awards included two contracts worth a combined $1.85bn on the Khurais Increment Programme for Saudi Aramco and a $1.2bn deal on Saudi Basic Industries Corporation’s (Sabic’s) methyl methacrylate complex in Jubail.

Oman awarded a long-term record of $3bn in EPC contracts in 2014, up from a strong year of $2.4bn in 2013. Major awards in the sultanate in 2014 included $1.2bn on the central processing facility for the Khazzan tight gas project for BP and $1bn of contracts for the Rabab Harweel Integrated Project for Petroleum Development Oman (PDO). Both the main deals were awarded to UK-based Petrofac.

Oman is set to have another strong year in 2014 with major contract awards expected on further Khazzan packages and on the greenfield Duqm oil refinery.

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