The GCC’s projects market recorded another six months of growth in the first half of 2014 as the region continues to benefit from government investment in energy, utilities and infrastructure schemes, together with a resurgent property market in Dubai, which is once again attracting attention from the private sector.

In the first half of 2014, some $92bn-worth of contracts were awarded across all sectors in the GCC, according to data from regional projects tracker MEED Projects. This is up about 14 per cent on the second half of 2013, and an increase of nearly 29 per cent on the same period last year. It also represents the third consecutive six months of growth after the market dipped briefly in the second half of 2012.

Construction leads

The most active sector in the region was construction. There were nearly $32bn of awards made during the first half of 2014 as it regained its position as the GCC’s most active sector, after coming second to an unusually active transport sector in the second half of 2013. Transport still performed strongly and was the second-most active sector, with nearly $22bn of awards, followed by oil, which rebounded strongly from a slump in the second half of last year with about $17bn of awards, and power with $14bn of new orders.

The most active country during the first half of this year was the UAE, which awarded $28bn of deals. This was almost $6bn more than Saudi Arabia’s $22bn of contracts.

The UAE has been steadily growing since its projects market bottomed out with just over $4bn of awards in the second half of 2011. After a stuttering start in 2012, it grew solidly in 2013, briefly overtaking Saudi Arabia as the GCC’s most active market for contract awards in the first half of 2013, before the kingdom regained that position in the second half, boosted by the signing in July of more than $22bn of deals for the delivery of the Riyadh Metro network.

The UAE awarded $28bn of deals [in the first half of 2014], almost $6bn more than Saudi Arabia’s $22bn

The three largest awards in the UAE during the first half of this year came from three different sectors. This highlights the diversified nature of the country’s projects market, which now offers a wide range of opportunities to engineering and construction companies, as well as suppliers. The largest of the awards was in the energy sector. In April, Abu Dhabi selected a consortium of South Korea’s GS Engineering & Construction and the local Dodsal Group for an estimated $1.4bn deal to develop the onshore Rumaitha and Shanayel oil fields, which form part of the emirate’s Northeast Bab asset, located 31 kilometres from Abu Dhabi city.

Northeast Bab has the capacity to produce about 110,000 barrels a day (b/d) – about 8 per cent of Abu Dhabi National Oil Company’s (ADNOC) total onshore production – and this capacity is due to be doubled after the third-phase expansion at the three fields.

The second-largest award came from the construction sector. Since 2012, developers in Dubai have been selling off-plan properties again and, with funds secured, have been signing major construction contracts. The largest, valued at close to $1bn, was awarded to Lebanon’s Arabian Construction Company (ACC) by Dubai developer Emaar Properties for the construction of The Address Residence Fountain Views development at its Downtown Dubai district. The main construction package involves building three towers including a 220-metre-tall, 60-storey, 280-unit luxury residential tower looking out on Burj Khalifa, the world’s tallest building, and The Dubai Fountain.

The third-largest award in the UAE during the first half of the year came from the power and water sector. In July, the consortium led by the UK/French GDF Suez Energy International signed the power and water purchase agreement for the Mirfa independent water and power project in Abu Dhabi. The GDF Suez consortium awarded the $987m engineering, procurement and construction (EPC) deal to a consortium of Hyundai Engineering & Construction and Hyundai Engineering Company, both of South Korea, and Italy’s Ansaldo Energia. France’s Degremont, a subsidiary of Suez Environment, has been appointed to build the reverse osmosis desalination plant as a subcontractor for the main EPC consortium.

The Mirfa project will have a capacity of 1,600MW of power and 52.5 million gallons a day of desalinated water.

Saudi slide

While the UAE’s projects market has grown during the first half of 2014, Saudi Arabia’s has dipped. In the second half of 2013, awards in the kingdom reached a historic high of just over $44bn, before slumping to $22bn in the first six months this year. That drop can be easily explained. If the Riyadh metro awards are discounted, the figure for the second half of 2013 would be about $22bn and consistent with the first six months of this year and the first half of 2013.

The third-most active market for contract awards during the first half of this year was Qatar, which has been a key focus for companies looking to secure work on its World Cup infrastructure programme. More than $18bn of contracts were signed, up nearly 225 per cent on the $5.6bn inked in the second half of 2013. The growth is a less spectacular 17 per cent compared with the first half of 2013, when nearly $16bn of deals were awarded.

Like the first half of 2013, the major contracts in Qatar have come from the Doha metro project. In April, Qatar Railways Company (Qatar Rail) formally awarded the estimated $3.3bn deal to build the underground sections of the metro’s Gold Line to a group of Greece’s Aktor, Turkey’s Yapi Merkezi and STFA, India’s Larsen & Toubro, and the local AlJaber Engineering. Earlier in March, Qatar Rail awarded a consortium of Spain’s FCC, Geneva-registered Archirodon Construction, Turkey’s Yuksel, and the local Petroserv a $700m contract to build an elevated section of the metro.

Kuwait spike

There has also been a spike in project activity in Kuwait. During the first six months of this year, nearly $18bn of contracts have been signed, up almost five-fold on the $3bn awarded in the second half of 2013 and about three times more than the $5.7bn seen in the first half of last year.

The increase is largely attributed to the letting of more than $12bn of EPC contracts by refiner Kuwait National Petroleum Company on its long-awaited Clean Fuels Project (CFP) to upgrade the country’s refineries. Three contracts were awarded to groups led by the UK’s Petrofac, the US’ Fluor and Japan’s JGC Corporation.

The CFP will increase refining capacity at the Mina al-Ahmadi and Mina Abdullah refineries to 800,000 b/d from 730,000 b/d currently, while also retiring the older 200,000-b/d Shuaiba refinery.

For the remaining GCC markets of Oman and Bahrain, the performance was mixed. In Oman, there was a slight fall compared with the second half of last year, with nearly $4.5bn of awards. The dip in activity could be explained by corruption investigations at the sultanate’s ministries, which have slowed decision-making.

Bahrain uptick

In Bahrain, which is traditionally the smallest of the GCC’s projects markets, there has been a sharp uptick in the value of awards. In the first half of this year, $803m of contracts were signed, up significantly from $305m in the second half of last year and $220m in the first half of 2013.

This signals a turnaround in the projects market of the small Gulf state, which has been experiencing severe social unrest since 2011. News that the Bahraini government has approved a gas allocation for Aluminium Bahrain (Alba) will provide a further boost to the projects sector, as the firm will now be able to proceed with its long-wished for sixth potline.

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