Kuwait makes progress with major infrastructure schemes

25 August 2015

Airport contract approved days after final deal was awarded for Al-Zour North refinery

  • A $4.3bn contract for Kuwait’s new airport terminal was awarded two weeks after bids were submitted
  • Country’s reformed public-private partnership (PPP) body has prequalified groups for next two major utilities projects
  • Final package on $11.5bn Al-Zour Refinery was awarded in August

Kuwait’s Central Tenders Committee (CTC) has approved the award of a $4.3bn contract to a joint venture of Turkey’s Limak and the local Kharafi National to build the new passenger terminal at Kuwait International airport (KIA), only two weeks after bids were submitted.

The speed of the contract award, following the resubmission of bids in early August, has pleasantly surprised many within Kuwait’s business circles and has increased optimism that the country can finally become a lucrative market for contractors and consultants across its projects markets.

The Limak/Kharafi National consortium’s $4.3bn bid was nearly $250m lower than its original offer, which was made in November 2014 during the first round of bidding. The project was retendered by the Ministry of Public Works (MPW) earlier this year, after it deemed the original offers as too high. The authority also said the technical proposals were inadequate.

The award of the airport deal came less than a week after Kuwait National Petroleum Company (KNPC) announced it had awarded the $1.57bn final package on the $11.5bn Al-Zour North New Refinery Project (NRP), which, like the airport, had suffered numerous delays in the tendering and bidding stages.

Those within Kuwait’s projects and economic sectors say progress with the long-delayed schemes has improved sentiment over the country’s development aims, despite lower oil prices.

“The progress with the airport and Al-Zour projects has led to positive sentiment and shows there is commitment to deliver these schemes,” says an economist at a major local bank. “Much of the focus now is on oil prices, and the question that is always asked is: will this lead to a cut down in planned projects?”

“With regards to all these major projects recently awarded and under bidding, the answer is no. These projects have been delayed for years and, like the airport, are urgent, so clients know they need to get something going.”

While government clients award major construction contracts, Kuwait’s recently reformed public-private partnership (PPP) body, the Kuwait Authority for Partnership Projects (KAPP), is pushing ahead with the procurement process for the country’s next two independent water and power projects (IWPPs) – Al-Zour North 2 and Al-Khiran 1.

Progress with the IWPPs stalled in 2014 as a result of the restructuring of KAPP’s predecessor, the Partnerships Technical Bureau (PTB). The restructuring, which happened in parallel with the amendments of the country’s PPP and IWPP laws, was implemented in response to the slow bidding process for the country’s first PPP project, the Al-Zour North 1 IWPP.

However, progress with the schemes has been much swifter in 2015, and between 16 and 23 August, KAPP announced it had prequalified seven groups to participate in the bidding for each project.

Groups prequalified for Al-Zour North 2 and Al-Khiran 1 IWPPs

  • Abengoa (Spain)
  • Acwa Power (Saudi Arabia) / Al-Mulla (local)
  • Korea Electric Power Corporation (Kepco; South Korea)
  • Marubeni (Japan) / Fouad al-Ghanim (local)
  • Mitsubishi (Japan)
  • Mitsui (Japan)
  • Sumitomo (Japan)

The Al-Zour North 2 IWPP will have a power capacity of at least 1,500MW, to be provided through combined-cycle gas turbines, and a desalination capacity of 102 million imperial gallons a day (MIGD). As with the first phase, the Al-Zour North phase two project will use natural gas as the main feedstock, and gas oil will be provided by the Ministry of Electricity & Water (MEW).

The Al-Khiran 1 project will have larger generation and desalination capacities, with the plant producing 1,800MW of power and 125 MIGD of desalinated water respectively. The site will be located on the coast about 100 kilometres south of Kuwait City. KAPP and MEW are also planning to develop a second phase, a 1,800MW independent power project (IPP), by 2029 at the Al-Khiran site.

While KAPP and MEW conducted the prequalification process for both the Al-Zour North 2 and Al-Khiran 1 IWPPs simultaneously, the clients are expected to stagger the submission dates by six months due to the size of the projects and the fact that the same seven developers have been prequalified for both tenders.

The Al-Zour North 2 IWPP is likely to be the first tendered, according to sources close to the IWPP programme.

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