THERE IS nothing like an increase in oil prices to lift spirits in the Middle East and ease anxieties about payments. Regional states that have been battling with budget deficits can breathe a little more easily and contractors can expect to be paid more promptly.

Oil revenues will be significantly higher this year as a result of the $4 a barrel increase in prices, fuelling expectations that governments will be in a better position to bring forward major projects next year. Capital spending, which has been steadily squeezed in the pursuit of balanced budgets, could be a direct beneficiary of the windfall. However, until budgets for 1997 are published in January, contractors will have to live in hope that they will be the ones to gain from any increase in spending.

The record of spending in the first nine months of 1996 indicates very clearly where the priorities lie. Contract awards are dominated by new investment in the oil sector, from enhanced recovery work in Algeria to greenfield development in Saudi Arabia. The power sector is the next biggest area of investment, with major contracts for new projects awarded recently in Saudi Arabia, Qatar, Bahrain, Turkey and Pakistan.

Financial reforms around the region are making their mark on the construction market in the soaring demand for prestige new premises for banks and major organisations. In Casablanca, Bouygues of France has won a $99 million contract to build a new headquarters for the central bank, while in Bahrain the local Jalal Costain is building a $32 million headquarters for National Bank of Bahrain. A joint venture of Germany's Phillip Holzmann and the UK's Balfour Beatty is building an $80 million complex in Abu Dhabi to house two of the emirate's oil companies.

Further testimony to the demand for new buildings in the region is the sudden surge of interest in new cement capacity. Three Egyptian cement companies have gone to Polysius of France to undertake expansion projects and the company is also to build an entirely new plant in Suez. Syria is trying to launch both a private cement plant and a state-owned scheme, and Kuwait and Oman are both expanding their capacity.

Record breaker

Yet, one project and one company continue to break all records in the region. In April, the Great Man-made River Authority in Libya indicated to Korea's Dong Ah Construction Industrial Company that it was keen to proceed with two more phases of the huge water transfer scheme, at an estimated cost of $10,000 million (see page 28).

Some of the biggest contracts let in the oil sector this year are associated with the Shayba development in Saudi Arabia which Saudi Aramco is anxious to develop as quickly as possible. The US' Bechtel took the estimated $500 million contract to construct the main production facilities; other contracts went to Techint of Argentina, Technip of France and the Lebanese- owned Consolidated Contractors International

Company.

At the start of this year Pritchard Corporation signed the front end engineering and design contract for the Asab gas development project in Abu Dhabi, at an estimated cost of $500 million. Even bigger commitments are being made in Algeria where the US' Arco announced in April a rehabilitation project for the vast Rhourde el-Baguel oil field which will entail investment of $1,500 million. Also in Algeria, the US' Brown & Root has taken a $600 million award to build a 480-kilometre gas collection network and processing plant.

In Iran, France's Serimer has a $200 million offshore construction contract for the Sirri A and E oil fields. After a fiercely fought contest, China Petroleum Engineering & Construction Company took the biggest oil sector contract in Kuwait this year, a $391 million award for the construction of gathering centres 27 and 28 in the western

oil fields.

Elsewhere, Libya let a series of contracts in February for the early development of the Murzuq oil field and Qatar has awarded multiple contracts for the Arab D gas recycling project and the Dukhan development.

Downstream developments have seen the award of the engineering procurement and construction contract for the Midor refinery in Egypt to Technipetrol of Italy and its parent company Technip of France. This ground-breaking Egyptian-Israeli joint venture project is expected to have an eventual price tag of $1,200 million. On a more modest scale, Yemen has let a $180 million contract to Wimpey of the UK and the US' ABB Lummus Global for an upgrade of the ageing Aden refinery.

In Saudi Arabia, the debottling of three gas processing plants is being executed in advance of a massive expansion of the master gas system (MGS) which was announced by Saudi Aramco in the summer.

Saudi Arabia has also made up for lengthy delays to one of its largest power projects with the July award of a contract for the Ghazlan-2 expansion. Japan's Mitsubishi Heavy Industries won the $1,500 million deal from Saudi Consolidated Electric Company (Sceco-East) and will add an additional 2,400 MW to the existing plant. A syndication to pay for part of the cost is now in the market.

After years of discussion Bahrain has finally ditched plans to let British Gas develop a private power project under a concession agreement and awarded a $400 million contract to the US' Black & Veatch for a new power and desalination plant at Hidd which will be funded and managed by the state. Late last year Qatar let a $720 million contract to a French consortium of Cogelex and Alsthom for the Doha transmission project. Other major power projects have been awarded to MHI and Itochu in Turkey, Raytheon and Westinghouse in Pakistan, and the General Electric subsidiary in Saudi Arabia, Samge, for expansion of the Rabigh power plant.

Industrial expansion

The market for major industrial construction projects has also seen some significant awards. Austria's Voest Alpine took the biggest deal so far this year when it won the $800 million contract to expand the Hadeed steel complex in Saudi Arabia with the addition of a flat steel products rolling mill.

The expansion of Qatar's energy-based projects has rolled on too, with the award to Chiyoda of a $460 million contract to construct a plant for Qatar Fuel Additives Company (Qafac). Chiyoda's recent run of regional success continued with the securing of a $200 million contract to build an aromatics plant in Saudi Arabia for Ibn Rushd, one of the Saudi Basic Industries Company (Sabic) affiliates.

The conventional construction market has seen the award to an Italian consortium, again after a long bidding battle, of the prestigious contract to build a mosque for Sheikh Zayed in Abu Dhabi for $398 million. A classic infrastructure contract was awarded in Pakistan, where the UK's Siemens Plessey Systems and Joannou & Paraskevaides are to expand Lahore airport for $247 million.

An even bigger airport expansion is underway in Dubai where the work is being let in small lots (see page 40). The expansion of Egypt's tourism infrastructure includes the new Conrad Hotel in Cairo which is to be built by Besix of Belgium with the local Orascom for $73 million. Orascom has built up an impressive portfolio in recent months and will partner Polysius on its four cement projects in Egypt which are worth more than $530 million.