Oil prices that have exceeded $30 a barrel in recent weeks have transformed the finances of the oil-producing states of the Gulf. The region's economies are growing again, although the euphoria is tempered by the knowledge that governments are not about to unleash a flood of new spending. Instead, the emphasis is going to be on private finance initiatives as the state shifts more of the burden of expanding infrastructure to the private sector. This has led to predictable complaints from local contractors, who have depended on state spending in the past, about the dearth of new work in several Gulf markets.

A perverse consequence of the oil price rise is to make downstream developments in the oil and gas sector less attractive so long as the production of crude oil is so profitable. Contractors expect upstream investment to continue while downstream projects may be delayed. Among recent awards in the oil and gas sector, AMEC-BKW won a $385 million contract from Saudi Aramco for an NGL unit at the Berri gas processing plant. The brightest prospect for a major new capital project from Aramco is the Haradh gas processing plant, which could be awarded for construction later this year.

The other big source of Saudi projects, Saudi Basic Industries Corporation, is in a period of consolidation and the batonhas passed for the time being to private petrochemicals developers. Private petrochemicals group National Industrialisation Company (NIC) is currently finalising funding for its new polypropylene/propane plant at Jubail for which a construction contract should be awarded soon.

On the conventional construction scene, the prestigious Al-Faisaliah centre in Riyadh is racing towards completion this year. The pace of work is also quickening on the neighbouring Kingdom Centre, which is due for completion next year. Both developments will add significantly to the volume of top-end retail and commercial space in the Saudi capital. It remains to be seen whether more large-scale developments are going to be launched by other investors.

Energy leads

In Kuwait, where the government-funded construction market remains fairly flat, to the frustration of local contractors, the oil sector continues to produce a series of projects for upgrades and expansions. These include gas booster stations, gathering centre upgrades, water injection works and a new export pier. Bids were due in late March for the largest non- oil prospect, the Sulaibiya wastewater treatment plant, which is a build- operate-transfer (BOT) initiative.

Qatari contractors have been boosted by signs that the government is prepared to spend again after a period of budget austerity. The Doha International Airport expansion has a budget at last and there are several road projects on the cards. The vibrant oil, gas and industrial sectors continue to attract international companies: newcomer Christiani & Nielsen of the UK was rewarded with a sub-contract for the offshore civils on the Q-Chem scheme.

Major awards due this year include other subcontracts for Q-Chem and more packages on NGL-4. Snamprogetti of Italy snapped up the largest award of the year so far, the$200 million engineering, procurement and construction (EPC) contract for the Dukhan gas lift scheme. Tenders for the expansion of the RasGas liquefied natural gas plant are due in the summer.

Oman has generated fresh excitement in recent months with the relaunch of its private power programme. The commitment to full privatisation of the sector now appears irreversible and the country's next independent power project (IPP) is on the cards at Sharqiya, with a second to follow in quick succession at Barqa.

Piped gas

In early March the award of contracts for two gas pipelines worth a total of $305 million was announced. The two lines are the backbone of the gas system Oman Gas Company is developing to fuel new power stations and a range of ambitious industrial projects. Dodsal of India won a $181 million contract for a 700-kilometre line and a consortium of Saipem, Snamprogetti and Consolidated Contractors International Company took the$124 million award for the second 305-kilometre link. Bank finance for the pipeline schemes is now being arranged.

Outside the Gulf region, the tempo of new construction activity is more subdued. Egypt continues to be a hive of activity and fear that a government review of major projects might lead to disruptions has proved misplaced. The big schemes, including the Toshka land reclamation and the East Port Said development, are on track with payments to contractors running normally.

Two major projects are likely to feature in Egypt this year. A long list of international groups have prequalified for the contract to build a dam and a hydro-electric plant on the Nile at Naga Hammadi and tender documents for the estimated $400 million scheme are due out at the end of May. The other big-ticket scheme is the San Stefano hotel project in Alexandria. The redevelopment of the historic site, which is to include a Four Seasons hotel, will cost in excess of$300 million.

Egypt also has its share of energy sector projects. This year should see the award of an EPC contract for the project to lay gas pipelines for the Nile Valley Gas Company that will carry gas into the centre of the country for the first time. Developments are also expected on the development of deep-water gas reserves offshore West Delta for BG of the UK. The programme manager on this scheme is Bechtel of the US.