IN NUMBERS

$9.3bn: Value of roads contracts awarded in the GCC in 2010

$6bn: Value of road contracts awarded in 2011 to date

Source: MEED Projects

As governments look to improve transportation links and ease congestion, the GCC are investing heavily in road construction. States have awarded about $6bn-worth of road contracts in the first three quarters of 2011, 22.4 per cent more than in the same period in 2010.

Qatar has been the most active roads market in 2011, with $1.9bn-worth of contract awards

With a number of large road projects currently being tendered, the total value of contracts awarded by the end of 2011 is likely to surpass the $9.3bn awarded in the GCC last year. With more than $43bn-worth of road projects planned or under way in the GCC, the sector will continue to offer significant opportunities for the region’s construction firms.

Qatar leads roads market

Qatar has been the most active roads market in 2011, with $1.9bn-worth of contract awards. This includes the largest road contract since the start of the year, the QR3.7bn ($1bn) construction package awarded to the joint venture of Saudi Binladin Group and the local Qatari Diar for work on the Dukhan Highway in Doha.

We used to be bidding against eight other companies … now we are competing against more than 20 for work

Local contractor in Kuwait

This followed the signing of two road contracts in January, worth an estimated QR1.9bn, to a joint venture of Athens-based Consolidated Contractors Company and the local Teyseer Contracting Company. The first contract was for the second phase of the Dukhan Highway project and the second was for the 12th package of the Doha Expressway.

Also in February, the US’ KBR was awarded a contract to provide project management services for the Doha Expressway and other major road projects over the next five years. KBR will manage the construction of 29 major road projects, including the remaining packages for the Doha Expressway planned until 2015, as Qatar invests $20bn to upgrade and expand its road infrastructure.

Qatar is expected to award more work before the end of 2011. In August, the Public Works Authority (Ashghal) received bids for the estimated $700m first phase of its Lusail Expressway project. The first package will be 5.8 kilometres in length and will have about 16 lanes, some of which will be two or three levels. The expressway will also include three major interchanges, slip roads, underpasses and bicycle lanes. Construction work will take 36 months to complete.

GCC road awards 2011
  ($m)
Bahrain 166
Kuwait 500
Oman 1,100
Qatar 1,900
Saudi Arabia 1,500
UAE 500
First-third quarter 2011 5,666
Source: MEED Projects

The second package, which has not yet been tendered, will run beside the Lusail mixed-use development and then on to the Pearl real-estate development. The expressway will be about 12km long when completed.

Qatar is also preparing to tender the Al-Khor highway project for the Lusail real-estate development before the end of the year. The Al-Khor highway will be a multi-level road that will run along the western border of the Lusail City development and will include up to five interchanges.

Saudi Arabia has awarded the second highest value of road contracts in 2011 to date, with $1.5bn-worth of projects. This is marginally lower than the $1.6bn-worth of road schemes that were awarded for the whole of 2010. The kingdom has by far the highest value of road projects currently planned or under way. It has $19.9bn-worth of road schemes in varying stages, compared with $8.1bn in Qatar.

GCC road projects planned or underway
  ($bn)
Bahrain 1.2
Kuwait 2.2
Oman 4.6
Qatar 8.1
Saudi Arabia 16
UAE 7.6
Source: MEED Projects

In the current budget, Saudi Arabia’s Transport Ministry was allocated SR11.3bn ($3bn) for the construction of 389 new road projects, with a total length of 6,600km. The ministry has also earmarked SR750m for road maintenance and SR50m for conducting feasibility and design studies for 2,762km of new roads.

Most of the new roads are planned for Riyadh. The projects include the first phase of the Alkharj to Quqaieya road, the second phase of the Atif-Dhalam Road and the road linking the Riyadh to Qassim road with the Riyadh to Huraimala, that will pass alongside the Prince Sultan City for Humanitarian Services.

The biggest contract awarded in the kingdom 2011 was to Egypt’s Orascom Construction Industries to build $450m-worth of roads and related infrastructure.

Riyadh investment from government

Saudi Arabia’s road infrastructure is set to continue to receive heavy investment from the government in the next five years. In its Ninth Development Plan, Riyadh set out plans to invest $29.6bn to upgrade its transport infrastructure and communications networks until 2014. The infrastructure programme will involve local municipal projects and major highway road schemes.

Oman has seen the third most active roads market to date in 2011. The sultanate has awarded road contracts worth a total of $1.1bn as it undertakes a comprehensive infrastructure development programme.

The largest contract awards have been on the Bidbid to Sur dual carriageway project. In the first quarter, Oman’s Transport and Communications Ministry awarded a $325m contract to a joint venture of Italy’s Astaldi and Turkey’s Ozkar Insaat Sanayi ve Ticaret to build the phase 1a of the carriageway.

In September, a joint venture of UAE/Australian Habtoor Leighton and Turkey’s Sezai Turkes was awarded a $300m contract for phase 1b. Both packages involve the construction of about 50km of dual carriageway and some minor adjoining roads. The work also includes constructing bridges and cutting and filling work. The road between Bidbid and Sur is a major transport link in the sultanate, connecting the capital city of Muscat to the Sharqiyah region in the north-eastern part of Oman.

Oman highways

The sultanate is also pushing ahead with plans for its ambitious 265km Batinah Expressway project. The road will be extended from the current Muscat Expressway to Khatmat Malaha, located on the Oman/UAE border. The expressway will run parallel to the existing Batinah highway.

In early October, the transport ministry received bids for the first package of the project, which involves the construction of the road from Naseem Garden to Suwaiq. The ministry has also invited contractors to submit bids for the second and third phases of the expressway scheme. The expressway project has been allocated RO250m ($649m) in the sultanate’s eighth five-year plan (2011-15), which was announced by the government earlier in the year.

In the UAE, some $513m-worth of road contracts have been awarded so far in 2011. The biggest was the $460m contract awarded in Dubai for the Roads & Transport Authority’s parallel road scheme. The total does not include the $2.4bn-worth of contracts awarded on the Shamkha South project in Abu Dhabi, which will involve road works, in addition to other infrastructure work such as drainage.

Investment in the UAE’s road sector has shrunk considerably since 2009. The $513m of contracts awarded in the first three quarters of this year is almost half of the $930m signed in the same period in 2010 and significantly lower than the $2.3bn in the first three quarters of 2009.

The drop in the value of road projects in the UAE compared with other GCC states is indicative of the slowdown in the country’s construction sector. Work has also been completed on several key road infrastructure schemes.

Kuwait is expected to be one of the most active road markets in 2012. It has only awarded $488m of road contracts in 2011 to date, but has tendered several major schemes that are likely to be awarded early next year. In 2010, the Public Works Ministry pledged to spend $11.5bn over the next four years developing the country’s infrastructure, with road links making up a major part of the planned investment.

“We are seeing a lot of road projects coming out for tender now. The roads are so congested, and these projects are vital,” says a local Kuwaiti contractor.

Kuwait is facing population growth, with the number of people in the state expected to grow from the current 3.4 million to 5.4 million people by 2030. In September, the Public Works Ministry received bids for the contract to build the middle section of its Jahra road project. The local Combined Group Contracting Company submitted the low bid of $167m. In 2010, a joint venture of Kuwait Arab Contractors and Egypt’s Arab Contractors was awarded an estimated $965m contract for the project to upgrade the 7.2km Jahra road.

The ministry also recently invited firms to submit bids for the estimated $130m contract to build and maintain roads and related infrastructure for the First Ring Road and Abdulla al-Ahmed Street.

Contractors are awaiting tenders for the main construction package on the estimated $575m Nawaseeb road project. The ministry was expected to tender the road project in February, but this has been delayed. The work involves upgrading the current Nawaseeb road into a six-lane divided highway, with five interchanges and grade separated U-turns. The Nawaseeb road, also known as Route 40, links Kuwait with Saudi Arabia and is a major trade crossing between the two states.

Bahrain slowdown in road sector

As a result of the political unrest that began in February, Bahrain’s road sector has unsurprisingly been the least active in the GCC in 2011. The country has awarded just $166m-worth of road projects since the start of the year.

Much of the Gulf’s private real-estate projects came to a standstill when the recession struck in 2008, contractors have now started to turn their attention to government infrastructure projects. With many of the Gulf states continuing to witness rapid population growth and already suffering from insufficient transport infrastructure, the road sector will continue to offer high-value contracts in the years ahead.

The shift in focus of contractors towards infrastructure schemes has increased competition in the road sector, with international contractors also looking to enter the fray.

“We used to be bidding against eight other companies for road jobs. Now we are competing against more than 20 companies for work. It’s difficult,” says a local contractor in Kuwait.

But with more than $40bn-worth of road projects already planned or under construction, if contractors are able to price competitively and form strategic partnerships when necessary, the Gulf’s road sector should have plenty to offer them in the next decade.