Saudi Arabia dominates GCC projects market

15 August 2011

Kingdom awards over half of deals made this year

Saudi Arabia has dominated the GCC projects market this year. So far this year, it accounts for close to half of the contracts awarded in the six member countries.

According to regional projects tracker MEED Projects, there have been $36bn of contract awards in the kingdom this year. This accounts for 48 per cent of all the contracts awarded in the GCC during 2011.

The spending is largely the result of an aggressive spending plan.  The Ninth Development Plan, which was prepared in 2010, will see Riyadh spend $385bn before the end of 2014. This takes the total value of projects planned for the kingdom to $623bn, making it the region’s largest projects market.

Saudi Arabia awards 2011
Construction & infrastructure46
Oil & gas22
Power & water5
Source: MEED Projects

The plan targets a range of sectors, from housing and social infrastructure to new transportation links. Some $67bn has been earmarked for 500,000 new houses, $195bn for education, $73bn for healthcare and $30bn for transport infrastructure.

In 2011, the most active sectors so far have been construction and infrastructure with $17bn of contract awards, accounting for 47 per cent of the Saudi total.  The majority of these contracts are government funded, with contractors winning major deals to build universities, schools, and transportation schemes such as railways and airports.  

The private sector is also playing a role. Earlier in August, local developer Kingdom Holding awarded the local Saudi Binladin Group a $1.2bn contract to build its 1-kilometre tall Kingdom tower on the outskirts of Jeddah (MEED 3:08:11).

“The private sector across the region is very quiet at the moment,” says a Doha-based contractor. “The one exception is Saudi Arabia. There it is quite buoyant and that is because they have real demand. They are building for people that are already there.”

Following construction and infrastructure were oil and gas with $8bn of awards and power and water with $7bn. The kingdom is still developing its energy reserves to support its industrialisation plans with new sources of feedstock, especially gas. This year national oil company Saudi Aramco has awarded $4bn of contracts to development gas processing facilities at the Manifa field.

For power and water, the Riyadh is investing heavily in new capacity to meet the demands of the kingdom’s growing population. In 2010, the kingdom’s population was 26.1 million, a 2.3 per cent increase on the previous year. Power demand grew even more. It hit 45,000MW, a 9 per cent increase on 2009.

The rest of the awards in Saudi Arabia came from the petrochemicals and industrial sectors. The kingdom is developing these projects for two key reasons. The first is to add more value to its natural resources. Traditionally, the kingdom has just exported resources to other countries that then add value by turning hydrocarbons into petrochemicals products. The second reason is to create jobs. Riyadh hopes that by developing downstream industries it will create the jobs that its young people will need in the future.

Elsewhere in the GCC, the second most active market in the GCC for contract awards is the UAE. Before 2008, the UAE was the region’s busiest market for contractors. Much of this work came from the construction and infrastructure sectors and since the collapse of property prices across the federation, the market has slowed significantly. Since 2008, property prices have fallen by as much as 60 per cent. This year, it has awarded $20.7bn of contracts accounting 27 per cent of the work awarded in the GCC.

Qatar is the third most active market with $7.9bn of awards. Although contractors across the region have great hopes for the market as it invests up to $70bn on infrastructure for the 2022 World Cup, companies looking for work in Doha this year say that the market is slow. Firms are awaiting awards on a number of landmark building projects such as the Qatar National Library.

Kuwait has awarded $5.6bn of contracts and Oman has awarded $3.6bn of contracts. Bahrain, which has dealt with large-scale protests and civil unrest this year, has awarded just $1.6bn of contracts.

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