Season gets off to an active start

22 March 1996

MIDDLE East construction markets got off to a promising start in the first quarter of the year with some major contracts signed in key markets. The predictions for economic performance suggest that 1996 will be a year of modest growth for the region, with flat oil price trends and continuing budget strain.

Contractors busy with projects which will be coming to an end during the course of the year expect there to be fewer new orders to replace them. Capital spending by Gulf governments will be restrained, but funding is being found for essential infrastructure projects, particularly in the power sector.

Contractors are focusing more attention on private sector projects despite the higher risks they entail and many companies based in the region are looking beyond their national borders for a new stream of business.

A survey of the construction contracts recorded in MEED during the first two months of the year points to some clear trends:

Infrastructure for the oil and gas industry is generating some of the highest value contracts Industrial projects are very active, especially in the petrochemicals sector The highest infrastructure spending is on power stations hydro-electric schemes and electricity transmission projects There is a steady flow of high quality hotel, commercial and corporate headquarters work going to international contractors The oil and gas producing states of the Middle East and North Africa will have to enhance their capacity to meet demand into the next century. This is reflected in the growing spending on expansion schemes. The largest such order of the year so far went to the US' Brown & Root, which has won the $600 million order from Algeria's state energy company Sonatrach for a 480-kilometre pipeline and gas processing plant. Also in North Africa, Joannou & Paraskevaides, with Spanish and French partners, was awarded the contract for initial development work on the Murzuk oil field in Libya.

In the Gulf, Kuwait has finally awarded the long-awaited and much-tendered western oil fields gathering centres scheme to China petroleum Engineering & Construction Corporation. The repeat bidding and respecification of the project whittled the cost down to $390 million, a reduction of about $100 million from initial estimates. In the UAE, Pritchard Corporation of the US took the front-end engineering and design contract for the $500 million Asab gas development project. The UK's Costain Oil & Gas has the task of boosting production from Qatar's Dukhan oil field. During the course of the year, the Shaybah oil field development in eastern Saudi Arabia should be generating more contracts.

Petrochemicals projects are also to the fore. as many of the region's first generatoin plants expand and other energy-rich countries follow the example of the established producers. Snamprogetti of Italy won the last major contract on the Equate joint venture petrochemicals project in Kuwait towards the end of last year and Abu Dhabi National Oil Company (ADNOC) will choose a foreign partner soon for its planned $ 1.000 million petrochemicals complex.

Chiyoda Corporation has added to its substantial portfolio of regional business with the $200 million contract for an aromatics plant for Ibn Rushd in Saudi Arabia. Also in the kingdom, Hitachi Zosen won a $176 million award for a soda ash plant for the local Arabian Mining and Manufacturing Company, which is the first venture by this new private sector company. Private investment in such projects is likely to become an increasing feature of the market in the years to come International firms have also won several contracts for major industrial projects.

France's Polysius and its local partner cleaned up in Cairo in January when it signed three contracts worth $380 million for work on three cement plants. Two of the contracts are for one expan sion of existing plants; the third is for a new 1.2 million tonne-a-year plant a new joint venture, the Egyptian Cement Company. Denmark's FL Smidth also won a $78 million contract for a cement plant in Syria. In Pakistan, the UK division of Foster Wheeler has been awarded the engineering, procurement ano construction contract for the second phase of a $350 million purified teraphohalic acid (PTA) plant being built by ICI Pakistan.

The rapid growth in demand for electricity, often at rates of 10 per cent a year or more, is reflected in the number of new power station projects. One of the largest contracts to be signed in the first two months of the year was the 1,400-MW Bursa power station in Turkey, let to Japan's Mitsubishi Heavy Industries and Itocho Corporation for $509 million. In Pakistan, an internatonal consortium led by Impregilo:

of Italy won contracts worth $511 in December for work on the $1,450-MW Chazi Barotha hydroelectric power project.

A division of the AngloFrench GEC Alsthom took the $720 million Phase 4 transmission project in Qatar; in Lebanon a cabling order worth nearly $200 million went to several companies from France, Italy, Saudli Arabia, Turkey and the UK.

Large-scale conventional construction projects which aim to build to the highest contemporary standards are still attracting the interest of international companies, although experienced local contractors are also making an impressive showing. Belgium's Besix has taken the $73 million contract for the new Conrad hotel in Egypt, where forthcoming bids for the new Media City and the Alexandria library project should also attract a strong international turnout.

In the UAE there is still buoyant demand for new corporate headquarters buildings.

One of the latest awards went to a joint venture of the UK/local Balfour Beatty Abu Dhabi and Germany's Phillip Holzmann which has an 80 million contract to build a new shared headquarters for two Abu Dhabi-based energy companies, Zadco and Gasco. The order was placed by ADNOC and the new complex will be next to the joint headquarters of two other ADNOC affiliates, Adma-Opco and Adgas which is under construction by the local arm of Belgium's Six Construct. Dubai is still in the throes of an extraordinary expansion in hotel capacity as it develops its role as a regional services centre and international tourist destination.

Dubai has the reputation of a market where the construction never seems to stop, Indeed, the projects in the pipeline suggest that activity will be just as buoyant in 1996 as it was last year (see page 30). Contractors in other regional markets will be hoping to experience similar good fortune as the pace of business picks up after the Eid holidays.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications