The value of projects awarded across the GCC states’ transport sector fell 36 per cent from $22.9bn in the first half of 2014 to $14.7bn between January and June 2015 when compared with same period last year.

A major drop in the value of contract awards for roads, which accounted for 78 per cent of project awards during the first half of 2014, is the main decelerating factor for the transport sector’s project awards performance in the first half of 2015. Contract awards for roads halved from $17.9bn to $8.6bn, while the value of airport project awards contracted by 22 per cent from $1.37 in June 2014 to $1.06bn over the same period.

Compared with the first half of 2014, the contract awards for seaport projects increased by 59 per cent during the first half of the current year. However, the contract value for seaports, at $486m from January to June 2015, is small compared with the other sub-sectors. Similarly, the value of rail projects awarded during the first half of 2015 increased by 35 per cent compared to the same period a year ago to reach $4.6bn.

Despite the drop in the value of awards, the value of contract awards in the first half of 2015 is close to the average value of first-half project awards within a six-year period starting in 2009, which is estimated at $14.68bn. These findings are based on data from regional projects tracker MEED Projects.

Rail

The only major rail project awarded in the first half of 2015 is the $4.1bn systems, rolling stock and track work for the Doha Metro. Some $18.4bn worth of rail schemes are expected to be awarded for the remainder of 2015 including the Mecca Metro Lines B and C, the Oman National Railway Buraimi-Sohar line, rolling stock and systems for the long distance rail in Qatar, and five packages under phase two of the UAE’s Etihad Rail.

If all these planned rail schemes get awarded during the next six months, the projected 2015 full year awards would carry a value of nearly $23bn, which is only $2.6bn shy of the total project awards within this subsector in 2013, so far the best year for rail project awards since 2009.  However, there is a high likelihood that the award of some of these projects will be delayed and pushed backwards to 2016 if the overall trend of a longer decision cycle among clients persists.

Project awards by country

Of the $14.7bn project awards from January to June 2015, Qatar accounted for the largest share at 42 per cent ($6.1bn), followed closely by Saudi Arabia at 40 per cent ($5.8bn). The UAE and Oman accounted for 13 per cent and 5 per cent of the half-year project awards, respectively.

Similarly Qatar dominated the project awards during the first half of 2014 with a share of 63 per cent. The largest projects awarded during this period in Qatar included the $3.3bn tunneling work for the Doha Metro Gold Line, $2.7bn LRT phase 2, and the Ministry of Public Works’ multi-billion expressway programme.

Key drivers

Projects in the transport sector are highly inter-related prompting municipalities such as Jeddah to develop a public transport master plan to integrate rail, road and port projects. All the GCC states have been making major investments in developing their public transport infrastructure to accommodate growing population and economic expansion and to address traffic congestion in their key cities.

Average annual project awards for the transport sector between 2009 and 2014 is estimated at $30bn, with 2013 serving as the outlier for having awarded $48.5bn worth of projects in a single year.

Investment in road projects particularly in Saudi Arabia in recent years has been driven primarily by rehabilitation and modernisation schemes including the introduction of dualisation or dual carriageways. They are also building new bridges and tunnels as a way to address traffic congestion particularly in major cities such as Riyadh. Saudi Arabia’s Ministry of Transport (MOT) has also recently required road contractors to comply with international standards in terms of the usage of polymer modified bitumen (PMB) in its major roads to ensure long-term sustainability of these projects.

Still in Saudi Arabia, the development of industrial clusters in previously underdeveloped regions require the construction of new roads, ports and rail schemes to aid the timely delivery of raw materials and end products to consumers.

A similar trend exists in nearly every GCC state particularly in Kuwait and Oman, which ensures sustained spending in transport projects over the long term regardless of cyclical fluctuations in project awards value.