Transport overhaul in Qatar vital to World Cup

21 November 2012

The success of Qatar’s 2022 World Cup aspirations is dependent on the emirate creating adequate transport links to support its $70bn construction programme

When Qatar won its bid to host the 2022 Fifa World Cup, there were widespread doubts as to how a tiny country with summer temperatures of 50 degrees Celsius could host the tournament. The lack of large-scale sporting facilities, hotels and public transport systems was a major concern.

Qatar plans to defy its doubters by pumping at least $70bn into an infrastructure development programme. It is set to build state-of-the-art stadiums using advanced air-conditioning technology, a rail and metro network, and new roads, among other projects.

The country’s transport connections, however, are a potential obstacle to its ambitions. Facilities at Qatar’s port and airport are already pushed to capacity and will not be able to accommodate the rise in traffic expected as the World Cup approaches. Projects could also be hampered if the materials needed to construct them cannot be shipped quickly and in sufficient volume to ensure that tight construction deadlines are met.

Major transport bottleneck

Qatar’s government has sought to overcome these hurdles by investing in the New Doha Port at Mesaieed and in New Doha International airport. The timely completion of both projects is imperative to the success of the World Cup.

“The major bottleneck for the whole of Qatar at the moment is the airport,” says Tim Verdon, programme director at Aecom, project manager for New Doha port. “The second major bottleneck for the construction of the nine stadiums is the port facilities.” The existing port in Doha’s city centre is only capable of handling up to 300,000 containers a year.

[Infrastructure] will be a key driver of growth over the next few years and lead to a stronger private consumption picture

Liz Martins, HSBC Middle East

“[This is] nowhere near sufficient to supply all the required needs, and the road network makes it impossible to get huge volumes of materials into the country,” says Verdon. “To develop the entire infrastructure required for 2022, a major new port is needed and our port is due to be finished in 2016.”

The facility is a greenfield development under construction outside of Doha, which will allow larger vessels to dock. The waters around Qatar are shallow so a lot of dredging work was required to enable the port to accommodate the larger Panama ships.

“We are now virtually unrestricted in terms of the size of the vessels coming into the port,” adds Verdon.

The development will have an initial capacity of 2 million twenty-foot equivalent units (TEUs) on completion of phase one in 2016. That is considered sufficient to import the materials needed for the World Cup construction programme. Phases two and three will take place after 2022, to expand the port in line with demand for capacity. The facility will eventually link to Qatar’s planned railway line and to the wider GCC rail network.

More than $7bn is being invested in the port complex, which will cover 26.5 square kilometres and includes the construction of a naval base and an economic zone. About 40 per cent of the contracts have been awarded, with 17 per cent under evaluation. Nearly 20 per cent of the contracts are at the prequalification stage, with about 5 per cent out on tender as of the start of November.

Based on the most recent projections, the majority of the procurement will be completed by the end of next year, with just two contracts to be awarded in 2014 and 2015.

Contractors appointed for port

To date, four of the port’s major contracts have been tendered. The latest, issued in October, covered the construction of two commercial terminals and associated utility buildings and logistical facilities. It follows the tender of the container terminal package, which saw bids submitted in October and is likely to be awarded in early December.

In March, the Middle East Dredging Company and the local/Belgian Dredging International won the $1.23bn phase two construction contract, which involves dredging an access channel so ships can reach the port. In 2011, China Harbour Engineering Company won an $880m package to carry out phase one of the project, covering excavation works and the construction of the quay wall.

Contractors have also been invited to bid on smaller contracts, with bids for a marine works package due before the end of the year. The contract is for the construction of quay walls and dredging works for the access channel into Qatar Economic Zone 3, a self-contained development to be built next to the port.

A crane package for the supply and installation of ship-to-shore and stacking cranes is expected to be tendered at the end of this year and awarded by the second quarter of 2013.

Despite being on target for completion by 2016, the port has struggled to secure sufficient rock imports. The facility requires a type of rock that is unavailable in Qatar and must be shipped from the UAE. High demand has led to a GCC-wide shortage of barges able to import the material, and the UAE has also imposed restrictions on sales of the rock.

Qatar airport delays

In contrast to the port, New Doha International airport is running both behind schedule and over budget. A further $2bn was invested in the project earlier this year, bringing total costs to $17.5bn. Phase one of the airport was slated for completion by December 2012, but will now not be open to passenger traffic until the second half of 2013.

They can use the World Cup to showcase to the world what Qatar has to offer, which will drive the tourism market

Rob Shaw, OAG Aviation

The project has been blighted by a string of delays and contract cancellations since its launch in 2004. In 2008, it was pushed back by two years, bringing its target completion date to 2011. China State Construction Engineering Corporation saw its building contract for the airport terminated in 2010. The deal had covered the construction of 20 buildings, including a general aviation terminal and hangar.

In June this year, the UAE/German Lindner Depa had its AED900m ($254m) contract terminated. The deal, which covered the interior fit-out of the airport’s 17 lounges, was awarded in October 2011.

On completion of phase one, the facility will provide capacity for 28 million passengers a year, a significant increase on the existing capacity of 4.2 million. The cargo division will have a capacity of 1.4 million tonnes a year. When fully operational in 2015, the airport will be able to handle 50 million passengers and 2 million tonnes of cargo each year.

The main passenger terminal, comprising concourses A, B and C, is being built by the Sky Oryx consortium, consisting of Japan’s Taisei Corporation and Turkey’s TAV. Few contracts remain to be tendered, aside from several facilities management deals.

The surge of investment in Qatar’s transport sector has proved beneficial to the emirate’s attempts to diversify its economy away from oil and gas. “In the last decade [Qatar has] had double-digit growth, but really the only engine of that growth is the expansion of the natural gas output volumes,” says Liz Martins, an economist at HSBC Middle East. “What we are seeing now is the country getting away from that purely energy-driven growth.”

This shift has affected the emirate’s economic growth forecast. The latest data from the Washington-based IMF estimates real gross domestic product (GDP) growth at 6.3 per cent in 2012, falling to 4.9 per cent in 2013.

Non-oil growth is forecast to outpace the hydrocarbons sector. The IMF estimates Qatar’s non-oil GDP will grow at 9 per cent in 2012 and 2013. By comparison, oil-driven GDP will grow at 2.9 per cent in 2012, down from 15.7 per cent in 2011. In 2013, Qatar will see negative growth of -0.3 per cent.

“[Infrastructure] will be a key driver of growth over the next few years and lead to a stronger private consumption picture,” says Martins.

Yet questions have been raised about the long-term impact of Qatar’s large-scale infrastructure investments in the run-up to the World Cup. Doha is at risk of overcapacity post-2022, when the supply of hotel rooms, flights and port facilities may outstrip demand.

“It is a legitimate question to ask of Qatar in the long term, but in the short term it is a strong private sector non-oil growth picture, and that is a good thing,” says Martins.

The aviation sector is already thinking beyond 2022. The construction of New Doha International airport is as much about supporting Qatar Airways’ expansion plans as it is about transporting World Cup-related traffic.

Passenger traffic at the current Doha airport is increasing at roughly 14 per cent a year, driven by Qatar Airways’ rapid growth. The carrier has 60 Boeing 787 Dreamliners on order, and took delivery of its first in November. In the last 11 months, the airline has added 10 destinations to its network and plans to launch a further seven by May.

Attracting tourists to Qatar

Qatar will also be eager to promote itself as a tourist destination in its own right, to ensure its World Cup spending does not go to waste.

“If the government is investing in new airport facilities, they need to be investing in tourist facilities as well,” says Rob Shaw, director of analytics at UK-based OAG Aviation. “They can use the World Cup to showcase to the world what Qatar has to offer, which will drive and stimulate the tourism market.”

Tourists will aid Qatar in competing with rival aviation hubs in the region. Dubai World Central airport is planning to increase passenger capacity to 160 million a year, with similar expansion plans in place in Abu Dhabi. Shaw warns there is a risk the GCC will not attract enough traffic to support the long-term sustainability of all its airports, however.

New Doha port, meanwhile, has no ambitions to compete directly with existing ports in the GCC. “At the moment, the port is primarily for the domestic economy,” says Verdon, adding that it may look to carve out a small share of the transshipment business.

There is little likelihood that Qatar will threaten the dominance of Dubai in trade or tourism within the GCC. “I can’t see Qatar doing anything to increase its competitive advantage compared to Dubai,” says Martins.

But Doha’s large-scale transport investments will ensure the emirate remains on track to meet its World Cup deadlines, as well as laying the foundations for the long-term growth of a more diversified domestic economy.

Key fact

When fully operational, New Doha International airport will be able to handle 50 million passengers a year

Source: MEED

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