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Gulf project contracts to hit $110bn this year

GCC construction contracts Reuters
Large contracts include Abu Dhabi's Al Mirfa desalination plant and Qatargas’ liquefied natural gas expansion scheme
  • GCC contracts planned in power, water, construction, oil and gas  
  • Saudi Arabia accounts for bulk of work at $64bn
  • Longer term pipeline to exceed $2trn driven by giga-projects

A combined $110 billion worth of project contracts are expected to be awarded in the GCC this year, with Saudi Arabia accounting for more than half of the total as it ramps up its Vision 2030 economic diversification plans. 

Saudi Arabia make up $64 billion of the combined value, followed by the UAE ($23 billion), Kuwait ($10.2 billion), and Qatar ($10.1 billion), according to Middle East data provider Meed Projects’ 2023 outlook

The largest contract for this year is valued at $6 billion and aims to deliver two production units at Qatargas’ North Field South liquefied natural gas expansion scheme.

Others include $2.5 billion for Abu Dhabi National Oil Company’s Al Mirfa desalination plant; $2.5 billion at Al Marjan Island, a multi-resort leisure destination under construction in the UAE’s Ras Al Khaimah; and a $1.2 billion utilities contract for Red Sea Global’s (RSG) Amaala luxury hospitality development.  

Oil and gas works led by Saudi Aramco, plus several contracts for the kingdom’s Diriyah and Neom giga-projects, feature in the list.

“The ambitions of Saudi Vision 2030 and the Public Investment Fund (PIF) are playing a key role in driving giga-projects and other major developments across the kingdom,” said Ben Edwards, group head of cost, commercial and procurement at Red Sea Global (RSG). 

“Many projects are emerging from the master-planning and design phase, which will feed into more tenders entering the market as focus turns to construction and then operations.”

Red Sea Global
The Red Sea International Airport is among the developments projects in Saudi Arabia. Picture: RSG

Across the Red Sea Project – RSG’s flagship tourism giga-project on the kingdom’s west coast – and Amaala, the group “expects to award upwards of SAR20 billion ($5.3 billion) of contracts in 2023, and has already surpassed SAR2 billion ($533 million) of new awards in January alone”, Edwards told AGBI

Work is progressing to deliver the first phase of Amaala, comprising 16 hotels, while the second stage is being planned at present, he said. 

Construction at Amaala’s Triple Bay is also ramping up, with RSG last week awarding a development contract worth nearly $266 million to Saudi-based Al-Ayuni Investment and Contracting Company.

A string of other large contracts, including several zones of the permanent staff village accommodation and the main utilities work, are “close” to being awarded. 

UAE-based Alec Construction & Engineering, part of sovereign wealth fund Investment Corporation of Dubai, is another major procurer of contracts in the GCC, especially in the residential property sector. 

“From the level of activity we have seen in January alone, we can be optimistic about the year ahead,” operations director Sean McQue told AGBI.

“Alec was already coming into this new year with a healthy project pipeline, and the volume and quality of tenders our team has been working on through this first month has been impressive. 

“In the UAE the overall construction market is booming, and the residential sector is a fundamental driver of momentum.

“We are seeing opportunities not only in Dubai but in other emirates, as Abu Dhabi continues to unveil complex cultural projects, for example at Yas Island, while large developments are underway in Ras Al Khaimah.”

He added: “Another market where Alec is seeing tremendous opportunity and growth is Saudi Arabia, where momentum is being driven by major cultural and entertainment projects.

“In 2022 we were awarded large and high-profile construction contracts, including the Qiddiya water theme park and Diriyah Gate.” 

This year’s contracts reflect a healthy spread of activity across all project sectors, according to Meed, and include oil, gas, construction, chemicals, industrial, power, water and transport.

Water represents the biggest chunk of work at $216 million, followed by construction ($190 million), and transport ($153 million). Oil and gas taken together account for $265 million. 

Most GCC markets are forecast to show growth compared to last year in terms of the value of contracts, with Saudi Arabia and the UAE leading the pack with an estimated 20 percent year-on-year rise.

UAE-based Alec Construction & Engineering was awarded a contract for Saudi’s Qiddiya water theme park. Picture: Qiddiya

Meed provided an estimated value for the GCC’s future project pipeline, based on planned contract awards for 2023 and longer term announced projects.

The figure here is more than $2 trillion, of which Saudi Arabia again accounts for more than half of the total ($1.2 trillion), followed by the UAE with almost a quarter ($473 billion). 

The outlook takes into account future projects announced but not yet fully planned, such as the Neom city development programme, PIF’s King Salman International Airport, and urban renewal schemes in Saudi Arabia including King Abdullah Economic City, Jeddah Central, and Green Riyadh.

Other projects include Abu Dhabi’s Masdar City, Emaar and DP World’s Mina Rashid port redevelopment in Dubai, Bahrain’s Integrated Public Transport Network, Kuwait’s Al Zour North water and power plant, and Seven’s entertainment complexes in the kingdom. 

In the UAE real estate is the biggest driver of future growth in project contracting.

“The economy has been buoyed by high oil prices and the property market has seen a notable inflow of foreign capital as investors,” McQue said.

“Dubai alone recorded a staggering 90,881 transactions in 2022 and 70,957 units are anticipated to be delivered this year [according to CBRE].

“Having capitalised on selling off-plan during the boom, developers must meet their commitments in delivering this high volume of units, which translates to significant opportunities for the construction and related industries.”

A separate report this week by Kuwait-based analyst Kamco Invest said the total value of GCC project contracts dropped 18.7 percent to $93.6 billion in 2022, from $115.2 billion the previous year, as global economic challenges mounted.

This was the lowest figure since 2005 apart from a pandemic-related drop in 2020, Kamco added.

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