GCC project awards fell in H1, but expected to pick up

Contracts awarded to build economic projects in the Gulf’s rich Arab oil exporting states slumped in the first half of this year but are expected to pick up in the second half, a data service tracking the industry said on Saturday.

Awards in the six-nation Gulf Cooperation Council dropped to $56.1bn in the January-June period from $69.3bn a year earlier, according to MEED Projects. Low oil prices have forced governments in the region into tough austerity policies.

With the exception of Saudi Arabia, where contract awards rose 12 per cent from a year ago to $15.8bn as the government showed signs of spending a little more freely with a modest improvement in its budget position, awards fell in every GCC state.

Kuwait saw a 46 per cent drop to $6.9bn and awards in Bahrain plunged 84 per cent to $917m. Even Dubai experienced a slight fall, MEED said; awards in the United Arab Emirates dropped 13 per cent to $21.3bn.

However, MEED forecast $61bn of project awards in the GCC during the second half of this year, bringing the total for 2017 to about $117bn, roughly the same as in 2016.

“There’s no doubt that the past two years have been tough for the projects supply chain as government spending has slowed,” said Ed James, director of content and analysis at MEED Projects.

“But with construction companies now more efficient, the private sector more active and the number of public-private partnership projects growing by the week, there is cause for optimism.”

This year’s total is expected to be boosted by Oman, where the venture planning a 230,000 barrel of oil per day refinery at Duqm said in early August that it was likely to award over $5bn of engineering, procurement and construction contracts to Petrofac, Samsung Engineering, Technicas Reunidas, Daewoo Engineering and Construction and Saipem.

In Saudi Arabia, sources told Reuters this week that the government was preparing to restart work on projects that are important to its drive to boost Islamic tourism, including expansion of the Grand Mosque in Mecca and a $3.5bn hotel complex in that city.

James said there were over $2 trillion of known, active projects in the pipeline across the GCC.

“The majority of these are infrastructure schemes that are essential to the future prosperity of the region, job creation and economic diversification,” he said.

“While inevitably not all will come to fruition, we can be confident that there is still a large amount of work to come regardless of the oil price.”