Business Outlook

PROJECTS
MEED Projects
The region’s leading
projects tracking service.
GCC projects market slumps
Gain access at:
www.meedprojects.com
in the first half of this year
The IMF’s prediction that economic growth will slow in the region
in 2018 has been borne out by a further drop in project awards

D
ata from MEED Projects
on contract awards in the
GCC in the first half of
2018 suggests this year
could be one of the worst
years for the regional projects market
in a generation.
The total value of GCC project awards
in the first half of 2018 contracted by
19.9 per cent compared with the same
period in 2017, resulting in $45.2bn of
engineering, procurement and construc-
tion (EPC) contracts awarded so far.
Although the slowdown may be partial-
ly due to the earlier timing of Ramadan
this year, the downward trend has been
evident since 2015, when the GCC hit a
high of $177bn of EPC contracts award-
ed. Comparing the first half of 2017 with
the first six months of 2016 shows a
drop of 16.9 per cent, which means the
value of project awards has plunged by
more than 30 per cent in just two years.
On a case-by-case basis, there are
significant differences in how markets
performed in the first half of 2018. The
UAE accounted for more than 50 per
cent of the total value of projects
awarded, making it the only market with
year-on-year growth, up 8.5 per cent
compared with the first half of 2017.
Although Dubai’s construction sector
is traditionally the main driver of growth
in the UAE, the single-largest EPC
contract in the first six months of 2018
was awarded by Abu Dhabi National
Oil Company for its $3.1bn upgrade of
the Ruwais refinery. During the period,
Adnoc awarded capital-intensive utility
and hydrocarbon projects amounting to
$5.2bn-worth of EPC contracts, resulting
in increased optimism for the local oil,
gas and petrochemicals industry.
Steep fall
In sharp contrast to the UAE, project
awards in the five other GCC economies
plunged 36.8 per cent in the first half
of 2018 compared with the same period
in 2017. The biggest drop – of 62.5 per
cent – was in Kuwait, followed by 53.9
per cent in Oman.

QUARTERLY PROJECT AWARDS, 2014-18

$m
70,000

60,000

50,000

40,000

30,000

20,000

10,000

0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2014 2015 2016 2017 2018
Source: MEED Projects

80 \ MEED Business Review

CONTRACT AWARDS BY COUNTRY UAE and Kuwait
drag index down
$m
70,000

68,001
60,000
he Gulf Projects for which contractors

56,506
50,000 Index fell by 0.2 are prequalifying, was
per cent in the also added to Iraq’s

45,250
40,000
week ending 15 July, projects market.
30,000 on account of a 0.8 per The UAE market’s de-
20,000
cent decline in both the cline was mainly due to

23,571

22,822
UAE and Kuwait mar- the completion of con-

21,024
7,560
7,269
6,869

4,695
5,219

3,840

15,113
14,885
3,431

2,574

kets and an unchanged struction work for the

2,166

10,000
13,335
1,493
1,536

12,355

0 index in Saudi Arabia. Barakah nuclear power

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ai

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jointly account for 68.4 third reactors. The UAE

TO
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Jan-Jun 2016 Jan-Jun 2017 Jan-Jun 2018 per cent of the overall took in 17 new projects
Source: MEED Projects Gulf projects market, during the week, led by
worth an estimated the planned seawater
Saudi Arabia, historically the largest $3.86tn as of 15 July. reverse osmosis desal-
GCC market, awarded only $12.3bn- Of the eight Gulf ination plants in Ras
worth of projects, down 18.2 per cent countries, only Iraq al-Khaimah and Umm
year-on-year, echoing the kingdom’s showed a slight improve- al-Quwain
past few difficult years. ment, with a 0.6 per Construction work
Bahrain contracted by 2.8 per cent, cent rise in its market. on Kuwait’s &1.28bn
but this is expected to pick up in the New projects in Iraq Al-Jahra Hospital
second half of the year. include the Hilla sewage has also been com-
Despite the strengthening of oil prices, water network project pleted, with no new
the period ahead should be anticipated in Babil and a school. projects added to the
with only mild optimism. With the slower The Iraqi-Turkish crude country’s pipeline.
summer months to come, it remains oil export pipeline, Jennifer Aguinaldo
uncertain whether 2018 will see the GCC
countries pass $100bn in projects award-
ed. This is in spite of a solid pipeline of GULF PROJECTS INDEX
projects scheduled to be awarded soon, Value of projects planned or under way ($bn)
in particular in the transport, construc- 1,600
tion and power sectors. 1,400
1,200
Several major projects across the
1,000
region are scheduled to be awarded in 800
the second half of 2018, but given the 600
overall market slowdown, the outlook 400
200
for these projects appears uncertain. 0
The market that investors are most 08 09 10 11 12 13 14 15 16 17 18
20 20 20 20 20 20 20 20 20 20 20
ly
confident about is Dubai, where there Ju
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are $17bn-worth of projects in the

pipeline. The emirate has consistently UAE Kuwait Oman Iraq

led the way over the past five years, no Saudi Arabia Iran Bahrain

doubt thanks to its lower reliance on oil Source: MEED Projects

prices, but also testament to its efficient Read updates through the month on:
projects market set-up. www.meed.com/classifications/gulf-projects-index

Igor Gavric

MEED Business Review / 81