GCC contract awards to be resilient in 2016

Posted on 1st March 2016 in Articles

The level of contract awards in the 2016 GCC projects’ market will fall slightly compared to 2015 but the impact of oil price volatility will be limited.

The total value of contract awards across the GCC was about $197 bn in 2015, according to research presented at an event hosted by Ventures ONSITE on February 24th, 2016. The same research indicates that the value of awards will be around $167 bn in 2016. This is a clear drop, but nothing as pronounced as the delayed drops in 2010 and 2011 which followed the global economic crisis.

The reason, according to Julian Herbert who presented the data on behalf of Ventures ONSITE, is that there is no clear relationship over time between oil price levels and the value of project awards. “Despite anxiety in the media and elsewhere about the low oil price, history shows that the value of contract awards is not necessarily at its highest or lowest when the oil price peaks or troughs”, says Herbert. “Three years ago, bodies like the International Energy Agency were predicting a marked softening of the oil price as a response to the impact of US tight oil production and sustained Saudi oil output. This warning gave GCC governments a two to three-year window in which to stockpile surpluses to spend strategically on long-term projects and on social and transport infrastructure”.

The data shows that this is happening, most notably in Kuwait – which awarded over $35 bn in contracts in 2015, its highest ever – and Qatar which awarded $34 bn in 2015, for the second year in a row. Oman too recorded contracts worth over $18 bn with water, power generation and industrial diversification projects featuring prominently.

History also shows that major events over a five-year timespan, starting with the global economic meltdown in 2008/09 leading up to the award of Expo 2020 to Dubai in December 2013, have compelled companies involved in the construction sector and governments to adapt making them better able to take advantage of opportunities when they arrive. For this reason, whilst Saudi Arabia and to some extent Abu Dhabi is treading a cautious path with projects, the rest of the GCC – Dubai, Kuwait and Qatar in particular – will be alive with activity for the next two years.

Over a hundred representatives from companies across the construction industry, met at the Grosvenor House hotel in Dubai to hear about the state of the GCC construction projects market. Here they heard from Julian Herbert, expert and advisor to Ventures ONSITE, Mibu John, Head of Syndicated Research for Ventures ONSITE, Jonathan Eveleigh, Group Business Development Manager for Khansaheb, Tim Holmes, Projects Director of Depa and R Prakash, Senior Project Director MEP for ETA about prospects in the contracting, MEP and interior fit-out markets.

Ventures ONSITE is a construction projects information platform tracking construction projects in the MENA region from early planning and design stage to completion.

Mibu John, Head of Syndicated Research from Ventures ONSITE also shared information about expected project tenders for the next 12 months and the top projects to look out for.

We expect to see contracts worth US$ 167 bn being awarded to contractors in 2016, which is nearly 15% less than the total value of contracts awarded in 2015.” Says Mibu John, “We have seen some major contractor awards already in January and February such as The Royal Atlantis Resort, Bahrain International Airport Expansion, Borouge BOG Compressor, Sohar-Ibri IPP to name a few. The top projects to look out for in the coming months include the Route 2020, MMRT contracts, Alba Sixth Potline Expansion, Qatar Power Transmission – Phase 13 among others. “

It is our strong intention to stay close to our clients and support them with their information needs – on a project-by-project basis as well as at a higher industry level” says John. “In the past 2 months many of our clients have been asking us about the outlook for 2016-17 and we saw this event as an opportunity to reach our clients and prepare them for both embracing the coming opportunities and facing the challenges ahead. The response to the event was amazing and we hope to put together more events likes this in the future for our clients in different cities and countries.”

For more information contact:

Irene Sentine Marketing Manager Ventures Middle East +971 (0)4 365 9918 Irene@ventures-me.com

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