Kuwait projects sec­tor grows de­spite oil rev­enues shrink­ing

Lower oil prices dampen state oil earn­ings

Kuwait Times - - LOCAL -

KUWAIT:

Kuwait’s projects market main­tained its rel­a­tively healthy mo­men­tum in the third quar­ter of 2016, with the gov­ern­ment com­mit­ted to im­ple­ment­ing its devel­op­ment plan even as lower oil prices con­tinue to dampen state oil earn­ings. Cit­ing the Mid­dle East pro­ject tracker (MEED), the Na­tional Bank of Kuwait re­ported that Kuwait awarded KD 1.0 bil­lion ($3.4 bil­lion) in con­tracts in 3Q16, an in­crease of KD 129 mil­lion (14.8 per­cent) over the pre­vi­ous quar­ter. “This brings the to­tal value of con­tracts awarded so far this year to KD 3.6 bil­lion ($12.0 bil­lion), roughly KD 1.5 bil­lion ($4.8 bil­lion), or 42 per­cent, of which are oil and gas con­tracts.

“With an­other KD 2.3 bil­lion ($7.7 bil­lion) ex­pected before year-end, 2016 should be an­other stel­lar year in terms of con­tract awards. Last year saw al­most KD 10.0 bil­lion ($33.2 bil­lion) in con­tracts signed,” reads the re­port. The re­port also showed that the to­tal value of Kuwait’s projects market (ac­tive and planned) stood at KD 75.1 bil­lion ($247 bil­lion), up 0.8 per­cent year-to-date, by the end of Septem­ber. Look­ing ahead to 2017, the to­tal value of awarded projects is ex­pected to in­crease to KD 11.5 bil­lion ($38.1 bil­lion).

In spite of the chal­lenges fac­ing Kuwait’s pro­ject mar­ket­mainly lower oil earn­ings and sub-op­ti­mal lev­els of for­eign di­rect in­vest­ment (FDI)-cap­i­tal for projects is not in short sup­ply thanks to the gov­ern­ment’s com­mit­ment to rolling out its in­fra­struc­ture devel­op­ment plan. More­over, a cen­tral plank of the plan is the par­tic­i­pa­tion of the pri­vate sec­tor through at least eight public pri­vate part­ner­ships (PPP). The re­port stated that af­ter soft­en­ing in 2Q16, pro­ject awards in the oil and gas sec­tor were boosted in 3Q16 by Kuwait Oil Com­pany’s (KOC) sign­ing of the re­main­ing two pack­ages (Pack­ages 1, 2) of the Juras­sic Non-As­so­ci­ated Gas Re­serves pro­ject: the West and East Raud­hatain fields.

Lo­cal com­pany Spetco In­ter­na­tional Petroleum Com­pany was awarded the con­tract for the west field while US firm Sch­lum­berger se­cured the con­tract for the east field. The two pack­ages to­gether are worth around KD 228 mil­lion ($758 mil­lion). Sch­lum­berger had al­ready won the con­tract to de­velop the Sabriyah and Umm Niqa fields (Pack­age 3) ear­lier in the year for KD 144 mil­lion ($480 mil­lion). Up­stream op­er­a­tor KOC aims to ex­pand do­mes­tic pro­duc­tion of nat­u­ral gas to 300 mil­lion cu­bic feet per day (cf/d) in or­der to keep up with ris­ing do­mes­tic con­sump­tion.

Dur­ing the same quar­ter, KOC also awarded two FEED pipe­line projects, one for oil trans­mis­sion worth KD 84 mil­lion ($280 mil­lion) and an­other for gas trans­mis­sion val­ued at KD 53 mil­lion ($177 mil­lion). They were awarded to lo­cal firms Com­bined Group and Arabi En­ertech, re­spec­tively. In the con­struc­tion sec­tor and af­ter com­ing in at over KD 301 mil­lion ($1 bil­lion) in the first two quar­ters of 2016, the value of awarded projects in this sec­tor fell to KD 63 mil­lion ($210 mil­lion) in 3Q16. How­ever, the sec­tor is ex­pected to get a boost in 4Q16 af­ter KIPCO (the Kuwait Projects Com­pany) awarded its KD 723 mil­lion ($2.4 bil­lion) Hes­sah Al-Mubarak pro­ject to the Ah­ma­diah Con­tract­ing Trad­ing Com­pany.

In the mean­time, fig­ures also showed that the value of awarded projects in this power and wa­ter sec­tor came to KD 28 mil­lion ($92 mil­lion) in 3Q16, which is the low­est level this year. How­ever, there are ma­jor projects in the pipe­line under the own­er­ship of the Kuwait Author­ity for Part­ner­ship Projects (KAPP) that should re­sult in at least KD 2.1 bil­lion ($7.1 bil­lion) in con­tracts awarded over 4Q16 and 1Q17. The au­thor­i­ties con­tinue to press ahead with up­grad­ing and devel­op­ing Kuwait’s trans­port in­fra­struc­ture. Ac­cord­ing to MEED projects, the sec­tor cur­rently ac­counts for the sec­ond largest share of the awarded projects market in 2016.

In 3Q16, KD 572 mil­lion ($1.9 bil­lion) worth of projects were awarded, 86 per­cent of which were awarded by the Min­istry of Public Works (MPW). Some of the MPW’s ma­jor projects in­clude the devel­op­ment of the North­ern Re­gional Road (to fa­cil­i­tate the growth of inter-re­gional and in­ter­na­tional trade with the GCC states), the 6.5 Ring Road and the im­prove­ment of the Sheikh Jaber Al-Ahmed Al-Sabah Road. A fur­ther KD 572 mil­lion ($1.9 bil­lion) worth of projects is ex­pected to be awarded in 4Q16 in this sec­tor. — KUNA

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