Kuwait projects mar­ket re­mains healthy in Q3

NBK ECO­NOMIC RE­PORT

Kuwait Times - - BUSINESS -

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. Ac­cord­ing to MEED Projects, 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.

By the end of Septem­ber, 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.

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 mar­ket-mainly 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).

Below is a break­down of ma­jor project de­vel­op­ments by sec­tor.

Oil & gas

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.

Af­ter com­ing in at over KD 301 mil­lion ($1 bil­lion) in the first two quar­ters of 2016, the value of awarded projects in the con­struc­tion 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. The project, which is sit­u­ated in Al-Daiya area on the out­skirts of Kuwait city, will be the coun­try’s first mixed-used de­vel­op­ment. It will cover 381,000 sqm and in­clude 82 plots for both res­i­den­tial and com­mer­cial spa­ces as well as in­fra­struc­ture such as roads, parks and walk­ways. Through its sub­sidiaries, KIPCO will be de­vel­op­ing 38 plots of the de­vel­op­ment scheme. The rest of the project will be de­vel­oped by other par­ties.

The project’s in­fra­struc­ture is ex­pected to be com­pleted by Septem­ber of 2017. The first phase of the project, which will in­clude res­i­den­tial prop­er­ties de­vel­oped by KIPCO’s sub­sidiaries, should be ready for habi­ta­tion by 2020. The rest of the project is due in 2030 or sooner.

Power & wa­ter

The value of awarded projects in this 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.

KAPP had to ex­tend the bid sub­mis­sion dead­line for three of its projects sev­eral times this year. Af­ter the bid sub­mis­sion dead­line for its Umm Al-Hay­man Waste­water Treat­ment Plant project was ex­tended four times, ac­cord­ing to me­dia re­ports in early Oc­to­ber, a con­sor­tium led by the Com­mer­cial Bank of Kuwait agreed to fi­nance the KD 450 mil­lion ($1.5 bil­lion) project. The bids for the KD 265 mil­lion ($880 mil­lion) Kabd Mu­nic­i­pal Solid Waste project are cur­rently un­der re­view, with the con­tract ex­pected to be awarded by the end of this year. The bid sub­mis­sion date for the KD 217 mil­lion ($720 mil­lion) Al-Ab­daliya In­te­grated So­lar Com­bined Cy­cle (ISCC) Power Plant (CSP) has been pushed back again, to early Novem­ber of this year; it is now sched­uled to be awarded in the first half of 2017, ac­cord­ing to MEED. Ear­lier this year, KAPP had also an­nounced bids for Phase 2 of the Al-Zour North IWPP, val­ued at KD 810 mil­lion ($2.7 bil­lion). The project aims to pro­duce 1,800 megawatts (MW) of elec­tric­ity and 464,100 cu­bic me­ters of de­sali­nated wa­ter a day. Three con­sor­tiums in­volv­ing 11 com­pa­nies sub­mit­ted their bids in June. Ac­cord­ing to MEED Projects, as of the end of Septem­ber, the tech­ni­cal bids were still un­der eval­u­a­tion and the com­mer­cial bids were still to be opened.

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