kuwait projects 2018 - buy.meed.com€¦ · kuwait projects 2018 25 kuwait gdp, 2010-20 source: imf...

KuwaitProjects 2018

November 2017

Project spending in the low oil price era

Kuwait Projects 2018

1


2

1. Preface Kuwait is rapidly emerging as one of the Middle East’s most promising markets, presenting a wide range of opportunities in the projects sector and in other areas for local, regional and international businesses.

This should not be surprising, as Kuwait has a high-income, asset-rich economy with oil reserves that can last about 100 years at present production rates and substantial gas assets. The government has practically no debt and official savings are worth at least $592bn. The private sector has abundant savings and the banking system is profitable, well-capitalised, liquid and solvent. On paper, Kuwait has the potenial to be one of world’s stellar growth economies

With about $263bn worth of projects planned or underway, Kuwait’s projects market is the third biggest in the GCC and sixth largest in the Middle East and North Africa. And, driven by an ambitious public-private partnership (PPP) programme, Kuwait’s projects market has expanded more than 6 per cent over the past 12 months.

But, despite Kuwait’s huge promise, companies seeking new business opportunities should always be prepared for unexpected challenges. Kuwait has in the past, disappointed companies seeking to tap its potential. A combination of political in-fighting and a cumbersome bureaucracy has resulted in many planned projects being delayed or cancelled. And the fall in oil prices since 2014 has added new uncertainties to Kuwait’s projects market.

But the re-launch of the Kuwait Vision 2035 in January 2017 marks a major new drive to remove many of the previous barriers to investment, and introduces an ambititious programme of reforms aimed at mitigating the impact of lower oil prices.

After a difficult year in 2017, Kuwait’s economy is expected to rebound strongly in 2018, supported by a surge in project awards and the creation of new job opportunities for nationals.

Kuwait Projects 2018 provides you with a complete snapshot of Kuwait’s projects market, providing early actionable market intelligence as well as MEED’s unique expert insight on Kuwait’s new and future project opportunities.

The reports also provides a compreheive view of the political and econmomic background to Kuwait’s projects market that provides detailed understanding of the barriers and challenges that may arise, and the efforts being taken to remove them.

I hope that Kuwait Projects 2018 helps you to identify opportunities, win work, and grow in one of the region’s most exciting growth markets.

I look forward to hearing your feedback on this report and wish you every success as you seek to develop your business in Kuwait.

See you in Kuwait!

Richard Thompson

Editorial Director, MEED

November 2017


3

Table of Contents 1. Preface ................................................................................................................................................ 2

Table of Contents ............................................................................................................................................ 3

2. Executive summary ............................................................................................................................. 7

3. Governance ......................................................................................................................................... 9

3.1 Parliamentary storms since 2011 ..................................................................................................... 11 3.2 Regional relations ............................................................................................................................. 16 3.2.1 The Divided Zone .................................................................................................................. 16

3.3 The Paris Climate Agreement .......................................................................................................... 19 3.3.1 Plans to reduce greenhouse gas emissions ......................................................................... 20

4. Economy ........................................................................................................................................... 21

4.1.1 Structure of the economy ...................................................................................................... 22

4.1.2 Energy sector ........................................................................................................................ 22

4.2 Economic performance .................................................................................................................... 24 4.2.1 Balance of payments ............................................................................................................. 27

4.2.2 Fiscal reforms ........................................................................................................................ 27

4.2.3 The medium-term outlook ..................................................................................................... 30

4.3 Debt & assets ................................................................................................................................... 31 4.4 Banking & finance ............................................................................................................................ 31 4.4.1 Kuwait Stock Exchange ........................................................................................................ 33

4.4.2 The exchange rate ................................................................................................................ 35

4.4.3 Credit ratings ......................................................................................................................... 36

4.5 Ease of doing business .................................................................................................................... 36 4.6 Economic planning ........................................................................................................................... 37 4.7 Conclusion ........................................................................................................................................ 40

5. The PPP programme ........................................................................................................................ 41

5.1 The legal framework ......................................................................................................................... 42 5.1.1 KAPP guidebook ................................................................................................................... 45

5.1.2 Procedures for PPP projects ................................................................................................. 46

5.2 Request for proposals (RFP)............................................................................................................ 47 5.3 Evaluation of bids ............................................................................................................................. 47 5.4 Sale of shares in PPP projects ......................................................................................................... 48 5.5 Implementation & monitoring............................................................................................................ 49 5.6 End of contract ................................................................................................................................. 50 5.7 Consolidation of authorities .............................................................................................................. 50 5.8 Projects programme ......................................................................................................................... 51 5.8.1 Project delays ........................................................................................................................ 53

5.8.2 Al-Zour North IWPP Phase 1 ................................................................................................ 57

5.8.3 Al-Zour North IWPP Phase 2 ................................................................................................ 58

5.8.4 Al-Khiran IWPP ..................................................................................................................... 59

5.8.5 Umm al-Hayman wastewater project .................................................................................... 60


4

5.8.6 Kabd municipal waste facility ................................................................................................ 61

5.8.7 Al-Abdaliya ISCC................................................................................................................... 62

5.8.8 Kuwait national railway .......................................................................................................... 63

5.8.9 Kuwait Metro ......................................................................................................................... 64

6. Projects market ................................................................................................................................. 66

6.1 Historical analysis ............................................................................................................................. 66 6.1.1 Project awards in 2017 .......................................................................................................... 68

6.1.2 Outlook for 2018 .................................................................................................................... 68

6.2 Main clients ...................................................................................................................................... 70 6.3 Main contractors ............................................................................................................................... 72 6.4 Future projects ................................................................................................................................. 73

7. Energy ............................................................................................................................................... 78

7.1 Introduction ....................................................................................................................................... 78 7.1.1 Oil .......................................................................................................................................... 78

7.1.2 Gas ........................................................................................................................................ 80

7.1.3 Refining ................................................................................................................................. 82

7.1.4 Petrochemicals ...................................................................................................................... 83

7.2 Industry structure .............................................................................................................................. 83 7.2.1 Supreme Petroleum Council ................................................................................................. 84

7.2.2 Oil Ministry ............................................................................................................................. 84

7.2.3 Kuwait Petroleum Corporation .............................................................................................. 85

7.3 Politics & the oil sector ..................................................................................................................... 90 7.3.1 Project Kuwait/TSAs ............................................................................................................. 92

7.3.2 K-Dow .................................................................................................................................... 92

7.3.3 Oil strike ................................................................................................................................ 93

7.4 Upstream .......................................................................................................................................... 93 7.4.1 Oil fields ................................................................................................................................. 93

7.4.2 Enhanced oil recovery ......................................................................................................... 102

7.4.3 Gas fields ............................................................................................................................ 106

7.4.4 Jurassic non-associated gas expansion scheme ................................................................ 109

7.5 Production & export infrastructure .................................................................................................. 111 7.5.1 Production & distribution ..................................................................................................... 111

7.5.2 Export facilities .................................................................................................................... 119

7.5.3 Gas imports ......................................................................................................................... 121

7.6 Downstream ................................................................................................................................... 122 7.6.1 Mina al-Ahmadi ................................................................................................................... 124

7.6.2 Mina Abdulla ........................................................................................................................ 125

7.6.3 Shuaiba ............................................................................................................................... 126

7.6.4 The NRP .............................................................................................................................. 126

7.6.5 The CFP .............................................................................................................................. 132

7.7 Petrochemicals ............................................................................................................................... 136


5

7.7.1 Petrochemical Industries Company .................................................................................... 137

7.7.2 Equate Petrochemicals ....................................................................................................... 138

7.7.3 The Kuwait Olefins Company (TKOC) ................................................................................ 138

7.7.4 Kuwait Aromatics Company (Karo) ..................................................................................... 138

7.7.5 The Kuwait Styrene Company (TKSC) ............................................................................... 139

7.7.6 Other plants ......................................................................................................................... 139

7.7.7 Other projects ...................................................................................................................... 140

7.8 Contract awards ............................................................................................................................. 141 8. Power .............................................................................................................................................. 142

8.1 Consumption .................................................................................................................................. 142 8.2 Generation ...................................................................................................................................... 143 8.3 Forecasts ........................................................................................................................................ 147 8.4 Projects........................................................................................................................................... 148 8.4.1 Al-Zour North IWPP............................................................................................................. 149

8.4.2 PPP law amendments ......................................................................................................... 150

8.4.3 Future PPP projects ............................................................................................................ 151

8.4.4 MEW projects ...................................................................................................................... 153

8.4.5 Subiya projects .................................................................................................................... 154

8.5 Fuel ................................................................................................................................................. 156 8.6 Alternative energy .......................................................................................................................... 158 8.6.1 Abdaliya ISCC ..................................................................................................................... 159

8.6.2 Kabd Municipal Solid Waste Project ................................................................................... 161

8.6.3 Kisr renewables programme ............................................................................................... 162

8.7 Contractors ..................................................................................................................................... 165 8.8 Transmission & distribution ............................................................................................................ 166

9. Desalination..................................................................................................................................... 168

9.1 Projects........................................................................................................................................... 169 10. Wastewater ..................................................................................................................................... 174

10.1 Sulaibiya ......................................................................................................................................... 175 10.2 Umm al-Hayman treatment plant ................................................................................................... 177 10.3 Sabah Al-Ahmad Sea City: sewage treatment plants .................................................................... 178 10.4 Sewer systems ............................................................................................................................... 179 10.5 TSE ................................................................................................................................................. 181

11. Construction .................................................................................................................................... 183

11.1 Market overview ............................................................................................................................. 183 11.2 The Kuwait Masterplan ................................................................................................................... 186 11.3 Township programme ..................................................................................................................... 188 11.3.1 South Al-Mutlaa City ........................................................................................................... 192

11.3.2 South Saad al-Abdullah City ............................................................................................... 196

11.3.3 Township PPP packages .................................................................................................... 197

11.4 Healthcare ...................................................................................................................................... 198 11.4.1 Unawarded hospital projects ............................................................................................... 201

11.5 Kuwait University ............................................................................................................................ 202


6

11.6 KAPP .............................................................................................................................................. 206 11.6.1 Schools Development Programme ..................................................................................... 206

11.6.2 Services and Entertainment Centre in Egaila ..................................................................... 207

11.6.3 South Al-Jahra Labour City ................................................................................................. 207

11.7 Other projects ................................................................................................................................. 208 11.7.1 National Bank of Kuwait: new headquarters ....................................................................... 209

11.7.2 Palace of Justice ................................................................................................................. 209

11.7.3 Juvenile Housing Care Complex ......................................................................................... 209

11.7.4 Al-Jahra Ministerial Complex .............................................................................................. 209

11.7.5 Hospitality projects .............................................................................................................. 210

12. Transport ......................................................................................................................................... 213

12.1 Aviation ........................................................................................................................................... 213 12.1.1 Airport expansion ................................................................................................................ 215

12.1.2 Kuwait Airways .................................................................................................................... 221

12.2 Ports ............................................................................................................................................... 222 12.2.1 Mubarak al-Kabeer Seaport ................................................................................................ 224

12.2.2 Expansion of existing ports ................................................................................................. 226

12.3 Rail ................................................................................................................................................. 227 12.3.1 Mainline ............................................................................................................................... 229

12.3.2 Metro ................................................................................................................................... 230

12.4 Roads ............................................................................................................................................. 233 12.4.1 Al-Ghouse Road .................................................................................................................. 236

12.4.2 First Ring Road ................................................................................................................... 237

12.4.3 Second and Third ring roads ............................................................................................... 238

12.4.4 Fourth Ring Road ................................................................................................................ 239

12.4.5 Fifth Ring Road ................................................................................................................... 239

12.4.6 Regional Road ..................................................................................................................... 240

12.4.7 Other roads ......................................................................................................................... 244

12.4.8 The Subiya Causeway ........................................................................................................ 247

13. Appendix, Law No. 116 of 2014 (regarding PPPs) ......................................................................... 249

Copyright 2017 MEED Media FZ LLC All rights reserved. No part of this publication may be reproduced, stored in any retrieval system, or transmitted in any form, by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior permission of the copyright owner. While every care has been taken in completing this report, no responsibility can be accepted for any errors or omissions that may occur.


25

Kuwait GDP, 2010-20

Source: IMF

For the fiscal year 2017/18, the government has forecasted a budget deficit of $25.9bn based on a conservative assumption of an average oil price of $45 a barrel. The baseline crude price is higher when compared to the estimated price of $35 a barrel in the 2016-17 budget. Revenues are expected to reach $43.6bn (KD13.3bn) in the fiscal year 2017/18, up from $33.8bn (KD10.2bn) in the previous year. Of the overall revenue, oil is estimated to account for $38.7bn (KD11.7bn) in 2017/18, 36 per cent higher than the last year’s budget.

The IMF expects Kuwait’s GDP growth to decline by 2.1 per cent in 2017 owing to lower oil production following Opec’s decision in November 2016 to stabilise oil prices through production cuts for 21 countries, designed to reduce global oil supply by 1.8 million b/d. Members are required to maintain these production cuts until March 2018. This will lead to Kuwait’s average crude output declining by about 7-8 per cent in 2017.

GDP is expected to grow by 4.1 per cent in 2018. The reason for this increase is the anticipated rise in oil production after March 2018. Kuwait is also in talks with Saudi Arabia for the resumption of oil production in the Wafra and Khafji fields in the Divided Zone, which Kuwait shares with Saudi Arabia. However, as of October 2017, there had been little in the way of updates on progress to production restarting. The fields are capable of producing 250,000-300,000 b/d.

Kuwait can comfortably finance budget deficits for the foreseeable future. It is estimated that the Kuwait Investment Authority (KIA) has assets of about $600bn, although most of this is held as part of the Future Generations Fund, which in principle should not be used to finance short-term deficits. In the 2017/18 budget, the government announced that it would contribute 10 per cent of the annual revenue to the Future Generation Fund.

-40

-30

-20

-10

0

10

20

30

40

0

20

40

60

80

100

120

140

160

180

200

2010 2011 2012 2013 2014 2015 2016e 2017e 2018f 2019f 2020f

GDP ($bn) Change in GDP (%)


26

Kuwait government revenue and expenditure (KDbn)

Sources: IMF

Balance after transfer to Future Generations Fund as a per cent of GDP

Sources: IMF

Kuwait has said it will turn to the debt markets and issue bonds to bridge the shortfall in state revenues. Following in the steps of other GCC member states, Kuwait also tapped the international debt market for the first time and issued $8bn debt in March 2017. The debt was issued in two tranches – the $3.5bn five-year tranche due in 2022 and $4.5bn in notes due in 2027.

The sovereign offering attracted strong interest from investors, and the order book reached $29bn from 778 orders, with demand from both international and regional accounts. Banks, private banks, asset managers and agencies including pensions and insurance funds made up the bulk of investor types for the offering.

21.223.4

30.734.6 35.7

30.8

20.817.8 18.9

12.914.8

16.618.9 18.8 20.5

18.8 17.7 18.3

0

5

10

15

20

25

30

35

40

2009 2010 2011 2012 2013 2014 2015 2016e 2017e

Government revenue Government total expenditure

20.0

2.4

-17.5 -17.3-12.6

-20

-15

-10

-5

0

5

10

15

20

25

2013 2014 2015 2016e 2017e


58

the first quarter of 2018. By January 2017, companies submitted technical and financial bids to manage the IPO process for the Al-Zour IWPP phase 1.

On 11 September 2017, KAPP appointed a consortium led by local NBK Capital as adviser and offering manager for the distribution and transfer of shares in Shamal AzZour al-Oula, the owner of Al-Zour North 1. (Detailed under the power section 8.4.1)

5.8.3 Al-Zour North IWPP Phase 2

Expressions of interest for the second phase of the Al-Zour North IWPP were invited in 2013, well before the first phase of the scheme had reached financial close. The project then stalled for nearly two years as the government carried out legislative reforms and the PTB was restructured.

An RFQ was finally issued in February 2015, along with the RFQ for the Al-Khiran IWPP. MEED reported that in August 2015, seven consortiums had been prequalified to bid for the Al-Zour IWPP phase 2 project.

The seven prequalified groups were led by the following developers:

• Abengoa (Spain) • Acwa Power (Saudi Arabia)/Al-Mulla (local) • Kepco (South Korea) • Marubeni (Japan)/Fouad al-Ghanim (local) • Mitsubishi (Japan) • Mitsui (Japan) • Sumitomo (Japan)/Osaka Gas Company (Japan)/ National Industries

Holding Consortium (local)

The tender was issued in September 2015, initially with a 17 January 2016 deadline for bid submissions. This was subsequently extended to 16 February, 6 April, 10 May and finally 21 June, when bids were submitted.

Phase 2 will have a capacity of 1,800MW of power and 107 MIGD of water. Under the 2012 IWPP law, the maximum contract term will be 40 years. The project will use natural gas as its main feedstock, with fuel oil as backup. The developer can select a suitable desalination technology. The choice of natural gas as feedstock, despite potential shortages, reflects Kuwait’s need to get the project operating as soon as possible to address growing electricity demand. The existing site facilities will be shared, meaning new capacity there can be brought online rapidly.

The MEW will be the offtaker under the energy conversion and water purchase agreement, as well as a shareholder in the public joint stock company. A lead developer will take at least 35 per cent of shares in the consortium, which in turn will be allocated at least 26 per cent of shares in the joint stock company.

In June 2016, three of the seven groups that had prequalified for the project submitted bids:

• Acwa Power (Saudi Arabia) / Mitsui (Japan) / Al-Mulla Group Holding (local) • Marubeni Corporation (Japan) / Fouad al-Ghanim & Sons (local) • Sumitomo Corporation (Japan) / Osaka Gas Company (Japan) / National

Industries Holding Group (local)


79

Top 10 countries by oil production, 2016

Countries Production (‘000 b/d) Share of world total world (%) US 12,354 13.4 Saudi Arabia 12,349 13.4 Russia 11,227 12.2 Iran 4,600 5.0 Iraq 4,465 4.8 Canada 4,460 4.8 UAE 4,073 4.4 China 3,999 4.3 Kuwait 3,151 3.4 Brazil 2,605 2.8 Source: BP

Oil was first discovered in Kuwait in 1938 at the Burgan field. Under the management of international oil companies (IOCs), Kuwait’s oil output peaked at 3.3 million b/d in 1972.

An oil embargo led by oil producers’ group Opec in 1973 and the rapid nationalisation of the sector throughout the 1970s led to a sharp slide in production during the decade, with output falling as low as 882,000 b/d in 1982, partly in reaction to an international supply glut and low oil prices. Throughout the rest of the 1980s, oil production gradually increased, before the Iraqi invasion of 1990 caused a collapse in output. Since then, stated policy has been to increase both capacity and proven reserves.

Kuwait oil production (thousand barrels a day)

Source: BP

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000


119

The main contract for the project is expected to be awarded in the second quarter of 2018, and the project is targeted to be completed in the last quarter of 2020.

Pipeline and export infrastructure

Source: KOC

7.5.2 Export facilities Kuwait has four export terminals, although three of these – Mina al-Ahmadi, Shuaiba and Mina Abdulla – are so close to one another as to be counted under one single name, Shuaiba. All lie a short distance to the south of Kuwait City.

The fourth facility, and the site of Kuwait’s fourth refinery, which is currently under construction, is Al-Zour, also known as Mina Saud. It is used to load oil from the Wafra field in the Divided Zone shared with Saudi Arabia.

The most important facility is Mina al-Ahmadi, which acts as a central collection and distribution point for Kuwait’s oil and gas production. Following an expansion programme awarded to Hyundai Heavy Industries in 2005, it can handle 3 million b/d of oil, liquids and refined products at peak and has storage capacity of over 11 million barrels. To the south lies Shuaiba, which can load 730,000 b/d, while Al-Zour has handling capacity of up to 1 million b/d.

Order full report here >>>

https://buy.meed.com/product/kuwait-projects-2018-report/?utm_source=SamplePages&utm_medium=content

kuwait projects 2018 - buy.meed.com€¦ · kuwait projects 2018 25 kuwait gdp, 2010-20 source: imf...

Documents