the gcc projects forecast & review...
TRANSCRIPT
© 2013 MEED Insight
The GCC Projects Forecast & Review 2017
The authoritative report on the region’s projects market
1
Table of Contents
Section Page
1 Preface 5
2 Executive Summary 7
3 Macroeconomic context 9
4 The Historical Context 20
5 Top Clients and Contractors 34
6 2016 Performance 42
7 Future Outlook 53
Copyright 2016 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 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.
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Figures & Tables
Figure/ Table Title Page
Figure 1 US average annual crude oil prices 1970-2016 10
Figure 2 Cushing, OK WTI spot price FOB, 2015-16 11
Figure 3 World Bank and IMF oil price forecasts 12
Figure 4 GCC fiscal breakeven oil price 13
Figure 5 GCC government revenues 14
Figure 6 GCC nominal GDP 15
Figure 7 GCC government expenditure 16
Figure 8 GCC current account balance 17
Figure 9 GCC government lending/borrowing 18
Figure 10 GCC net debt 2013-20 19
Figure 11 GCC total contract awards, 2003-15 21
Figure 12 Number and average size of GCC contracts 22
Figure 13 GCC contract awards vs. the oil price 23
Figure 14 GCC contract awards, 2008-15 24
Figure 15 Number and average size of GCC contracts by country 25
Figure 16 Value of GCC contract awards by sector 26
Figure 17 Number and average value of GCC contracts by sector 27
Figure 18 GCC country and sector country awards, 2010-15 28
Figure 19 GCC contracts by selected geographical area, 2010-15 29
Figure 20 GCC civil construction sector contract awards breakdown, 2010-15 30
Figure 21 GCC utilities sector contract awards breakdown, 2010-15 31
Figure 22 GCC hydrocarbons contract awards by subsector, 2010-15 32
Figure 23 GCC contract awards by client ownership, 2010-15 33
Figure 24 GCC contract awards by ownership type and country, 2010-15 33
Figure 25 GCC top civil contractors by value of work under execution 35
Figure 26 GCC top utilities contractors by value of work under execution 36
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Figures & Tables
Figure/ Table Title Page
Figure 27 Top GCC hydrocarbons contractors by value of work under execution 37
Figure 28 Top GCC civil construction clients by work under execution 38
Figure 29 Top GCC utilities clients by work under execution 39
Figure 30 Top GCC hydrocarbons clients by work under execution 40
Figure 31 Top awarded GCC projects 2010-15 41
Figure 32 Value of GCC contract awards Q1-Q3 2016 43
Figure 33 Comparison of 2015 vs. 2016 GCC contract awards 44
Figure 34 Comparison of 2015 vs. 2016 GCC sector contract awards 45
Figure 35 Top awarded GCC projects 2016 46
Figure 36 Delayed GCC 2016 projects 47
Figure 37 Selected new GCC projects announced in 2016 48
Figure 38 GCC contract awards by selected urban area Q1-Q3 2016 50
Figure 39 Top awarded Dubai 2016 projects 52
Figure 40 MEED’s 2017 GCC contract award forecast by country 57
Figure 41 MEED’s 2017 GCC contract award forecast by sector 58
Figure 42 MEED’s 2018-21 GCC contract award forecast by country 59
Figure 44 Bahrain contract award forecast, 2018-21 60
Figure 45 Kuwait contract award forecast, 2018-21 61
Figure 46 Oman contract award forecast, 2018-21 62
Figure 47 Qatar contract award forecast, 2018-21 63
Figure 48 Saudi Arabia contract award forecast, 2018-21 64
Figure 49 UAE contract award forecast, 2018-21 65
Figure 50 GCC contract award forecast, 2018-21 66
Figure 51 GCC contract awards vs. cash flow, 2010-17 67
Figure 52 Selected top Bahrain projects scheduled for award in 2017 68
Figure 53 Selected top Kuwait projects scheduled for award in 2017 69
Figure 54 Selected top Oman projects scheduled for award in 2017 70
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Figures & Tables
Figure/ Table Title Page
Figure 55 Selected top Qatar projects scheduled for award in 2017 71
Figure 56 Selected top Saudi Arabia projects scheduled for award in 2017 72
Figure 57 Selected top UAE projects scheduled for award in 2017 73
Figure 58 Value of planned and un-awarded GCC contracts 74
Figure 59 Value of planned and un-awarded GCC contracts by sector 75
Figure 60 Comparison of actual contract awards 2012-16 vs. project pipeline 2017-21 76
Figure 61 Top future civil construction clients by project pipeline 77
Figure 62 Top future utilities clients by project pipeline 78
Figure 63 Top future hydrocarbons clients by project pipeline 79
Preface
5 5
1
Preface
It has been a miserable year for the GCC projects market. After an excellent performance in 2015, the hope was that the market could
still prosper even with lower oil prices. Unfortunately, with the notable exception of Dubai this has not been the case; the market is likely
to record its worst annual performance since at least 2004.
Just $85bn worth of contracts were awarded in the first three quarters of 2016 compared with $135bn in the same period last year.
Overall, we expect the GCC to record between $110bn and $120bn worth of deals for the year as a whole, which will be considerably
lower than 2015’s total of $177bn and the $188bn posted in 2014.
The impact of this much lower spending has been felt by companies across the board. Many have been facing declining order books
and job losses as the market contracts. More will be looking for an improvement in 2017 when the hope is that the market will pick up
as governments release the funds for the much needed capital infrastructure programmes.
This report is aimed at providing clarity to firms preparing for the year ahead. Whether it is guidance on setting their budgets or
strategies, or information on the value of projects to be awarded in the short and medium terms, the report provides the necessary data
to enable companies to be better informed and prepared during these challenging times.
This report is based on data captured in November 2016 and has been prepared by MEED Projects, MEED’s project tracking service.
Providing real time project tracking on more than 13,000 active projects across the MENA region, MEED Projects is an essential tool
for identifying project opportunities and undertaking analysis and research on the region’s project market trends.
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Ed James, Director of Content & Analysis, MEED Projects, Report Author Dubai, November 2016
7 © 2014 MEED Projects
The Oil Price
Source: Inflationdata.com
Any macroeconomic or projects market analysis of the GCC must start with the oil price context. During the boom years,
when oil averaged more than $100 a barrel, the governments of the GCC posted record revenues. Today oil hovers
between $40 and $50 a barrel and the GCC states have face real restrictions on their spending as a result.
0
10
20
30
40
50
60
70
80
90
100
US average annual crude oil prices 1970-2016 ($ barrel)
Oversupply resulted in a price
slump for more than 15 years in
the ‘80s and 90s’
Boom times for the GCC as oil
hits a record $147 a barrel due
to massive demand growth
2009 financial crisis hit oil price
hard but only briefly
The Arab oil embargo saw
crude rise above $10 a
barrel for the fist time
7
8 © 2014 MEED Projects
Fiscal breakeven points
Source: IMF
0
20
40
60
80
100
120
140
Bahrain Kuwait Oman Qatar Saudi Arabia UAE
GCC Fiscal Breakeven Oil Price ($ a barrel)
2014 2015 2016 2017
Despite years of diversification efforts, the GCC states are still heavily reliant on oil sales revenues. Saudi Arabia, Bahrain
and Oman are most exposed to oil price fluctuations, requiring crude to be priced a between $80 and $100 a barrel to
balance their budgets. As the oil price has fallen, so governments have reduced spending requirements to ensure the can
meet their expenditure requirements. Even then, they have had to resort to borrowing and other means to raise funding
Bahrain is the most
exposed to the oil
price fall
Kuwait is least
exposed to the oil
price fall
8
9 © 2014 MEED Projects
Historical awards
Source: MEED Projects
The region went through an explosive projects boom after oil prices started rising in 2003. Then in 2008 the global
financial crisis took hold and the construction market almost collapsed, although spending on oil and gas projects in 2009
reached a record high. The market started to recover in 2013, hitting a record of $187bn in 2014
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
200,000
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
GCC total contract awards, 2003-15($m)
Total = $1.6 trillion
Average contract size = $124m
The collapse of the
regional real estate market
saw a fall in awards in
2008
9
10 © 2014 MEED Projects
Historical contract awards by country
Source: MEED Projects
2015 total = $177bn
2008-15 total = $1.2 trillion
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Bahrain Kuwait Oman Qatar Saudi Arabia UAE
GCC contract awards 2008-15 ($m)
2008 2009 2010 2011 2012 2013 2014 2015
Saudi Arabia and the UAE have historically been the largest of the GCC projects markets by some margin. The latter,
particularly in the Dubai suffered badly from the 2009 real estate crisis but has since recovered. Saudi Arabia has been
particularly hard hit by the oil price fall, while Qatar and Kuwait actually experienced record years in 2015 despite the
crude price
10
Top utilities contractors
11 Source: MEED Projects
In contrast, the regional utilities sector is dominated by international firms, particularly those from South Korea which fill
the top three spots. This highlights the challenge GCC firms have with being able to lead and complete world-scale power
generation and desalination projects. On the flip side, transmission and distribution schemes have a much more region-
heavy presence
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000
Samsung C&T
Hyundai E&C
Hyundai Heavy Industries
SEPCO III Electric Power Construction Corporation
Siemens
Larsen & Toubro
Shandong Electric Power Construction Corporation
National Contracting Company
Doosan Heavy Industries & Construction
Saipem
General Electric
Jazan Gas Projects Company
Tecnicas Reunidas
Abengoa
Saudi Services for Electro Mechanic Works
Mitsubishi Heavy Industries
Alfanar Group
Al Arrab Contracting
Valoriza Agua
Harbin Electric International Company Limited
GCC top utilities contractors by work under execution ($m)
2016 YTD performance
12 Source: MEED Projects
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Bahrain Kuwait Oman Qatar Saudi Arabia UAE
Value of GCC contracts awarded Q1-Q3 2016 ($m)
Frankly speaking, 2016 has been disastrous for the GCC projects market. Just $85bn worth of contracts were awarded in
the first three quarters of the year compared with $135bn for the same period last year. Qatar and Saudi Arabia have been
particularly disappointing as project activity slowed to crawl. Only Dubai and Bahrain have performed well in the year to
date. Little surprise, therefore, that many companies have been suffering this year.
Total = $85bn
Total at same point in 2015 = $135bn
2015/16 comparison (2)
13 Source: MEED Projects
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Comparison of 2015 vs. 2016* GCC sector awards 2015/2016 ($m)
2015 2016
*2016 figure is for Q1-Q3 only
This disappointing performance has been translated into individual sectors, with no one sector doing better than last year.
Scale-wise, however, each sector is doing as expected, with construction remaining the largest sector followed by
transport in keeping with previous years
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Negative factors
Governments simply
don’t have the money
Failure of PPP and
alternative means of
financing projects to
really get going in the
region
Delays in prioritising
their spending with less
cash
Public-dominated
projects market, with
the private sector
unable to step in
2 3
1 4
Lower oil prices results in
lower impetus for oil and
gas spending especially
with global demand growth
falling
Economic slowdown
plus job losses have
dented confidence
Government attitude
towards the sector as it has
not prioritised the release of
payments or the
maintenance of its spending
programmes
Project bottlenecks and
logistical challenges in
delivering existing under
construction projects
7 6
8 5
© 2014 MEED Projects
What’s gone wrong in 2016
© 2014 MEED Projects
Aside from the obvious impact of low oil prices, there have been a number of other major challenges facing the market,
ranging from the macro-economic and the political to the logistic and financial. Together they have combined to create a
perfect storm of negative forces which have hampered the market in 2016
.
14
Future project pipeline by country
15 Source: MEED Projects
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
Bahrain Kuwait Oman Qatar Saudi Arabia UAE
Value of planned and un-awarded GCC projects ($m)
The overall pipeline of known planned and un-awarded projects in the GCC stands at just over $2 trillion. The largest
market is Saudi Arabia, which is unsurprising given it has the largest economy and population. UAE is ranked second at
more than $600bn, primarily due to the ambitious plans of Dubai, while Oman, Qatar and Kuwait all have similar-sized
future ambitions. Naturally, this data is indicative as not all projects will proceed.
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© 2013 MEED Insight