Despite a dramatic fall in capital project spending among Gulf Cooperation Council states in 2020, projects are expected to come roaring back in 2021, said Edward James, director of content and analysis, MEED Projects.
“It has been a difficult 12 months unsurprisingly, but we expect a quick rebound this year and looking forward longer term to the pipelines remaining positive,” James said during the opening day of the Breakbulk Middle East Digital Special.
While GCC states saw about US$1.4 trillion worth of capital project contracts from about 2010 to 2020, spending plummeted 40 percent in 2020 to about US$64 billion, due to the pandemic and cratering oil prices, according to MEED, a project tracking platform for the Middle East and North Africa.
“While 2020 was a pretty bad year all-round, what we actually saw is a large backlog of tenders and contracts,” James said. “Where the tender has actually been issued, bids submitted in many cases, we can see there’s a very significant pipeline of projects.”
As these project move from the back burner, the GCC will heat up, with “well over US$120 billion worth of projects to be awarded in 2021,” he said.
As with 2020, everything comes with a caveat: “of course many things can happen … nevertheless this is quite indicative of likely performance over the next 12 months,” James added.
2021 and Beyond
Among GCC leaders, MEED’s 2021 forecast has Saudi Arabia and UAE each awarded nearly US$400 billion in contracts, Oman at about US$250 billion, and followed closely by Qatar and Kuwait.
Leading projects are the US$20 billion Qatargas’ LNG processing trains in Qatar, and ADNOC’s US$12 billion Hail and Ghasha sour gas development in the UAE, according to MEED.
Looking ahead, MEED predicts nearly US$2.8 trillion over the next five to 15 years, he said. By GCC state, estimates for the period are:
• Saudi Arabia, US$1.2 trillion, led by the US$500 billion Neom City to be built in the emirates’ northwest region.
• UAE, more than US$700 billion.
• Kuwait, Qatar and Oman all within US$100 billion to US$200 billion.
Construction is expected to account for US$154 trillion of the future pipeline, followed by transport at US$395 billion, and power and oil, with US$151 billion and US$113 billion, respectively.
“Not only on a country level, but on a sector basis there is a large diversification and broad mix of projects going forward which provides optimism and hope for the market,” James said.
Looking Back
Given that not all of the forecast projects will eventually be awarded, “even at 50 percent … there’s still more than US$1.2 trillion over the next 10 years or so, so still a very positive outlook for the region,” he said. And of course there are other projects likely to be announced in that time.
The conservative outlook would still compare favorably with the US$1.4 trillion worth of projects from about 2010 to 2020. That decade peaked in 2014-15, with about US$170 billion a year, then declined due to lower oil prices, which left governments unable to invest in projects.
James noted that looking at the GCC’s overall numbers doesn’t paint an accurate picture for its member states.
The two leading markets, Saudi Arabia and UAE, accounted for more than US$900 billion of the 2010-20 total. Projects for each were more than double that of third-place Qatar’s total.
In 2020, Saudi Arabia and UAE “also saw the largest fall in project activity” among GCC states, each declining more than 50 percent, James said. “On the other hand, Egypt, Qatar, Iraq, Oman, Algeria and Kuwait all have been fairly stable by comparison.” In fact, the last three actually saw increases in 2020.
Among the GCC’s project sectors, construction was the largest by a significant margin, topping US$500 billion in 2010-20. Transport was a distant second at about US$250 billion, followed by oil, power and gas.
The largest two sectors also saw the largest fall in 2020, as construction spending dropped below US$400 billion and gas plummeted from more than US$500 billion to less than US$50 billion. Transport and power saw significant increases during the pandemic.
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