Projects in the region’s oil and gas sectors are likely form the bulk of the rise in construction spending. “With oil prices comfortably higher this year, investments in value generation projects across the regions hydrocarbon sector in both upstream and downstream verticals will likely rise, as would investments in green and renewable energy projects associated to those hydrocarbon sectors,” said Shady Shaher Elborno, head of Macro Strategy at Emirates NBD.
Equally, investments in utility and infrastructure projects remain essential across much of the region as governments try to meet the needs of their young but rapidly growing populations, he added.
In the UAE the project sector declined sharply over the last couple of quarters, with Q1 2021 coming in lower than an already muted Q4 2020. Between Q1 2019 and Q1 2020 projects awarded in the UAE declined from $10.3 billion to $2.3 billion.
The decline in the UAE project market can be attributed to factors ranging from lower government spending to wide-ranging projects rationalisation exercises across many sectors, the report assessed.
Saudi Arabia, the largest project market in the region, has seen muted project spending over the past few quarters, as lower oil prices pressured government coffers.
Project spend reached a low of $2.6 billion in Q3 2020, a new low since 2007, the report said citing MEED data. However, the first quarter saw the market edge back up to $5.3 billion.
Kuwait’s project market is one of the smallest in the GCC, lagging its GCC peers due to political headwinds and the lack of a cohesive government.
However, the scale of opportunity to invest across all industry and sector verticals is huge. Spending levels fell during the pandemic, slowing to just $352 million in Q2 2020, a level not seen since 2004.
Qatar invests in gas
Qatar’s massive natural gas resources have allowed it a more comfortable buffer with which to spend on projects. In the past few years, it has spent on infrastructure for the football World Cup in 2022. It has also continued investments in the country’s hydrocarbons infrastructure.
Spending in Q1 2021 reached a record high on the back of a $13 billion gas project awarded in February which was the biggest single contributor to regional project spending in that quarter.
In Oman over the past few years project activity has picked up such with several megaprojects completed such as the Duqm refinery, the new Muscat International airport and the Batinah expressway scheme.
Bahrain’s project market will be driven by the pace of the development of its public-private sector partnership agenda, due to the fiscal headwinds faced by the government.
(Writing by Brinda Darasha; editing by Seban Scaria)
Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.
© ZAWYA 2021