Kuwait construction industry - hitting new heights

With oil prices fixed firmly above US$60 a barrel and over US$ 1 trillion worth of projects planned or under way in the GCC, the stage is set for the activities to continue uphill for the next five years and beyond.

In 2005, the region's market went from strength to strength and reached new heights in terms of contracts awarded and projects announced. The outlook for 2006 looks equally buoyant across most sectors including infrastructure, building, power and water and petrochemicals. The total value of contracts awarded in the region has more than doubled in the past two years.

The activity at Kuwait's construction industry is in line with the general Gulf trend. The state of Kuwait is going through a complete head to toe overhaul. The local real estate companies, in the wake of the renewed confidence in the market has already announced a handful of prestigious projects including the $5,500 million Khabary City project, planned by Efad Holding subsidiary Al-Dar First Holding, and the highly ambitious Madinat Hareer (City of Silk) in Subiya, estimated to cost more than $86,000 million. If completed, this project would include one of the world's tallest tower, and numerous housing, health, education, environmental, business, and touristic centers.

A host of smaller projects will also come on stream, including individual tower projects and various housing schemes.

Kuwait is planning to invest nearly $64,000 million in its hydrocarbon sector over the next 15 years as it seeks to ramp up both oil production and refining capacity. The lion's share, $26,000 million, will be invested upstream domestically as the country aims to attain the goal of 4 million barrels a day (b/d) of crude production capacity by 2020, while $17,000 million will be invested downstream. As for the remainder, $8,000 million will be spent in the local petrochemical industry, $7,000 million on international downstream schemes, including a planned integrated refinery and petrochemical complex in southern China, $4,000 million on upstream opportunities overseas through Kuwait Foreign Petroleum Company (Kufpec), and $2,000 million on acquiring new crude carriers.

The strategy of the country's petrochemical sector which was late in developing, is to achieve a minimum production rate of 100 million barrels of oil equivalent by 2010 outside Kuwait, and are looking at new opportunities in growth markets, especially China and India.

In the energy sector, Al Zour Power Plant Expansion in the North and the Shuaiba Power & Desalination Plant is gathering momentum with the bids expected to be submitted soon. Substantial investment has been earmarked for infrastructure development and upgrade schemes. Kuwait City Ring Road is a prestigious project in the pipeline in addition to construction or updrade of 1st, 2nd, 3rd, 4th, 5th and 8th Ring Roads, Jahra-Subiya Expressway scheme etc.

The main hindrance in achieving these development goals are the growing capacity restraints on contractor and labour resources. Resource availability and logistics are sensitive areas to be tackled efficiently. Material prices will, as always, remain crucial. However, in the second half of the year 2006, prices are expected to become low as new cement capacity begins to come on line and global steel prices stabilize.

The major multi-billion schemes in Kuwait which are in the pipeline include:



Source: Ventures Middle East GCC Projects Database (www.ventures-uk.com)

Construction Statistics

According to Ventures Middle East, a leading management consultancy firm in the region, Kuwait's project market, has grown to over US$250 billion. This value takes into account projects in its early conceptual stage to project under construction. Building projects in Kuwait is estimated at nearly US$200 billion which includes high valued projects like Madinat Hareer, Arifjan Housing Project, Subiya Township, Khiran Housing Project, Bubiyan Island, Failaka Tourism Island etc. Oil & Gas projects combined with Petrochemical projects are valued at over US$30 billion where as infrastructure projects worth over US$10 billion are planned or underway. Power and Water projects are estimated at over US$8 billion.
Kuwait construction industry witnessed the award of over US$8 billion worth of projects to contractors during the year 2005. The figure is expected to rise to over US$12 billion in 2006 and is expected to hit the US$15 billion mark in 2007.