Another bumper year for Mena projects

25 December 2024

 

The Middle East’s projects market in 2024 has been fuelled by the same heady cocktail of favourable oil prices, continued investment into oil and gas projects, government infrastructure spending, the energy transition, real estate investment and economic diversification that propelled the total value of awards in 2023 to record levels.

By the end of October 2024, there were $262bn of contract awards across the Middle East and North Africa (Mena) region, according to regional projects tracker MEED Projects. By the end of the year, the 2024 total may top the $290bn recorded in 2023. 

While economic diversification is a priority for governments across the region, oil and gas remains a key sector for project awards. The three largest contract awards in 2024 were from the sector.

The top-ranked contract by value was a $20bn deal awarded to Iranian companies Petropars, Oil Industries Engineering & Construction, Khatam Al-Anbiya Construction Headquarters and Mapna Group for the South Pars gas field pressure-boosting project in Iran by Pars Oil & Gas Company.

Next was the $8bn deal won by China’s Hualu Engineering Technology Company for delivering the Al-Faw refinery in Iraq for Southern Refineries Company.

The third-largest award was a $5.5bn contract won by a joint venture of France’s Technip Energies, Japan’s JGC Corporation and the UAE’s NMDC Group for the Ruwais low-carbon liquefied natural gas terminal project by Abu Dhabi National Oil Company (Adnoc).

These contract awards mean that the oil and gas sector accounted for 32% of the $262bn total that was recorded in the Mena region by the end of October 2024.

Breaking down the sector into oil and gas separately reveals a telling trend. Oil accounts for 12% of awards, while gas accounts for 20%. These numbers reflect the growing importance of gas as a transition fuel that is cleaner and more environmentally friendly than oil, but still provides the dependable energy that many renewable alternatives still do not offer. 

Strong performances

Construction is the second-largest sector after oil and gas, accounting for 23% of awards. Its significance has dropped in 2024 compared to 2023, when it accounted for 32% of contract awards. 

In terms of value, there were $68bn of contract awards in 2024 until the end of October. If the same pace is maintained during November and December, the 2024 total is expected to be about $81bn, which falls short of the 2023 total of $97bn. 

While the total value of contract awards may have dropped, there was the largest construction contract award on record in 2024 – a $4.7bn deal secured by Italian contractor WeBuild for the construction of three dams for the Trojena mountain resort at Saudi Arabia’s Neom gigaproject. 

The power sector accounted for 18% of the total awards during the period, the largest of which was the $5.3bn contract won by Saudi Arabia’s Alfanar Projects and China Electric Power Equipment & Technology Company for the 7,000MW Saudi Central, Western and Southern Regions high-voltage direct current overhead transmission lines project being developed by Saudi Electricity Company.

When analysed by country, Saudi Arabia and the UAE dominate the market, and together they account for over 60% of contract awards across the region in 2024 up to the end of October. 

As the region’s largest economy, it is unsurprising that Saudi Arabia accounts for the largest share, with 38.6%, followed by the UAE, which had 22%. The next most significant country was Iran, which came in a distant third with 8% of contract awards. 

The outsized contribution of Saudi Arabia and the UAE reflects the relative economic stability found in the GCC compared to other countries in the region that are grappling with the impact of conflict and other associated financial pressures. 

Looking beyond the contract awards numbers, the biggest project announcement in 2024 came in April, when Abu Dhabi investment vehicle ADQ released details of plans to invest $35bn in Egypt. The plans involve ADQ acquiring the development rights for Ras El-Hekma, a planned new city on Egypt’s northern Mediterranean coast, for $24bn. 

The development has been billed as having the potential to attract over $150bn in investment.

In October, ADQ appointed its subsidiary Modon Holding as the master developer for Ras El-Hekma. Modon will act as the master developer for the entire development, which covers more than 170 square kilometres (sq km). 

Modon will develop the first phase, which covers 50 sq km, and the remaining 120 sq km will delivered with private developers.

Key partners for delivering the project have already been found. For construction, Modon has signed a framework agreement with Egyptian firm Orascom Construction to serve as the primary contractor for the project’s first phase. 

Modon also signed a deal with Abu Dhabi National Energy Company (Taqa) for developing, financing and operating greenfield utility infrastructure projects, water desalination projects, electricity transmission and distribution projects and wastewater projects at the Ras El-Hekma development.

While economic diversification is a priority for governments across the region, oil and gas remains a key sector for project awards

Future prospects

Looking ahead, the performance of the projects market in 2025 will depend  on the favourable macroeconomic conditions remaining in the GCC, which if the other four members of the six-nation bloc are added, accounted for nearly 72% of the Mena region’s total contract awards during the first 10 months of 2024. 

The key metric to watch in 2025 will be the oil price. In mid-November, the price of Brent Crude was $72 a barrel, which is below what many in the region, including Saudi Arabia, require if they are to maintain their project spending plans. 

The outlook for oil prices is uncertain and after oil producers’ group Opec cut its global demand growth forecasts for both 2024 and 2025 for the fourth time, highlighting economic weakness in China, India and other regions, there are concerns prices will dip in 2025. 

The election of Donald Trump as US president adds to those concerns. He has promised to “drill, baby, drill”, and a sharp uptick in output from the US could cause oil prices to soften further.

Trump is also a protectionist and has said ‘tariff’ is his favourite word. Most of his new tariffs are expected to be aimed at China, which could mean that Chinese companies look to other markets that remain open to them, including the Middle East.

The appeal is clear to see. Chinese contractors already command a dominant position in the region – particularly in North Africa and Iraq – and Chinese companies will find great appeal in affluent markets such as Saudi Arabia and the UAE, which can offer large-scale project opportunities.

The other metric that will drive the projects market in 2025 is real estate. In the UAE, much of the ongoing development work is supported by the buoyant property market, particularly in Dubai, which has grown strongly throughout 2024. 

According to a report by data and analytics company Reidin, property sales in the UAE reached AED46.52bn ($12.7bn) in October 2024, marking a 55% year-on-year increase. Demand also remains robust, with 19,500 transactions recorded in October, reflecting a 72% rise compared to the same period in 2023. 

Looking ahead to 2025, Reidin says that the outlook remains optimistic as sustained demand, rising property values and steady inventory turnover are all expected to continue driving growth. 

While the forecast supports a positive outlook for construction in the UAE, those who have seen Dubai’s property market collapse before will be keenly watching the data in 2025.

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Colin Foreman
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