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• 
  Middle East’s evolving alliances continue to shift

  26 December 2024

  

   

  Within and without, alliances in the Middle East are in a state of flux.

  The brittle tensions that pitted three Gulf states against Qatar, before the January 2021 Al-Ula Agreement found an amicable resolution, have given way to burgeoning rapprochement between the UAE and Qatar.

  On the other hand, the UAE-Saudi rivalry has intensified in recent years, culminating in late March 2024 in Riyadh’s lodging of an official complaint at the UN General Assembly, rejecting the UAE’s designation of territory adjacent to the kingdom as a protected maritime area.

  Differences over the two countries’ Opec strategies, and their approaches to regional conflicts – notably Yemen and Sudan – have also come to the fore.

  Latterly, a de-escalation has helped to defuse those tensions. Saudi Crown Prince Mohammed Bin Salman Bin Abdulaziz Al-Saud and UAE President Sheikh Mohamed Bin Zayed Al-Nahyan have strived to improve relations, with a meeting between the two leaders in late May doing much to stem the fraying of a once-close relationship.

  Thawing enmities

  The bigger shift in regional relations involves Iran. The Gaza conflict, fanning out to Lebanon, has helped reframe Gulf states’ ties with Tehran.

  This was evident in the landmark visit of Iranian Foreign Minister Abbas Araghchi to Bahrain in October for a meeting with King Hamad Bin Isa Al-Khalifa – the first such visit in 14 years.

  With a reputation as the Gulf state most hostile to Iran, Bahrain’s recent diplomatic outreach to Tehran reflects its sense that talking to the enemy is better than isolation, in the context of the current heightened regional tensions.

  The Chinese-orchestrated Saudi-Iran agreement of 2023 at least provides a template for Manama to follow.

  Bahrain’s overtures to Iran also reflect a new security dynamic in the region.

  With Iran-backed militias in Iraq showing themselves capable of dispatching missiles as far as Israel, some regional analysts say the Gulf states’ leaders are increasingly anxious that these Shia militias could just as easily target them.

  In this sense, building relationships with the Islamic Republic is one way of ensuring that domestic territory is not targeted by Iranian proxy militias.

  China is playing to the crowd. It … is looking to put a wedge between the US and the wider world, including Southeast Asia
  Bill Hayton, Chatham House

  Beijing’s broadening reach

  The region has also found itself increasingly engaged east of the Suez. 

  China’s regional role remains a work in progress, with the Saudi-Iran agreement arising out of Beijing’s willingness to offer a non-Western alternative to conflict mediation.

  From Riyadh’s point of view, China’s leverage with Iran, primarily through extensive trade and investment links, made it the ideal broker for an agreement that Saudi Arabia views as key to helping dial down the threat posed by Iran.

  The backdrop to such Gulf engagements with the likes of Iran and China is the evident reluctance of the US to provide the blanket security guarantees to its regional allies that it once did.

  This has incentivised the Gulf states to attempt diplomatic entreaties with regional adversaries, compelled by an understandable need for self-preservation.

  This has wider significance, placing China in a more prominent role in influencing regional politics – a sharp contrast with its previous low-key strategy and one that China watchers such as Bill Hayton, Asia-Pacific associate fellow at the thinktank Chatham House, see as being driven by interests rather than by tactical power politics.

  For Beijing at least, its involvement in 2023’s Saudi-Iran deal affords an opportunity to reinforce its regional influence, while demonstrating its support for the Palestinian cause – an issue that resonates with many across the region. 

  “China is playing to the crowd,” says Hayton. “It has decided that large parts of [the world] don’t like Israel and it is looking to put a wedge between the US and the wider world, including Southeast Asia.”

  China is meanwhile looking to deepen relations beyond Iran.

  Despite the evident importance it places on maintaining close relations with the Islamic Republic – most notably as the main buyer of the latter’s crude oil exports – China also sees value in building ties with Saudi Arabia.

  The recent accession of Saudi Arabia, alongside the UAE, Egypt and Iran, to the Brics geopolitical bloc affords further means for China to expand its influence in the region.

  From Saudi Arabia’s point of view, Brics membership could provide opportunities to broaden its engagement beyond the Western powers with which it has been allied for generations.

  The Trump factor

  Given that when Donald Trump resumes his occupancy of the Oval Office in late January the US is likely to take a maximum-pressure approach towards Iran once again, a more multipolar disposition could offer the Gulf states something of a hedge.

  Saudi Arabia could equally find itself in a position to be a conduit between the wider region and the Trump White House.

  With inbound Trump appointees including the fiercely pro-Israel Mike Huckabee as the proposed US ambassador to Israel, there is a concern that the White House could give a green light to Israel to annex the West Bank and embed its occupation of Gaza.

  The region may then find itself counting on Riyadh’s clout in Washington to restrain Trump from pursuing positions that would only escalate regional tensions.

  Between the likes of the EU, the UK and China looking to revive relations with Saudi Arabia, and Russia still being a partner in the Opec+ group, the Saudi leadership may find itself the centre of regional attention in 2025.

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  James Gavin
• 
  Power sector awards momentum accelerates

  26 December 2024

  

   

  The Middle East and North Africa (Mena) region’s power sector awarded over $60bn of contracts between January and early November 2024, up 47.5% compared to the value of awarded contracts in the previous full year.

  This figure is more than double the average value of annual contract awards recorded between 2014 and 2023, based on data from regional projects tracker MEED Projects.

  It also exceeds by 21% the total combined value of contracts awarded between 2018 and 2020, when some regional governments and utilities began pivoting to renewable energy and freezing the expansion of thermal plant capacities, in line with goals aimed at decarbonising their electricity systems.

  In 2020, the Covid-19 pandemic slowed down project activity and temporarily delayed the awarding of some contracts.

  The market staged a short-lived comeback in 2021, when Saudi Arabia awarded a string of contracts for solar photovoltaic (PV) independent power projects (IPPs), including a contract to develop the 600MW Shoaiba solar PV scheme, which holds the world record for the lowest unsubsidised solar PV production at $cents1.04 a kilowatt-hour.

  A slight contraction occurred the following year due to a spike in raw materials and engineering, procurement and construction (EPC) costs.

  Last year saw a stunning recovery, however, helped by the award of new renewable energy projects in Saudi Arabia, the UAE, Egypt and Oman, as well as by a resumption of contract awards for new gas-fired power plants, particularly in Saudi Arabia, Libya and Iraq.

  Yet 2024 is set to outshine 2023 in terms of awarded contracts for thermal, renewable energy and nuclear power generation plants, as well as for power transmission and distribution (T&D) infrastructure such as substations and overhead transmission lines.

  Major 2024 awards

  In 2023, power generation projects accounted for an estimated 79% of total contract awards, with T&D projects accounting for the rest.

  A different picture is emerging in 2024, with data in the first nine months of the year suggesting that generation contract awards are retreating to about 64% of the total. This is due to increased T&D capital spending that has so far driven a 150% increase in award value compared to full-year 2023.

  This is a clear indicator of T&D capacity buildout catching up with the generation capacity expansion, especially as larger economies such as Saudi Arabia strive to set up stronger and more efficient electricity links domestically, and as the energy-rich GCC states seek to establish stronger electricity links with one another and with their neighbours, including Egypt, Iraq and Jordan.

  Saudi Arabia has dominated the overall Mena power contracts landscape. Its share of 29% in 2022 soared to 61% in 2023 and 67% in the first 10-11 months of 2024.

  In May, principal buyer Saudi Power Procurement Company (SPPC) signed two power-purchase agreements with Japan’s Marubeni Corporation for contracts to develop two wind IPPs under the fourth round of the National Renewable Energy Programme (NREP). The Al-Ghat and Waad Al-Shamal wind IPPs have a total combined capacity of 1,100MW. 

  The contract for a third wind IPP, tendered as part of round four of the NREP, is also expected to be awarded soon.

  In June, Saudi sovereign wealth vehicle the Public Investment Fund (PIF) let the fourth batch of solar PV schemes, which it is implementing bilaterally through the Price Discovery Scheme.

  A team comprising Acwa Power, PIF-backed Water & Electricity Holding Company (Badeel) and Saudi Aramco Power Company (Sapco), a subsidiary of the state majority-owned oil giant Saudi Aramco, will develop the three solar projects, which will have a total combined capacity of 5,500MW and will require an investment of about $3.3bn.

  The Haden solar PV and Muwayh solar power plants, which will each have a capacity of 2,000MW, will be located in Saudi Arabia’s Mecca region. The third project, the 1,500MW Al-Khushaybi solar PV plant, will be located in the Qassim region. The three new solar PV facilities are expected to become operational in the first half of 2027.

  In early November, SPPC also announced the winning bidders for the contracts to develop four combined-cycle gas turbine plants comprising the second batch of thermal capacity that it has tendered since 2023. The four plants, located in Riyadh and the Eastern Province, will each have a capacity of 1,800MW and will require an investment of about $2bn each.  

  A developer consortium comprising the UAE-based Abu Dhabi National Energy Company (Taqa), Japan’s Jera Company and the local Albawani Company successfully bid for the contracts to develop and operate the Rumah 2 and Nairiyah 2 IPPs. Meanwhile, Saudi Electricity Company (SEC), Riyadh-based utility developer Acwa Power and South Korea’s Korea Electric Power Corporation (Kepco) won the contracts to develop and operate the similarly configured Rumah 1 and Nairiyah 1 IPPs.

  State utility SEC is also understood to have issued the limited notices to proceed for six greenfield thermal power plants with a total combined capacity of over 16,000MW.

  Power generation projects for which final contracts are expected to be awarded before the end of 2024 include:

  • Hajr: 3,600MW
  • Marjan: 1,800MW
  • Riyadh PP12: 1,800MW
  • Qurayyah: 3,600MW
  • Ghazlan 1: 2,400MW
  • Ghazlan 2: 2,900MW

  The $5.3bn high-voltage direct current network project connecting the central, western and southern regions of Saudi Arabia was the single largest power contract awarded in Saudi Arabia in 2024.

  The UAE, meanwhile, has awarded three key power contracts this year, including for the Al-Ajban solar IPP, which was won by a team of France’s EDF and South Korea’s Korea Western Power Company (Kowepo), and for the Dhafra waste-to-energy project, which a team of Japan’s Marubeni Corporation, Japan Overseas Infrastructure Investment Corporation and Zurich-headquartered Hitachi Zosen Inova is developing.

  Dubai Electricity & Water Authority (Dewa) is also understood to have awarded the contract to complete the Jebel Ali K-Station to Egypt-based Power Generation Engineering & Services Company.

  2025 outlook

  The Mena power projects pipeline remains robust, with over $45bn-worth of contracts under bid evaluation and another $50bn in the prequalification stage as of late 2024, according to MEED Projects.

  Saudi Arabia is likely to remain dominant, particularly if SPPC and the PIF activate a plan by the Energy Ministry to procure 20,000MW of renewable energy capacity annually until it reaches its target for renewables to account for half of its energy production mix by 2030.

  Morocco has the second-largest power projects pipeline thanks to several planned schemes to export clean energy and green hydrogen to Europe. Notably, the tender is under way for the country’s first two solar PV plus battery energy storage system (bess) projects, Noor Midelt 2 and 3.

  Abu Dhabi also maintains a substantial renewables and gas-fired generation project pipeline. It has several upcoming IPPs with a total combined capacity of over 7,000MW, of which more than 6,000MW is in the tendering stage.

  While the procurement process for Saudi Arabia’s first nuclear power plant in Duwaiheen has been delayed, the UAE has plans to procure the next phase of its nuclear power plant project in Barakah.

  Green industrial development in steel and aluminium, as is being undertaken in the UAE, is a driver for ongoing clean energy capacity buildout, notes Karen Young, senior research scholar at Columbia University’s Centre on Global Energy Policy.

  Egypt, Iran, Kuwait and Iraq have the next largest power projects pipelines. The key drivers in each state vary, with populous countries Egypt and Iran seeking to develop integrated green hydrogen hubs and nuclear power capacity, respectively, while Kuwait remains a promising market with extended plans to procure both conventional and renewable energy capacity to address peak demand.

  There are indications that Iraq’s first utility-scale solar PV scheme – a 1GW project being developed by France’s TotalEnergies – will head into the construction stage in the coming months, along with other similar projects for which preliminary agreements were signed by Iraqi authorities in 2021-22.

  Oman is actively pursuing renewable energy capacity, with the state offtaker having tendered the contracts for two wind IPPs in September 2024.

  In Oman and Qatar, the main downstream companies, Petroleum Development Oman and QatarEnergy, are developing renewable energy capacity as a means of mitigating their greenhouse gas emissions, as well as to support their respective government’s net-zero targets.

  In November, Bahrain started the procurement process for its fourth independent water and power project (IWPP) in Sitra, which replaced the previously planned Al-Dur IWPP 3 scheme.

  

  Other trends

  SEC affiliate National Grid Saudi Arabia has awarded EPC contracts for several bess packages to local firm Algihaz this year. In August, it tendered a contract for the construction of a further 2,500MW of energy storage capacity. 

  In parallel, the procurement process is under way for the first independent bess packages in Saudi Arabia and Abu Dhabi, with other utilities expected to follow suit in procuring bess using an IPP model. Bess will boost grid flexibility and spinning reserves in the face of increased renewable energy capacity and demand.

  In addition to bess and several gigawatts of solar and wind capacity, Saudi Arabia gigaproject developer Neom, which plans to be powered 100% by renewable energy by the end of the decade, is also considering a network of large-scale pumped hydropower storage plants.   

  However, despite the ongoing capacity buildout across the Mena states, some end-users – particularly in fossil fuel-
  scarce jurisdictions such as Morocco – continue to struggle with supply.

  “I’ve been part of a research project in Morocco looking at the renewable power landscape and green economy more broadly. In that case, we do see massive buildout, but it is tailored for offtake to state-related industrials,” says Columbia University’s Young.

  She adds that a telephone survey of 1,000 small and medium-sized businesses in Morocco about their perception of the accessibility and affordability of renewable energy yielded surprising results.

  “They strongly suggested a lack of support, given that smaller enterprises continue to see power outages and this has in many cases caused damage to their equipment and abilities to stay open and service customers.

  “The disconnect between power buildout and industrial advances in a green supply chain and how small and medium firms see power accessibility and reliability is very stark. In a Mena-wide sense, we might start to question how the delivery and transmission of power in an equitable way affects economic growth opportunities overall.”

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  Jennifer Aguinaldo
• 
  Iran 2025 country profile and databank

  26 December 2024

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  MEED Editorial
• 
  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
• 
  Egypt 2025 country profile and databank

  25 December 2024

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  MEED Editorial