Oman construction is back on track
19 December 2023
MEED's January 2024 special report on Oman includes:
> COMMENT: Muscat needs to stimulate growth
> GOVERNMENT & ECONOMY: Muscat performs tricky budget balancing act
> BANKS: Omani banks look to projects for growth
> OIL & GAS: Oman diversifies hydrocarbons value chain
> POWER & WATER: Oman expands grid connectivity
> HYDROGEN: Oman seeks early hydrogen success
> CONSTRUCTION: Oman construction is back on track
In November, Oman restarted its plans to build the long-stalled Blue City project. The revival of the scheme, which was first launched in 2005, is the latest sign of the improving market conditions in the sultanate.
The country has shown resilience, with an increase of 17.4 per cent in real estate trading in the first two months of 2023 compared to the same period in 2022.
Factors such as the easing of global travel restrictions and the economic rebound following the Covid-19 pandemic have stimulated demand for residential and commercial properties.
The improving market conditions have prompted the government to push forward with other schemes as well.
In November, Oman’s Housing & Urban Planning Ministry issued tenders for Sultan Haitham City, a 14.8 square-kilometre mixed-use smart city project located in Muscat. The ministry issued a tender inviting companies to bid for contracts covering the construction consulting services and the enabling works packages.
In January 2023, the ministry also signed agreements to develop the $415m Surouh integrated mixed-use projects at Al-Amerat in Muscat and Halban in South Al-Batinah Governorate. Bids were received for project management consultancy services in October.
Elsewhere, the sultanate's cultural complex project was revived after almost a decade when Oman’s Culture, Sports & Youth Ministry awarded an estimated $384m design-and-build contract to a joint venture of the local Saif Salim Issa al-Harrasi and Turkiye’s Sembol Construction.
Oman’s Finance Ministry is also preparing to develop schools using a public-private partnership (PPP) model. Bid clarification is under way for the contract to develop 42 schools, for which the ministry received three bids earlier in 2023.
Planned pipeline
The pipeline of planned and unawarded projects in Oman’s construction sector is valued at more than $33bn, making it the second-largest sector in Oman. Of this total, $25bn-worth of the projects are for mixed-use schemes, $3.8bn are in the hospitality sector and $2bn are for residential developments.
The pipeline consists of $4.9bn-worth of projects in the bidding stage, $20bn in the design or front-end engineering and design (feed) phase, and just over $8bn under study.
The sultanate’s 10th five-year plan gives priority to construction development by ensuring optimal resource use and investment opportunities throughout the various governorates.
Transport schemes
In an effort to diversify its economy and grow the tourism sector, Oman has been investing heavily in upgrading its transportation infrastructure. Several projects to facilitate the movement of people and goods around the country are under way.
The Oman-Etihad Railway Company has qualified firms to bid for the three civil works packages of its rail project linking Oman and the UAE.
Plans are also in the study phase for a railway link between Oman and Saudi Arabia. If constructed, the line will stretch from the southeastern coast of Oman, through the city of Ibri and then on to Riyadh.
Oman also tendered a pre-feasibility consultancy services contract for the first phase of its planned Muscat Metro network at the end of January 2023. The move added further weight to the expectation that major new rail projects will progress in the sultanate and the rest of the region in the next decade.
Ports are also being expanded to support the growth of Oman’s industrial base. In October, contractors submitted bids for the Masirah multipurpose port in the wilayah of Masirah in Al-Sharqiyah South Governorate.
Contractors are also preparing bids for the contract to develop the Mahout fishery harbour in Oman's Al-Wusta Governorate.
Other major transport PPP projects planned in Oman include developing a seaport in Musunah, the Sohar Port expansion and the Salalah-Thumrait truck road (STTR).
In August, Oman’s Finance Ministry, together with the Transport, Communications & Information Technology Ministry, shortlisted five prequalified teams to compete for the STTR project. The scheme is the first of its kind to be developed under a PPP model in Oman.
The Transport, Communications & Information Technology Ministry also received proposals from bidders for packages three, four and five of the Adam-Thumrait road dualisation project. The scheme was retendered in 2023 after having been cancelled in 2019.
In 2020, Oman announced its National Aviation Strategy 2030 to attract an investment of $3.6bn in airport cities. The country plans to expand its aviation infrastructure and open the sector to private international investors by granting concessions for managing and operating local airports and aviation-related services.
In March, Oman’s Civil Aviation Authority invited international consultants to submit bids for the design and supervision of the proposed development of Musandam airport.
The pipeline of planned and unawarded projects in the transport sector is valued at $13.4bn, making it the third-biggest sector in Oman. Of this total, rail schemes account for $6bn, roads and utility networks comprise $4.5bn, and $1.6bn is for seaport projects. The pipeline consists of about $7.7bn-worth of projects in the bidding stage, $5.1bn under study and $500m in the design or feed phase.
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Neom requests revised Gayal wind proposals
6 September 2024
Neom’s energy, water and hydrogen subsidiary Enowa has requested that the final bidders submit updated proposals for a contract to build a 1,200MW wind farm catering to the gigaproject in Saudi Arabia.
This development follows the introduction of an addendum to the tender after companies submitted their best and final offers (bafos) for the contract to build the 1,200MW Gayal wind farm project in June, a source close to the project tells MEED.
MEED reported on 9 July that Neom is progressing towards awarding the engineering, procurement and construction (EPC) contract to the selected bidder following receipt of the bafos.
Enowa received the initial bids for the contract on 4 March.
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The wind farm project site is approximately 35 kilometres northwest of the former town of Gayal.
The project will have an estimated plot area of 164 square kilometres. The project duration is 31 months from the start of construction.
The scope of work for the EPC contractors bidding for the scheme includes the design, supply and installation of wind turbine generators and foundations, three 380kV substations and control systems, meteorological towers, site roads, hard stands, crane pads and associated infrastructure.
Enowa received bids for another renewable energy project, the 800MW Shiqri solar farm, in March. The client is conducting commercial clarifications for the solar project, MEED reported in May.
Neom aims to be powered 100% by renewable energy by 2030.
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Wabag confirms $317m Saudi water deal
6 September 2024
India-headquartered VA Tech Wabag has confirmed winning a contract to build a 300 cubic-metres-a-day (cm/d) seawater reverse osmosis (SWRO) plant project in Yanbu, Saudi Arabia.
The value of the contract for the Yanbu 5 SWRO plant is $317m, the Bombay Stock Exchange-listed company said in a statement on 6 September.
The engineering, procurement, construction and commissioning contract covers the design, engineering, supply, construction and commissioning of the desalination plant.
According to Wabag, the plant will operate using dual media filters followed by a two-pass reverse osmosis process and re-mineralisation to produce clean potable water, which will be further distributed by Saudi Water Authority (SWA).
The plant is located on the west coast of Saudi Arabia, south of the Red Sea-facing Yanbu Al-Bahr, and is scheduled to be completed within 30 months of the contract award.
MEED reported in July that Wabag submitted a lower bid for the contract.
Saudi Arabia's main producer of desalinated water, SWA – formerly Saline Water Conversion Company (SWCC) – received two bids in May for the contract to build the Yanbu 5 SWRO project.
The other bidder is understood to comprise a local contractor team and an overseas-based partner.
The bid evaluation process is ongoing for a second project, the Shuaiba 6 SWRO plant, which has a capacity of 545,000 cm/d.
Two other projects, the Jubail and Ras Al-Khair SWRO projects, are in the bidding stage. They will each have the capacity to treat 600,000 cm/d of seawater.
The four contracts are being procured using an EPC model, in contrast to the SWRO facilities being procured on a public-private partnership basis by state offtaker Saudi Water Partnership Company.
SWA is the world's largest producer of desalinated water, with a capacity of at least 6.6 million cm/d. Plants utilising older and more energy-intensive techniques such as multi-stage flash technology account for the majority of the current capacity.
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Chinese companies win 95% of all Iraqi energy projects
6 September 2024
Commentary
Wil Crisp
Oil & gas reporterCompanies headquartered in China have won 95% of all major project contracts awarded in Iraq’s oil, gas, chemicals and power sectors so far this year, as they increase their dominance in the market.
A total of $12.1bn in energy project contracts were won by Chinese companies during the first eight months of 2024, according to data gathered by regional project tracker MEED Projects.
The only major award so far this year that was not won by a company or partnership that was 100% Chinese, was the contract to rehabilitate the Baiji 2 gas-fired power station, which is estimated to be worth $1.3bn by MEED Projects.
This contract was awarded to a consortium of Beijing-headquartered China State Construction Engineering Corporation (CSCEC) and German technology conglomerate Siemens.
Commenting on the figures, one industry source said: “China has been a dominant force in Iraq’s energy sector for a long time and this is only increasing as time passes.
“The huge presence that China has in the country’s energy sector is a source of concern for Iraq’s leadership, which doesn’t want to cede control of so many important infrastructure projects to companies from any single country.”
“The problem is, other countries are reluctant to take on the risks of doing business in Iraq and at the same offer the competitive prices that Chinese contractors can offer.”
The biggest energy project contract won by a Chinese contractor so far this year is the agreement for the development of the Al-Faw Investment Refinery project.
The client on the project, state-owned Southern Refineries Company, signed a contract with CSCEC in May this year.
The refinery will have a capacity of 300,000 barrels a day and will produce oil derivatives for both domestic and international markets.
The project will be carried out in two stages. The first phase will involve refining operations, while the second will involve constructing a petrochemicals complex with a capacity of 3 million tonnes a year.
The wider project also includes the construction of a 2,000MW power plant and the establishment of the Al-Faw Academy for Refinery Technology, to train 5,000 Iraqi workers that will eventually work at the facility.
Hualu, a subsidiary of China National Chemical Engineering Company (CNCEC), signed a preliminary principles agreement for the project in December 2021.
At the time, Iraq’s Oil Ministry said that the project would have an investment value of $7bn-$8bn.
MEED Projects has estimated that the contract value of the deal signed with CSCEC in May for the refinery project is about $4bn.
Other energy project contracts won by Chinese companies during the first eight months of this year included the contract for the Artawi 1,000MW photovoltaic solar power plant in Basra.
This contract, estimated to be worth $1bn, was awarded to China Energy Engineering International Group.
Chengdu-based DongFang Electric Corporation was awarded the main contract for a project to convert the Baghdad South power plant into a combined-cycle gas turbine power plant.
The project is estimated to be worth $85m and will increase the capacity of the power plant by 125MW-625MW.
Also this year, a subsidiary of PetroChina, the listed arm of state-owned China National Petroleum Corporation, signed an agreement to develop Iraq’s Nahr Bin Umar onshore gas field.
The subsidiary, PetroChina Halfaya, was awarded the build-own-operate-transfer contract, which is estimated to be worth about $400m.
Iraq’s Oil Ministry said that the field will have an initial output capacity of 150 million cubic feet a day.
The project is expected to be completed within 36 months and will include the construction of gas-gathering facilities, storage tanks and pipeline networks to supply gas to power stations.
Strong performance
Chinese contractors also performed well in Iraq’s energy sector in terms of the value of contract awards in 2023.
Last year, Chinese contractors won $2.3bn in Iraqi energy sector contracts, almost half of the $4.8bn that was awarded.
Looking at the data for 2023 and the first eight months of 2024 together, Chinese companies won $14.5bn in contracts, 82% of the $17.6bn in energy project contracts awarded over the period.
The second closest competitors were companies from Germany, which won just over $1bn in contracts, 6% of all awards.
Iraqi companies were third, winning $816m in contracts, according to the data compiled by MEED Projects.
Contracts were also won by companies from Italy, the Netherlands and Turkiye.
Iraq is currently in the midst of a push to try and increase the volume of work being carried out by US companies in the country’s energy sector.
Earlier this month, Iraq announced that it was planning to offer about 10 gas exploration blocks to international companies in a new licensing round that will be launched during a visit to the US by Iraqi Oil Minister Hayan Abdel-Ghani.
Abdel-Ghani said that he will be specifically targeting US companies in the upcoming round.
Earlier this year, the US international oil and gas company ExxonMobil completed its exit from Iraq’s West Qurna-1 oil field, handing over operatorship to PetroChina.
Exxon’s plan to exit the West Qurna-1 oil field was first announced in April 2021, when Iraq’s Oil Ministry said the US-based oil company was considering selling its 32.7% stake.
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Region plugs in to electric future
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Commentary
Colin Foreman
EditorRead the September 2024 issue of MEED Business Review
Saudi Arabia is well known as one of the world’s largest oil exporters. What is less known is that the kingdom is also one of the world’s most significant consumers of oil.
According to the US-based Energy Information Agency (EIA), Saudi Arabia consumed 3.65 million barrels a day (b/d) in 2022, making it the fifth-largest consumer globally, with a 4% share of the global total.
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Anyone who has experienced Riyadh’s traffic congestion in recent years will attest to the fact that Saudi Arabia has a lot of cars.
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For Saudi Arabia’s efforts and similar endeavours across the region to be successful, other factors will also need to be considered. Shifting from gasoline to electric will require upgrading infrastructure with charging points installed at service stations and in residential areas.
Overhauling infrastructure in existing urban areas is complicated and costly, but the region’s governments have demonstrated a clear commitment to making EVs work. Initial success is within reach as the region plays catch up with other geographies that have shown higher EV ownership rates are achievable.
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Must-read sections in the September 2024 issue of MEED Business Review include:
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> GCC ponders electric future
> Region on the cusp of EV production boom> CURRENT AFFAIRS:
> Outlook uncertain for Iraq gas expansion project
> Security concerns threaten outlook for Libyan oil sectorINDUSTRY REPORT:
Analysis of the outlook for the downstream sector
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> Region advances LNG projects with pace> SAUDI GIGAPROJECTS: Communication gaps hinder Saudi gigaprojects
> INTERVIEW: Legacy building at Diriyah
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> LEADERSHIP: Navigating the impact of digital currencies on forex markets
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> ECONOMY: Fiscal deficit pushes Kuwait towards reforms
> BANKING: Kuwaiti banks hunt for growth
> OIL & GAS: Kuwait oil project activity doubles
> POWER & WATER: Kuwait utilities battle uncertainty
> CONSTRUCTION: Kuwait construction sector turns corner> MEED COMMENTS:
> Saudi World Cup bid bucks global trend for sporting events
> Finance deals reflect China’s role in delivering Vision 2030
> Harris-Walz portents shift in US policy on Gaza
> Aramco increases spending despite drop in profits> GULF PROJECTS INDEX: UAE leads slight dip in market
> JULY 2024 CONTRACTS: Saudi Arabia boosts regional total again
> ECONOMIC DATA: Data drives regional projects
> OPINION: The beginning of the end
> BUSINESS OUTLOOK: Finance, oil and gas, construction, power and water contracts
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PIF and Hyundai award car plant construction deal
5 September 2024
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Saudi Arabia's sovereign wealth vehicle, the Public Investment Fund (PIF), and South Korea's Hyundai Motor Company have awarded the contract to build a vehicle manufacturing plant in Saudi Arabia.
According to media reports, the firms awarded an estimated $248m contract to Seoul-headquartered Hyundai Engineering & Contracting.
Construction of the plant is expected to start in 2024, and vehicle production in 2026.
The facility will have a production capacity of 50,000 vehicles a year, including both conventional vehicles and electric vehicles (EVs).
MEED reported in November last year that Hyundai Motor Company had appointed Seoul-headquartered Heerim Architects as the design consultant for its vehicle manufacturing plant in Saudi Arabia.
PIF and Hyundai Motor Company signed a joint venture agreement to set up a vehicle manufacturing plant in the country in October last year.
The PIF will hold a 70% share in the joint venture, with Hyundai holding the remaining 30% stake. The total investment for the project is estimated to be about $500m.
In December 2022, Saudi Arabia's Industry & Mineral Resources Ministry signed a memorandum of understanding with Hyundai Motor Company to establish a car production plant in the kingdom.
The PIF is keen to invest in the kingdom's automotive sector. Last year, it launched the National Automotive & Mobility Investment Company (Tasaru Mobility Investments) to develop the local supply chain capabilities for the automotive and mobility industry in Saudi Arabia.
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