Stakeholders hope Kuwait can execute spending plans
11 August 2023
This month’s special report on Kuwait also includes:
> ENERGY: Kuwait's $300bn energy target is a big test
> BANKING: Kuwaiti banks enter bounce-back mode
> INTERVIEW: Kuwait’s Gulf Centre United sets course for expansion
Contractors in Kuwait hope that the country’s recently appointed cabinet will be able to execute spending plans without descending into political infighting.
Earlier this month, Kuwait’s National Assembly passed the 2023/24 budget, projecting the largest year of spending in the country’s history.
The budget projects spending at KD26.2bn ($85.2bn) and revenues at KD19.4bn, with a projected deficit of KD6.8bn. After the vote, the Assembly closed for its summer break to return in late October.
Speaking to lawmakers after the budget was approved, Prime Minister Sheikh Ahmad al-Nawaf al-Sabah thanked them for their cooperation and called for more collaboration in the next term when they return.
Key projects
Joint action by the country’s politicians will be vital in executing spending plans and pushing through strategic infrastructure projects.
In July, Kuwait’s government submitted a four-year programme for major infrastructure projects to the National Assembly. The programme included 107 projects to be completed through to 2027.
Among the projects are Kuwait’s section of the GCC Railway project and Kuwait International airport’s Terminal 2, which is expected to increase the capacity for flights in and out of the country from 240,000 to 650,000 by building three new runways.
Other key projects included in the programme are a scheme to repair thousands of kilometres of roads and the long-delayed Mubarak al-Kabeer port expansion.
The container harbour on Boubiyan Island faces Iraq and is anticipated to have a capacity of 8.1 million containers when completed.
If all the oil and gas projects in the programme are executed as planned, the country’s oil production capacity will increase from 2.7 million barrels a day (b/d) to 3.15 million b/d.
At the same time, natural gas production will be increased from 521 million cubic feet a day (cf/d) to 930 million cf/d.
Inadequate spending
The programme could have significant economic benefits for Kuwait. However, many contractors within the country remain pessimistic about the chances of the plans being fulfilled.
In May this year, official figures issued by government agencies revealed a worryingly low level of government spending on development projects despite large budgets being allocated.
During the 2022/23 fiscal year, only KD470m was spent despite KD1.3bn being allocated for projects.
The expenditure rate of only 36 per cent for the 2022/23 fiscal year has sparked concerns that the recently announced spending plans for the next four years are also likely to fail to hit targets.
Unpredictable policies
Kuwait’s low expenditure rate was mainly driven by political gridlock that has stopped the government from making key decisions and giving the essential approvals needed to execute projects.
Kuwait has had three elections in three years, creating policy uncertainty that has significantly impacted businesses and progress on policy issues.
Due to the political gridlock, major contract awards have been scarce in Kuwait over recent years and dozens of businesses have been forced to take drastic action.
With so few major new contract awards, some international contractors have reduced staff levels in Kuwait, and many domestic businesses have started seeking work overseas in Saudi Arabia, Oman and Qatar.
The government is very worried about potential electricity blackouts if one of the country’s power stations cannot operate for any reason
Power prioritised
While contract awards remain far below historic highs, a number of significant awards in the power and water sector in the first quarter of this year have increased optimism for some stakeholders.
The value of awarded projects in Kuwait for the first three months was KD527m ($1.7bn), more than four times as much as the same quarter the previous year.
This was mainly driven by activity in the power sector, which rose to its highest level in almost six years, according to the National Bank of Kuwait (NBK).
The jump in spending on the power sector came as the government tried to fend off possible electricity shortages.
One source said: “This was a form of emergency spending as the government is very worried about potential electricity blackouts if one of the country’s power stations cannot operate for any reason.”
A sector where major contract awards have remained very low is oil and gas, something that has worried analysts as Kuwait relies on this sector for more than 90 per cent of its revenues.
True test
In June, the prime minister named the country’s fifth cabinet in less than a year. The latest 15-person cabinet retained the prime minister and nine ministers from the previous cabinet in their old posts.
The new cabinet’s similarities with the last cabinet have fuelled concerns that it will be plagued by similar problems when it comes to pushing through spending plans.
However, the slight changes made have shifted the balance of the cabinet in a way that favours cooperation with the parliament, according to some contractors.
If cooperation can be fostered and we see a period where the government approves major projects, it could be transformational for the country.
Ultimately, the true test of whether Kuwait’s policymakers can work together to push through approvals for projects will come when they return to work after their summer break.
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Dubai prequalifies developers for $22bn tunnels PPP
6 February 2025
Dubai Municipality has prequalified developers for the first four packages of the $22bn Dubai Strategic Sewerage Tunnels (DSST) project.
According to industry sources, at least three companies have been prequalified as lead members of potential consortiums that can bid for the contracts.
These include:
- Etihad Water & Electricity subsidiary (local)
- Itochu (Japan)
- Vision Invest (Saudi Arabia)
Other companies have been prequalified as technical members.
MEED reported in October that over a dozen companies were keen to prequalify as investors or sponsors of the planned public-private partnership (PPP) project.
They included:
- Abrdn Investcorp Infrastructure Investments Manager (UK)
- Besix (Belgium)
- China Railway Construction Corporation (CRCC)
- China Railway Engineering Group (CREG)
- China State Construction Engineering Corporation (China)
- Itochu (Japan)
- Nesma Company (Saudi Arabia)
- Plenary (Australia)
- Samsung C&T (South Korea)
- Vision Invest (Saudi Arabia)
- Webuild (Italy)
The request for proposals for the project's first two packages is expected to be issued imminently.
MEED previously reported that the bidders for the PPP packages will be prequalified consortiums comprised of sponsors or investors, EPC contractors, and operations and maintenance contractors.
The overall project will require a capital expenditure of about AED30bn ($8bn), while the whole-life cost over the full concession terms of the entire project is estimated to reach AED80bn.
The investor prequalification process for the scheme comes after the client prequalified EPC contractors that can partner with the developers or investors to bid for the contracts.
MEED understands that packages J1 and W will be tendered together as separate contracts first, followed by J2 and J3, with the requests for proposals to be issued sequentially, staggered about six to 12 months apart.
DSST packages
Under the current plan, the $22bn DSST project is broken down into six packages, which will be tendered as PPP packages with concession periods lasting between 25 and 35 years.
The first package, J1, comprises Jebel Ali tunnels (North) and terminal pump stations (TPS). The tunnels will extend approximately 42 kilometres (km), and the links will extend 10km.
The second package, J2, covers the southern section of the Jebel Ali tunnels, which will extend 16km and have a link stretching 46km.
The third package, W for Warsan, comprises 16km of tunnels, TPS and 46km of links.
J3, the fourth package, comprises 129km of links.
J1, J2, W and J3 will comprise the deep sewerage tunnels, links and TPS (TLT) components of the overall project.
J1, J2 and W will be procured under a design-build-finance-operate-maintain model with a concession period of 25-35 years.
J3 will be procured under a design-build-finance model with a concession period of 25-35 years. Once completed, Dubai Municipality will operate J3, unlike the first three packages, which are planned to be operated and maintained by the winning PPP contractors.
The project’s remaining two packages entail expanding and upgrading the Jebel Ali and Warsan sewage treatment plants. MEED understands that these packages will be procured at a later stage.
https://image.digitalinsightresearch.in/uploads/NewsArticle/13370610/main.jpg -
Iraq and GE Vernova complete plants upgrade
6 February 2025
US-headquartered energy technology provider GE Vernova has completed the upgrades of “several key” power plants in Iraq.
The firm and the Iraqi Ministry of Electricity (MoE) announced the upgrade’s completion on 5 February.
The overall upgrade project, which GE Vernova previously announced, covers 46 gas turbines across 12 power plants, adding up to 500MW to Iraq’s national grid before the summer of 2025.
They did not specify which power plants have completed upgrade works.
According to GE, some of the power plants included in this project already transitioned from heavy fuel oil (HFO) to natural gas, with a capacity increase of approximately 260MW. These plants include Ninawa, Al-Diwaniyah, Hilla, Karbala, Shat Al-Basra, Najibiya, Samawa, Dhiqar, Al-Khairat and Al-Haidariya.
GE Vernova added: “The other plants are expected to be modernised within the summer of 2025, with an expected additional increase in capacity of approximately 250MW.
“This modernisation is expected to improve operational flexibility and boost output, efficiency and availability of the power generation assets.”
In addition, the firm announced the successful installation of its Advanced Gas Path (AGP) upgrades on several 9. E gas turbines powering the Al-Quds and Dhiqar power plants, and MXLII upgrades on 13E2 gas turbines powering the Al-Mansouriya power plant.
According to GE Vernova, the expected output increases of up to 6% for each power plant will enable the MoE to generate more electricity using the same amount of fuel.
In addition, as part of the services and upgrade agreement announced in 2024 with the MoE to enhance the availability of power plants across the country, GE Vernova completed comprehensive maintenance projects across several of these power plants, corresponding to a total capacity of 3.7GW.
These power plants include Qayyarah, Diwaniyah, Al-Haydariyah and Baghdad South.
Iraq periodically suffers from power outages, especially during the summer months, when increased cooling requirements overwhelm its power plants and electricity grid.
READ THE FEBRUARY MEED BUSINESS REVIEW
Trump unleashes tech opportunities; Doha achieves diplomatic prowess and economic resilience; GCC water developers eye uptick in award activity in 2025.
Published on 1 February 2025 and distributed to senior decision-makers in the region and around the world, the February MEED Business Review includes:
> AGENDA 1: Trump 2.0 targets technology> AGENDA 2: Trump’s new trial in the Middle East> AGENDA 3: Unlocking AI’s carbon conundrum> GAZA: Gaza ceasefire goes into effect> LEBANON: New Lebanese PM raises political hopes> WATER DEVELOPERS: Acwa Power improves lead as IWP contract awards slow> WATER & WASTEWATER: Water projects require innovation> INTERVIEW: Omran’s tourism strategies help deliver Oman 2040> PROJECTS RECORD: 2024 breaks all project records> REAL ESTATE: Ras Al-Khaimah’s robust real estate boom continues> QATAR: Doha works to reclaim spotlight> GULF PROJECTS INDEX: Gulf projects market enters 2025 in state of growth> CONTRACT AWARDS: Monthly haul cements record-breaking total for 2024> ECONOMIC DATA: Data drives regional projects> OPINION: Between the extremes as spring approacheshttps://image.digitalinsightresearch.in/uploads/NewsArticle/13370380/main.jpg -
Bankability remains hydrogen’s unbreakable challenge
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Commentary
Jennifer Aguinaldo
Energy & technology editorThere is some indication that green hydrogen as an industry has arrived at the valley of disillusionment if the Gartner hype cycle is anything to go by.
This is evident with the dwindling number of attendees and absence of offtakers – global commodity trading companies that are expected to buy premium green hydrogen and derivative products – at previously well-attended green hydrogen summits in major cities in the Gulf.
Following frenzied announcements of multibillion-dollar integrated green hydrogen and ammonia plants in the Middle East and North Africa region, particularly Egypt, Morocco, Oman and the UAE, between 2021 and 2023, it appears that key stakeholders have started coming to grips with reality.
Of the close to 80 green hydrogen projects that MEED and MEED Projects track, only three have so far signed an offtake agreement, and only one has managed to reach financial close.
The $8.4bn Neom green hydrogen project in Saudi Arabia reached financial close in March 2023, nearly two years after it was announced.
The project, the largest of its kind requiring over 4GW of renewable energy and 2GW of electrolyser capacity, managed to reach financial close based on one of the three co-developers, the US’ Air Products, assuming the full offtake and construction risks for the project, note some experts.
A project’s bankability ultimately relies on suitable stakeholders taking on the risks for every aspect of the project, from construction to operations.
Currently, the risks or threats include evolving global regulations related to consumption and carbon emissions pricing; lack of technology maturity; supply and demand uncertainty; and the lack of mainstream demand, according to Wael Almazeedi, chief executive at Abu Dhabi-based International Renewable Energy Certification (I-rec) certified firm Avance Energy.
Almazeedi said these risks “need to be mitigated to the satisfaction of project lenders” if the planned green hydrogen projects in the region are to secure financing and reach the construction phase.
The challenges do not necessarily mean all projects will fail, however.
Similar to predecessors such as solar and electrification technologies, the hope is for the planned green hydrogen projects to eventually emerge out of the realm of disillusionment and reach the so-called enlightenment slope and, ultimately, plateaus of productivity, using Gartner’s hype cycle model.
Government support in terms of regulatory frameworks, inevitably including some form of subsidies to bridge the so-called green premium, as well as global certification standards, are at the top of suppliers’ agendas.
Across the key aspiring Mena clean hydrogen hubs, like the UAE in particular, clearer regulatory frameworks have started to emerge, which could encourage more cohesive cooperation and enable projects to get off the ground.
Key EU countries also appear to remain committed to clean and green hydrogen imports as part of the green deal, while at least one power plant in Japan has completed a three-month trial of co-firing green ammonia with coal “with positive results”.
But until all these come together to ensure an unencumbered global supply chain, offtakers and project financing deals will likely remain elusive.
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Morocco explores salt caverns for hydrogen storage
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A feasibility study is under way for a project to explore underground salt cavern sites for green hydrogen storage in Morocco.
According to Samir Rachidi, director-general at Iresen, the underground salt caverns are located near the capital Casablanca.
“There is already an existing cavity used to store natural gas,” Rachidi told MEED.
It is understood the same process or principle will be used to store green hydrogen in salt caverns.
The potential storage capacity of the salt caverns for green hydrogen can only be determined once the feasibility study is completed.
Photo credit: Shutterstock
Underground salt caverns offer an option for the bulk storage of very large amounts of gaseous hydrogen.
According to Ireland-headquartered chemicals firm Linde, which operates the world’s first commercial hydrogen high-purity cavern in Texas, the gas has to be purified and compressed before it can be injected into a cavern.
It added that hydrogen-filled cavities can act as a backup for a pipeline network.
First green ammonia project
Rachidi also said that Moroccan phosphate specialist OCP is in the advanced stages of studying a project to produce 1 million tonnes of green ammonia annually by 2027.
The planned facility, which will cater to export markets, will include a 200,000 tonne-a-year (t/y) green hydrogen production plant and 4,000MW of renewable energy plants.
It will also include an electrolyser plant with a capacity of 2,000MW.
At least seven other green hydrogen or ammonia projects are under study or in the pre-front-end engineering and design stage in the North African state.
In April 2023, a team led by China Energy International Construction Group signed a memorandum of cooperation to develop a green hydrogen project in a coastal area in southern Morocco.
A year earlier, Serbia-headquartered renewables developer and investor CWP Global appointed US firm Bechtel to support the development of large-scale green hydrogen and ammonia facilities in Morocco and Mauritania.
The Amun green hydrogen project, which CWP Global plans to develop in Morocco, is understood to require 15GW of renewable energy and has an estimated budget of between $18bn and $20bn.
Morocco established a National Hydrogen Commission in 2019 and published a green hydrogen roadmap in 2021.
The roadmap entails the production of green hydrogen for local ammonia production and export between 2020 and 2030; the production and export of green hydrogen, green ammonia and synthetic fuels between 2030 and 2040; and the global trade of these products between 2040 and 2050.
Main photo: For illustrative purposes only (Adnoc)
READ THE FEBRUARY MEED BUSINESS REVIEW
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Qatar maintains stable growth heading
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> DATABANK: Qatar maintains stable growth headinghttps://image.digitalinsightresearch.in/uploads/NewsArticle/13369431/main.gif