Kuwaits projects pipeline remains robust against a backdrop of improving oil prices and a government commitment to maintain healthy capital spending and move forward with its development projects, according to a report by National Bank of Kuwait (NBK).
KWD 1.4bn ($4.6bn) worth of contracts were awarded in 1Q17, according to MEED Projects, a figure roughly in line with 2016s quarterly average. Looking ahead to the rest of 2017, Kuwait could award another KWD 6.2bn ($20bn) worth of contracts before yearend.
The oil sector dominated awarded projects in 1Q17. The sector saw KWD 672mn worth of awards for eight projects. The largest project was awarded by KOC to Petrofac for the value of KWD 397mn ($1.3bn) to build Gathering Center 32.
KOC awarded another three projects pertaining to water facilities in different gathering centers in the south, south-east and east of the country. The three contracts averaged KWD 69mn ($225mn) each and are expected to be complete between 4Q19 and 1Q20.
Housing was another sector to see notable activity, NBK said. In March 2017, the Public Authority of Housing Welfare (PAHW) awarded the second of four infrastructure contracts in South Mutlaa city, a strategic development plan project, to China Gezhouba Group. The contract, valued at KWD 216mn ($708mn), is for major infrastructure work and is expected to be completed by March 2019.
The Directorate General of Civil Aviation (DGCA) awarded one of the eleven sub-projects pertaining to the expansion of Kuwait airport. The project has been awarded to a joint venture of AVIC International & HOT E&C for a value of KWD 149mn ($489mn) and completion is expected by March 2022. This project includes construction of new runways in addition to extending existing ones and enhancing supportive infrastructure.
Looking ahead, project awards are expected to remain healthy in 2017. Another KWD 6.2bn ($20bn) worth of contracts could be awarded before year-end, split almost evenly between the second quarter and the fourth quarter of the year;
The third quarter is likely to see slower activity as a result of the Holy Month of Ramadan and the summer season. Construction projects and power & water contracts are expected to dominate awards during the rest of 2017.
Roadwork and construction of government buildings are expected to be a large part of the award activity in 2017. The ministry of public works has KWD 2.3bn worth of contracts in the pipeline to be awarded between the second and fourth quarter of this year. Out of the 18 contracts, eleven are for roads and the remaining eight are construction contracts for governmental buildings.
Public-private partnership (PPP) projects remain an important source of project awards in 2017, led by phase 2 of the Al-Zour North power and water project. Kuwait Authority for Partnership Projects (KAPP) extended the deadline for the project which was expected to be tendered in 2016.
Bid bonds for the two components of the phase 2 of Al-Zour North IWPP, the power plant and water desalination plant, with estimated net project values of KWD 534mn and KWD 287mn, respectively, have been extended to October 2017, when the project is likely to be awarded.
PPP projects for a wastewater plant and a solid waste facility are also likely to be awarded in 2017. The award date for the KWD 473mn ($1.5bn) Umm Al-Hayman Wastewater Treatment Plant has been set to 22 May.
Meanwhile, bids for the Kabd Municipal Solid Waste Project closed on 19 March. International Financial Advisors is said to have submitted the lowest bid at a cost of KWD 243mn. The award date is set for May.
2017 could see the awarding of another important power contract. Phase 3 of the Sabiya combined gas turbine will expand the existing capacity at the Sabiya site by 750 MW. The bids have been under evaluation since July 2016 though the project has yet to be awarded. Alghanim International General Trading & Contracting is the lowest bidder with the bid price of KWD 177mn.
The Kuwaiti government continues to be committed to moving forward with its development projects despite the decline in oil prices since 2014 and the fiscal deficit. According to the Supreme Council for Plannings (SCP) third follow up report of the annual development plan for FY16/17, KWD 1.45bn was spent between March and December 2016, or 49 percent of what was allocated for the fiscal year.