Gulf Cooperation Council (GCC) comprising of Saudi Arabia, UAE, Kuwait, Qatar and Bahrain is planning to boost public social and investment spending. According to sources, the value of projects that are planned or underway is nearly $2.46 trillion. The wide range of projects and markets would create a number of opportunities for contractors, suppliers and consultants. Over the past ten years, GCC has awarded contracts worth $1.1 trillion. Saudi is the leader when it comes to future projects with a pipeline of more than $477 billion followed by the UAE and Qatar. Construction is the largest sector followed by other sectors like oil and gas and then construction and power.
In the wider Middle East and North African area (MENA) outside the GCC contracts worth $444 billion have been awarded since 2006. The largest market is Iran with deals worth $86 billion. Iraq is not so far behind with deals worth $74 billion.
Demand for electricity in the MENA countries is expected to grow at the rate of 7 per cent per year. Nearly $283 billion is likely to be invested within the region’s power sector between 2014 and 2018. GCC states, on the other hand, are likely to invest over $300 billion in some 20 energy projects by 2020. These projects will generate 8 gigawatts (GW) of additional power. Hitherto, 75 GW of $200 billion worth renewable energy projects are already underway. The increase in investment in the region’s power sector is because energy consumption in the Middle East is growing at a rapid pace. GCC states will have to ramp up their power generating capacity by about 64,000 megawatts (MW) to reach 176,500 MW by 2020, which will require an investment of $40-45 billion.
Analysts have not failed to stress on the need for increased gas production – a necessity for regional and global markets. Gas export growth in MENA is driven by Qatar and Algeria. However, Algerian exports are already declining. Export growth in Oman and Egypt is also waning. Nevertheless, importers like Kuwait, Dubai, Bahrain and Fujairah are emerging. Of UAE’s current electricity production capacity, 85 per cent of the power that is generated is gas-based, whereas the other plants are oil-fired. Electricity in Dubai and Abu Dhabi also comes largely from gas-based stations. The UAE has planned a civil nuclear programme worth $20 billion and the country’s first nuclear reactor is scheduled to start operations in 2017. The country is also planning to set up 4 nuclear reactors in Barakah by 2020 to produce 5.6 GW of electricity.
Power demand in MENA is expected to growth at 7 per cent over the next 10 years. However, MENA countries, with the exception of GCC states, suffer from lack of necessary technology, infrastructure and political and economical stability. Despite having easy access to resources these countries cannot fully utilise or benefit from them.
The power sector in these regions faces problems of transmission and distribution losses. Thus, they are keen on increasing investments in the sector and are trying to develop alternative sources of power.
For Iran oil and gas production is the major source of foreign exchange income and fiscal revenues. The Islamic Republic is home to the second largest natural gas reserves and the fourth largest reserves of oil in the world. Iran has failed to utilize the abundant sunlight available into a major source of power. The increasing population is consuming energy at alarming rates, which has put the Iranian power sector under a lot of pressure.
Domestic oil consumption in Egypt has increased by over 30 per cent over the last decade and the government intends to invest about $100 billion over the next decade. However, political instability and security issues have impacted the economy. Increasing demand for power and shortage of domestic energy resources has pushed the Moroccan government to reduce reliance on non-renewable power sources. The government is currently trying to make use of hydro and solar resources for power generation.
In Iraq, power consumption increased at the rate of 3.6 per cent over the last decade. However, the power distribution networks in the country are plagued by poor design, lack of maintenance and theft. Investments worth 28 billion have been announced in the Iraqi power sector.
Demand for natural gas in Jordan was estimated at 255 million cubic feet, but supply rate was only 95 million cubic feet. Jordan imports over 96 per cent of its oil needs and is heavily dependent on Egypt for its gas supplies. The country is still to explore its energy reserves.
MENA governments are turning to renewable resources for power generation primarily due to depleting resources and enhanced global environmental awareness. MENA countries are home to 57 per cent of the world’s proven oil reserves and 41 per cent of proven natural gas reserves. However, increasing population and economic growth has put the power sector under greater pressure. With gradual reduction in subsidies investments in the power sector will increase.
The water sector has also experienced a rise in investments. Reports suggest that nearly $683 million is to be invested in water projects in the UAE and Lebanon this year. 2014 will witness an investment of $12.5 billion for water projects across MENA.
The power and water sector are the two most important sectors of the projects market in MENA. There is a need, however, to discuss certain key issues like waste water reuse, energy efficiency and effective use of technology. It is crucial that these countries implement sustainable water and energy programmes in order to ensure the existence of a planet capable of sustaining human progress.
Qatar has managed to secure a position among the top three markets for companies conducting business in and with the Middle East. Qatar is set to award major projects worth $200 billion in the years to 2030. Qatar will be awarding massive construction contracts for infrastructure, transport, energy and utilities sectors. The petrochemical industry of Qatar will be offering a large number of opportunities to international EPC contractors. The country is also expected to see a rise in population and decoupling in gas prices, which will affect Qatar’s infrastructure and energy sector.
Kuwait is all set to establish its first independent water and power project (IWPP). The plant is being built on a build-own-operate-transfer model. The Al Zour North will have a power generating capacity of 1,500 MW and a water desalination capacity of 486 million litres per day. The project once completed will account for 10 per cent of Kuwait’s power capacity and 20 per cent of its water production. The project’s estimated worth is $1.8 billion. 40 per cent of the project is owned by GDF Suez (France), Sumitomo Corporation (Japan) and AH AL Sagar & Brothers. Kuwait Investment Authority and Public Institution for Social Security together own 10 per cent of the project. The remaining 50 per cent will be up for a public offering and will be distributed to Kuwaiti citizens once the plant commences operations. A group of international banks provided $1.43 billion (80 per cent of the total project costs) in debt.
Japan is keen to strengthen relations with Kuwait through this project. Tight supply of natural resources has made it crucial for Japan to develop ties with resource-rich countries. The IWPP project will account for 7 per cent of Japan’s total oil imports. The Al Zour North 1 IWPP project has also proved beneficial for companies like Hyundai Heavy Industries and Sidem.
Thus, the ever rising demand for power and water is expected to bring about more projects in the Middle East.
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