A MATURING MARKET.

Author:Coulter, Steve
 
FREE EXCERPT

Steve Coulter reports on construction developments in the Middle East.

Attempts by Middle Eastern governments and developers to wean themselves off their dependence on oil-related funding -- including progressing alternative funding methods for capital projects -- look set to get a boost as states attempt to get to grips with the fallout from the plummeting price of oil.

Contractors report that the fall-off in their forward order books as a result of oil's plunge has not been as dramatic as they might have feared. Nevertheless, big project awards are currently at something of a premium, particularly in the oil-rich Gulf States, and one effect of this has been to refocus attention onto other areas of the construction market.

Whether or not private developments from non oil-dependent sources can fill the gap remains to be seen, and while contractors wait to see how things pan out, competition for those contracts on offer is becoming keener by the day.

On top of this, profit margins on successful tenders are likely to be undermined as East Asian-based bidders -- buoyed by devaluations in their own countries -- seek to refill order books in the Middle East.

Generalisations are always dangerous however, and states have varied in both their overall exposure to the oil shock and in the manner in which it has affected their development plans.

Qatar provides a prime example of the chaos that falling oil prices are wreaking on development plans. Heavily dependent on oil revenues, the Qatar government is committed to a major investment programme in gas production which will only begin to deliver early in the next century.

Development expenditure has been slashed by 35 per cent for 1998/99, with only one major project, the $125 million Doha International Airport, escaping unscathed.

High profile casualties include an ambitious $450 million plan to upgrade the country's highway network. This has been shelved indefinitely.

By way of response, the Qatari government is understood to be looking at unorthodox plans to re-finance its debt in an attempt to free-up funding for what it regards as essential improvements to the country's infrastructure. Proposals include issuing Treasury Bills and government bonds.

In the meantime, question marks surely remain over a number of industrial/petrochemical developments in Qatar. Project opportunities in these fields which look set to go ahead include a $600 million expansion scheme for Qatar National Oil Development Company's Umm Said refinery and a $1 billion methanol plant at Ras Laffan.

Bids are also expected to be received mid-year for a polyethylene complex at Umm Said. Developer for the $800m complex is the state-owned Qatar General Petroleum Corp. in joint venture...

To continue reading

REQUEST YOUR TRIAL