GCC Award Contracts Worth $29.9 Billion in Q1 of 2023

Putting behind the global economic turmoil and growing inflation, the GCC countries have awarded projects worth $29.9 billion in the first three months of 2023.

Led by Saudi Arabia and the UAE, the total value of GCC contracts awarded increased by 54.7% y-o-y compared with $19.3 billion in awards during Q1-2022. This was the second highest quarterly project awards since the start of 2022.

All GCC project markets witnessed y-o-y project awards growth during Q1-2023 except for Bahrain which remains the smallest project market in the region.

Saudi Arabia remained the largest projects market in the GCC during Q1-2023 and its project awards recorded 17.9% growth during the quarter to reach $13.3 billion compared with $11.3 billion in Q1-2022. Comparatively, the UAE project awards more than doubled to reach $10 billion during the quarter while Kuwait’s contract awards reached $1.8 billion during Q1-2023 compared with $407 million in Q1-2022 recording the highest percentage y-o-y contract awards increase in the region during the quarter.

According to Kuwait-based Kamco Invest, the chemical sector witnessed the biggest increase in the value of projects awarded during the year recording $4.7 billion y-o-y increase in new contract awards to reach a total of $5.7 billion during Q1-2023.

Saudi Arabia alone accounted over 44.6% of the contracts awarded in the GCC region during Q1- 2023, while Saudi Arabia, UAE and Qatar combined represented 84.1% of the overall projects in the GCC.

Saudi Arabia’s growth in contracts during the quarter was mainly fuelled by Saudi Aramco bumper profits during FY-2022 which reached $161.1 billion. It was reported that Aramco’s Capex is expected to grow 20% during 2023 as the energy giant undertakes its mission to build its long-term oil and gas production potential.

The growth in the GCC project awards during this quarter has been due to the determination of the GCC countries to diversify their economies away from hydrocarbons. GCC member states have backed and invested in projects in the industrial sector such as aluminum, steel, and other industrial equipment manufacturing projects.

For instance, Saudi Arabia plans to invest $453.2 billion in its National Industrial Development & Logistics Program by 2030. The UAE has 11 initiatives in its industrial strategy which covers 11 sectors and forecasts its Industrial sector’s GDP contribution to reach $81.7 billion by 2030.

In Kuwait, the government streamlined 164 programs and projects for its national industrial strategy with $100 billion earmarked for development through public-private partnerships.

Saudi Arabia

Saudi Arabia represented nearly half of the contracts awarded in the GCC region during Q1-2023. High oil prices and elevated energy demand supported the Saudi state’s financial coffers making it able to spend on new contracts as well maintain to fund ongoing projects in the Kingdom.  

UAE

The UAE representation of the GCC contracts awarded increased from 23.4% in Q1-2022 to 33.6% in Q1-2023. The Emirate’s projects market was mainly driven by the combination of factors that include elevated oil prices and ambitious development goals.

In terms of sectors, the construction sector once again accounted for the biggest pie of new project awards in the UAE representing 49.3% of total projects in Q1-2023. The UAE government has recently announced its allocation of 39% of its $68.63 billion federal budget expenditure between 2023 and 2026 to social development and benefits sector.

One of the major projects that was awarded during Q1-2023 in the Emirates was the $2 billion water PPP project contract awarded by ADNOC. The project involves the development of a nanofiltration plant with an estimated capacity to process 115 million imperial gallons a day (MIGD) in Mirfa, Kamco Invest report added.