Saudi Arabia and UAE lead in GCC project awards in Q2-2022

GCC project awards improved during the second quarter of the year despite global economic challenges that was caused by supply chain problems and higher oil prices primarily driven by the Russia-Ukraine conflict.

In its “GCC Projects Market Report for July 2022,” the Kuwait-based Kamco Invest said the total value of GCC contracts awarded increased by 11.7% y-o-y during Q2 of 2022 to $22.8 billion against $20.4 billion in Q2 of 2021. Saudi Arabia and Oman reported higher contract awards during the quarter that more than offset a dip in awards in Kuwait, Bahrain, Qatar, and the UAE.

Saudi Arabia, the GCC’s largest projects market, recorded the biggest y-o-y increase in value of contracts awarded during the first six months of the year that reached $16.5 billion in 2022. Contracts awarded as part of the $500 billion NEOM project boosted the Kingdoms project awards during the quarter.

The UAE recorded a 46.4% fall in y-o-y projects awarded in Q2-2022 which reached $3.1 billion and Saudi Arabia represented 77.2% of GCC contract awards for the same period. Total projects awarded in Kuwait during Q2-2022 declined by 67.9% to $521 million down from $1.6 billion for Q2-2021.

Oman witnessed Q2-2022 new projects awards jump almost three times to reach $1.1 billion rising from $390 million in value of contracts awards in Q2-2021. On the other hand, the value of contracts awarded in Bahrain during Q2-2022 witnessed a steep decline of 83.9% to reach $228 million as compared with $1.4 billion during Q2-2021.

In terms of sector classification, the transportation sector witnessed the biggest increase in terms of absolute value during the quarter with an increase of $4.8 billion in new contracts to reach a total of $7.7 billion during Q2-2022.

UAE

The UAE maintained its position as the second largest projects market in the GCC after Saudi Arabia during Q2-2022 despite witnessing a q-o-q decline of 25.4% to reach $3.1 billion in awards during the quarter.

In terms of y-o-y performance, the decline was steeper at 46.4%. As a result, the Emirate represented 13.8% of the total contracts awarded in the GCC during the quarter as compared to 25.2% during Q1-2022.

The construction sector once again topped the biggest pie of new project awards in the UAE representing 64.3% of total projects in Q2-2022. However, new projects awarded in the sector decreased 22.5% y-o-y to reach $2 billion during the quarter down from $2.6 billion in Q2-221.

On the other hand, the transport sector witnessed the largest percentage growth in awards during the quarter. The sector recorded $423 million in new contracts during Q2-2022 as compared to $106 million it registered in Q2-2021. The power sector witnessed the only other y-o-y growth registering 12.8% increase in value of new contracts that reached $379 million during Q2-2022 compared with $336 million in Q2-2021.

Saudi Arabia

Saudi Arabia has enjoyed the best Q2 contract awards since 2014 mainly reflecting elevated oil prices, although the Kingdom has clearly said that it wants to separate project awards and oil market performance.

Total Saudi project awards in Q2-2014 stood $19.5 billion compared with $16.5 billion during Q2-2022. The value of contracts awarded in the Kingdom during Q2-2022 witnessed a q-o-q increase of 106.7% or $8.5 billion from $8 billion in Q1-2022.

In terms of sectors, the transportation sector leapt into the lead as the largest sector by value of awarded projects among the sectors accounting 36.1% of the total projects awarded in the Kingdom during Q2-2022 mainly due to NEOM awards of transport and utility infrastructure during the quarter.

The NEOM project has awarded two key contracts to build two 28 km long tunnels for high-speed transport and freight services. Moreover, in another major transportation contract DP World and the Saudi Ports Authority (Mawani) have agreed to a 30-year $133 million deal to build a large-scale logistic park at the Jeddah Islamic Port. The agreement includes the construction of a 415,000 sq m area, which has an in-land container depot with capacity of 250,000 twenty-foot equivalent units (TEU’s).

Total value of projects awarded in the Saudi oil sector jumped nearly five times to reach $4.2 billion during Q2-2022, up from $882 million during the similar period of the past year.

Taking advantage from record high oil prices, Saudi Aramco has undertaken its commitment to increase its capital expenditure from $39.1 billion in 2021 to up to $50 billion in 2022.