Kuwait’s projects sector maintained its relatively healthy momentum in the third quarter of 2016, with the government committed to implementing its development plan even as lower oil prices continue to dampen state oil earnings.
The National Bank of Kuwait (NBK) reported that Kuwait awarded contracts worth KD1.0 billion (US$ 3.4 billion) during the third quarter of 2016 (3Q16), an increase of KD129 million (14.8%) from the previous quarter.
This brings the total value of contracts awarded so far this year to KD3.6 billion ($12 billion), roughly KD1.5 billion ($4.8 billion), or 42% of which are oil and gas contracts. Another KD2.3 billion ($ 7.7 billion) worth of contracts are expected to be awarded by the end of the year.
The report also showed that the total value of Kuwait’s projects market (active and planned) stood at KD75.1 billion ($247 billion), up 0.8% year-to-date, by the end of September.
Looking ahead to 2017, the total value of awarded projects is expected to increase to KD11.5 billion ($38.1 billion).
Foreign direct investment
Despite the challenges facing Kuwait’s project market, mainly lower oil earnings and sub-optimal levels of foreign direct investment (FDI), capital for projects is not in short supply thanks to the government’s commitment to rolling out its infrastructure development plan.
The NBK report said that after softening in the second quarter, project awards in the oil and gas sector were boosted in the third quarter by Kuwait Oil Company’s (KOC) signing of the two packages (Packages 1 & 2) of the Jurassic Non-Associated Gas Reserves project.
The two packages together are worth around KD228 million ($758 million). Schlumberger has already won the contract to develop the Sabriyah and Umm Niqa fields (Package 3) earlier in the year for KD144 million ($480 million). Upstream operator KOC aims to expand domestic production of natural gas to 300 million cubic feet per day (cf/d) in order to keep up with rising domestic consumption.
Feed pipeline projects
During the same quarter, KOC also awarded two feed pipeline projects – one for oil supply worth KD84 million ($280 million) and another for gas transmission valued at KD53 million ($177 million). They were awarded to local firms Combined Group and Arabi Enertech, respectively.
In the construction sector, project contracts worth over KD301 million ($1 billion) were awarded in the first two quarters of 2016. The value of awarded projects fell to KD63 million ($210 million) during the third quarter.
However, this sector is expected to get a boost in the fourth quarter after KIPCO (the Kuwait Projects Company) awarded the KD723 million ($2.4 billion) Hessah Al-Mubarak project contract to the Ahmadiah Contracting & Trading Company.
In the power and water sector, the value of awarded contracts was KD28 million ($92 million) in the third quarter, which is the lowest this year.
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