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CAPEX Q1 2018

A positive trajectory in oil prices has had a somewhat-strong correlation with project spends. With growing optimism in the market, many long-delayed projects have successfully secured FID. With Saudi Arabia and UAE continuing to lead the way in project spends, 2018 will see continued focus on the power and downstream sectors with greater activity also being seen in the alternatives space.


As oil prices started to witness upward movement by late 2017, the overall GCC markets too witnessed a positive correlation with increasing project spends. While the Middle East markets witnessed the slowest GDP growth of 1.1% in 2017, the higher price of oil has brought with it a degree of optimism within the region, with major global analysts predicting the region to grow at c.2.9% in 2018. As crude prices stabilized between the USD 65-70 band, project owners rushed to close 2017 on a high and as such Q4 witnessed the strongest activity in recent years with USD c.25.3bn in awards. Key to the high project spends was the securing of FID for several delayed mega projects that now looked feasible at slightly higher adjusted prices

While in comparison to Q4 2017, Q1 2018 has started on a more timid note with majority of the project activity restricted to the markets of the UAE (75%) and Saudi Arabia (15%). Little to no activity was seen in Bahrain and Qatar, primarily due to focus on projects under execution and larger focus on non-oil sectors

Gulf countries project spendings 2016


The largest project awarded in Q1 2018 was the much delayed ADNOC Refining - Crude Flexibility Project that was awarded to the JV of CB&I/Samsung.

The alternatives sector too saw continued focus, with Dubai Municipality awarding the USD 865mn waste-to-energy project. Saudi Arabia too made its first major foray into the solar sector this year with the award of Sakaka (300MW) Solar Plant. This was REPDO’s first award in an ambitious plan that targets 40% of Saudi’s electricity being generated by alternative energy projects by 2040. The two most prominent sectors of Power and O&G Production saw lesser activity as compared with previous quarters, however the rest of 2018 will see larger focus on these sectors.

Like Q1 2018, the remaining part of 2018 will further see a dominance in project spends in the two largest project markets of Saudi Arabia and UAE with Power, O&G Production, Pipelines, Petrochem and Alternatives being the major sectors of focus. These sectors continue to remain the focus in the region as part of the long-term strategy associated with these countries.






Gulf countries project spendings 2016

In the recent months several major announcements have been made, reiterating the market’s commitment to these focus sectors.

UAE: ADNOC’s focus has been on awarding new contracts for its expiring concessions, especially the offshore ones which saw interest from several new bidders including several Chinese, Indian and Japanese companies. Ultimately, CNPC, ONGC-Videsh, Inpex, Eni and Total were awarded USD 2.6bn in field development contracts. The rise of Asian companies within the region’s O&G sector has been part of a growing political and economic closeness which is now being noticed within a larger acceptance of Asian contractors and vendors in the region. The move also comes as part of the government’s long-term plans on increase oil production to 3.5mn bpd by end 2018 in order to support its growing downstream sectors.

Oman: Further discoveries, sales of concessions and focus on gas exploration and production continues to remain the focus of Oman. Ramp up of production at the Khazzan field along with a significant (4 Tcf) new discovery by PDO will further support Oman’s ambition of becoming a net gas exporter. Additionally, higher oil prices have supported Oman in obtaining FID for the long awaited Duqm Refinery project, which is integral to the country’s downstream initiatives.

Saudi Arabia: Saudi Arabia’s focus continues to remain on its downstream sector and new gas discoveries. The continues focus on power projects using gas and condensate as feedstock as compared to heavy oils indicates a continued shift in Aramco’s strategy of using its oil for greater valued added products. A significant move on this front has been the recent FEED and PMC award of the mega USD 20bn Oil-to-Chemicals project to Wood PLC. The country has also made its first award within the renewables sector with REPDO awarding the 300MW Sakaka Solar Plant. Another 450MW of Solar Projects are planned for award in 2018 making Saudi Arabia a new target market for major solar firms.

With markets showing signs of optimism with strong oil prices, 2018 is expected to be a more positive year for the projects markets. With restructurings and austerity behind us, owners are showing positive intent in awarding projects. Contax’s estimates suggest that a total of c.USD 55bn worth of projects are expected to be awarded in the GCC, which is in line with 2017. For more information, contact the VP of Business Advisory Services, Ann-Marie Carbery, at This email address is being protected from spambots. You need JavaScript enabled to view it.

- Kalpesh Ramwani, Project Manager
Contax Partners

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