DUBAI, UAE — GCC project awards surged by 86 percent during the second quarter (Q2) of 2023, reaching US$49.7 billion compared to US$26.7 billion in awards during Q2-2022, highlighting the GCC countries’ determination to execute and achieve their diversification targets.
The significant increase in the total value of project awards in the GCC also serves as a significant indicator of the region’s economic health. This quarter marked the highest value of project awards in over five years.
According to a new report by Kamco Invest, all GCC project markets, except Bahrain, witnessed year-on-year growth during Q2-2023. Saudi Arabia remained the largest projects market in the GCC during this period.
Saudi Arabia’s project awards recorded a growth of 33.7 percent during the quarter, reaching US$24.4 billion compared to US$18.3 billion in Q2-2022. Similarly, the UAE experienced a 127 percent jump in project awards, reaching US$12.2 billion during the quarter.
Contract awards in Kuwait increased from US$922 million in Q2-2022 to USD 1.3 billion in Q2-2023, marking the second-highest project value in the past six quarters.
Saudi Arabia accounted for over 49.1 percent of the contracts awarded in the GCC region during Q2-2023, while the combined contributions of Saudi Arabia, UAE, and Qatar represented 94.4 percent of the overall projects in the GCC.
The growth in Saudi Arabia’s contracts during the quarter was primarily fueled by the increased number of Neom projects awarded. According to MEED Business Review, the total value of Neom project awards in 2023 stood at US$13.6 billion, surpassing the total value of contracts awarded in the Saudi capital Riyadh and Dubai, which reached US$11 billion and US$9.3 billion, respectively. The four major elements of the Neom project, namely the Line, Trojena, Oxagon, and Sindalah, have already been launched and are currently under construction.
The total value of contracts awarded in Oman increased by 69.7 percent to reach US$1.5 billion compared to US$871 million in Q2-2022. This growth was driven primarily by year-on-year growth in the Sultanate’s power and gas sectors, which reached US$475 million and US$728 million, respectively.
Oman’s projects market is expected to witness significant growth throughout 2023. According to MEED Projects, Oman is anticipated to sign a US$6.7 billion hydrogen contract with a consortium led by the South Korean steel manufacturer Posco.
News in numbers GCC project awards surged by 86% in Q2-2023, reaching US$49.7 billion compared to US$26.7 billion in Q2-2022. Saudi Arabia remained the largest projects market in the GCC, with a growth of 33.7% to reach US$24.4 billion. UAE project awards jumped 127%, reaching US$12.2 billion in Q2-2023. Qatar witnessed an 8.3-fold increase in contract awards, totaling US$10.4 billion. Contract awards in Kuwait increased to US$1.3 billion, marking the second-highest project value in six quarters. Saudi Arabia accounted for over 49.1% of the contracts awarded in the GCC region during Q2-2023. The total value of contracts awarded in Oman increased by 69.7% to reach US$1.5 billion. Gas sector projects in the GCC recorded a US$10.3 billion increase in new contract awards during Q2-2023. MEED Projects estimates total GCC contracts in tender to surpass US$110 billion in 2023, led by Saudi Arabia, Qatar, and UAE. Saudi Arabia has the largest planned and unawarded projects in the MENA region, estimated at US$1.18 trillion. UAE has planned and unawarded projects worth US$409.2 billion, including US$228.7 billion in construction. Kuwait's pipeline of un-awarded and planned projects is estimated to be worth US$142.7 billion.
In terms of sector classification, the gas sector experienced the most substantial increase in the value of projects awarded during the year, recording a US$10.3 billion year-on-year increase in new contract awards and reaching a total of US$11.9 billion during Q2-2023.
Saudi Arabia
Saudi Arabia represented nearly half of the contracts awarded in the GCC region during Q2-2023. The Saudi government’s determination to achieve its 2030 Vision goals, combined with the fiscal cushion provided by elevated oil prices, enabled the Kingdom to increase the value of contracts awarded during this period. The growth in the Kingdom’s project awards was supported by the increase in expected capital expenditure of Aramco in 2023.
UAE
The UAE projects market maintained its position as the second-largest projects market in the GCC during Q2-2023, with a total value of contracts reaching US$12.2 billion. The UAE’s representation of GCC contracts awarded increased from 20.1 percent in Q2-2022 to 24.5 percent in Q2-2023. The Emirate’s projects market was primarily driven by a combination of factors, including resilient economic growth, which allowed the Emirate to stay on course and award pre-planned contracts.
Qatar
The total value of contracts awarded in Qatar increased by 8.3 times year-on-year, reaching US$10.4 billion compared to US$1.1 billion in Q2-2022, according to data gathered by MEED Projects. The growth in contract awards was mainly due to the performance of the country’s gas sector, which accounted for nearly 97 percent of the total value of projects awarded during the quarter. The total value of gas sector projects awarded jumped nearly 16 times, reaching US$10 billion during Q2-2023, up from US$600 million in Q2-2022. Additionally, the substantial growth in the country’s total project values was mainly due to one megaproject awarded by QatarEnergy.
Kuwait
Total projects awarded in Kuwait during Q2-2023 reached US$1.3 billion, compared to US$922 million in Q2-2022. The aggregate value of contracts awarded reached its second-highest mark in the past six quarters during Q2-2023, driven by infrastructure investment, which has become one of the key pillars in Kuwait’s Vision 2035 plan. According to MEED Projects, Kuwait is gearing up for a promising year of project awards, as the country’s total value of deals awarded during 1H-2023 (US$2.9 billion) has already surpassed the total value of contracts awarded in FY-2022, which reached US$2.4 billion. The Kuwait Public Authority for Housing Welfare (PAHW) is the largest single client of projects in the country and has an estimated USD 22.8 billion worth of projects currently underway.
Market outlook
According to MEED Projects, the total GCC contracts in tender or most likely to be awarded this year are expected to surpass US$110 billion in 2023, led by Saudi Arabia, Qatar, and UAE project markets, which are poised to witness significant growth. Kuwait and Oman are also expected to experience sharper increases in the value of contract awards during 2023.
The GCC projects market is projected to remain resilient to global economic headwinds. Although the IMF lowered its 2023 Saudi GDP forecast to 2.1 percent due to the oil cuts by OPEC+ countries and allies, the reduction in economic forecast and oil production cuts are expected to have minimal impact on the Kingdom’s project market and capital spending, thanks to the availability of other revenue sources such as sovereign and private assets. Saudi Arabia continues to hold the position of the largest projects market in both the GCC and the MENA region. Saudi Arabia’s project awards have averaged around US$42.5 billion in the past five years.
Regarding un-awarded and planned projects, Saudi Arabia has the largest planned and unawarded projects in the MENA region, estimated at US$1.18 trillion, with a total of US$836.7 billion in the construction sector and US$117.7 billion in the power sector.
Similarly, the UAE has planned and unawarded projects worth US$409.2 billion, including US$228.7 billion in the Construction sector, US$91.7 billion in the oil & gas sectors, and US$41.6 billion in the transportation Sector.
MEED Projects estimates the pipeline of un-awarded and planned projects in Kuwait to be worth US$142.7 billion, including US$44.3 billion (31 percent) in the construction sector, US$37.5 billion (26 percent) in the transport sector, and US$35 billion (25 percent) in the power sector.