Value of GCC contract awards set to fall by $30bn in 2016

The total value of Gulf construction contracts awarded this year will drop by $30 billion to around $167 billion but not necessarily because of the low oil price, new research claims.

Research by UAE-based information firm said a total of $197 billion of new contracts were awarded last year, but this is likely to drop by almost 15 percent to $167 billion in 2016.

The firm said in a statement: “This is a clear drop, but nothing as pronounced as the delayed drops in 2010 and 2011 which followed the global economic crisis.”

“We expect to see contracts worth $167 billion being awarded to contractors in 2016, which is nearly 15 percent less than the total value of contracts awarded in 2015.

“We have already seen some major contractor awards in January and February, [for projects] such as the Royal Atlantis Resort and Bahrain International Airport Expansion….

“The top projects to look out for in the coming months include Route 2020 [the expansion of Dubai Metro] Alba Sixth Potline Expansion and Qatar Power Transmission – Phase 13, among others.”

It gave no definitive reasons for the drop in value of contracts, but insisted that, despite reports to the contrary, there was no clear relationship over time between oil price levels and the value of project awards.

“History shows that the value of contract awards is not necessarily at its highest or lowest when the oil price peaks or troughs.”

“Three years ago, bodies like the International Energy Agency were predicting a marked softening of the oil price as a response to the impact of US tight oil production and sustained Saudi oil output.

“This warning gave GCC governments a two- to three-year window in which to stockpile surpluses to spend strategically on long-term projects and on social and transport infrastructure”.

The data shows that this is happening, the company said – most notably in Kuwait, which awarded over $35 billion of contracts in 2015, its highest ever, and Qatar, which awarded $34 billion in 2015, for the second year in a row.