After witnessing declines over the last several quarters, the GCC projects market showed healthy recovery during the first quarter of 2021 with value of projects awarded more than doubling to US$26.3bn compared to the previous quarter.
‘In terms of quarterly data on project awards, the GCC region witnessed the normal seasonal spike during the first quarter of 2021 with project awards worth US$26.3bn, more than double the contract awards during the fourth quarter of 2020 that stood at US$12.8bn,’ Kuwaitbased Kamco Investment Company said in a research report released on Sunday.
This spike in projects activity, according to Kamco Investment, was mainly led by pending project awards from last year. However, the growth in the first quarter of this year came mainly on the back of an increase in project awards in Qatar and Kuwait while the rest of the GCC countries reported declines.
The higher number for Qatar, Kamco Investment said, mainly reflects the US$13bn award for the Qatargas’ LNG processing trains project. On the other hand, Saudi Arabia and UAE have seen the biggest absolute fall in project awards during the first quarter of 2021 with declines at US$6.5bn and US$6.1bn, respectively. The GCC projects market has remained under severe pressure ever since the crude oil prices started declining and the onset of COVID-19 was essentially only partly responsible for the slowdown that the sector is witnessing recently.
‘The region has seen a decline in new project awards over the years as even the existing and ongoing projects were thoroughly scrutinized for their viability in a low spending environment,’ Kamco Investment said.
It added, ‘With rising debt levels and record high fiscal deficits as revenues declined, governments in the GCC cancelled numerous projects after the fall in oil prices.
This affected the aggregate project market in the region even before the COVID-19 pandemic started and as projects got completed contractors in the region were seeing declining workloads.’
According to Kamco Investment, the total value of projects planned and under execution in the GCC region has remained around the US$1.7tn mark since 2017. However, at the country level, UAE has seen its share decline consistently over the years whereas Saudi Arabia has seen an increasing share especially post the announcement of the big ticket projects. These two markets have accounted for more than 84 per cent of the total market over the last two years.
The quarterly contract awards for the GCC region shows a spike in projects for the gas sector during the first quarter, mainly due to the Qatargas award in Qatar. However, sectors like construction, power and transport continue to show promising consistency in awards in the region, the report said.
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