While oil-rich Kuwait remains one of the wealthiest countries in the world, its liquidity crunch has begun to affect the fate of major projects in the oil dependent Gulf state.

The budget situation has resulted in Kuwait cancelling or postponing major infrastructure projects such as the long planned Al-Dibdibah Solar Power plant and putting other projects on hold until further notice, International Trade Administration, a US agency that promoted trade and investment, observed in its overview of the GCC country.

“Currently, the Ministries have approved  the preliminary steps to issue consultancy tenders and pre-qualify companies in preparation of releasing solicitations/tenders in the second half of 2021,” it added.

According to a NBK report, the pace of project awards in Kuwait eased to KD 129 million ($427 million) in the fourth quarter of 2020 (4Q20), down 18.5 per cent compared to the same period last year.

Gulf Cryo’s Kuwait Gases plant

The value of total projects awarded in Kuwait in 2020, a year heavily affected by the coronavirus pandemic, reached KD 1.23 billion ($4.07 billion) helped by the boost in project activity in first quarter (1Q20), with nearly KD 670 million awarded, the latest NBK Economic Update said.

Although awards were higher than 2019 (KD 0.99 billion), they fell short of initial expectations, it noted. The bulk of project awards in 2020 were in the power and water sectors (KD 588 million), followed by the construction sector (KD 322 million) and the transport sector (KD 250 million).

According to Middle East Economic Digest (MEED) Projects, some KD 3.4 billion worth of projects are planned for 2021, mostly in the construction sector, but given the recent trend of delays and setbacks, it is likely that a smaller figure will materialise, the NBK update said.

A large proportion of expected 2021 project awards hinges on the construction sector’s MPW’s Mubarak Al-Kabeer Seaport Project: Phase 1: Package 3A (KD 271 million) and the gas sector’s KOC Jurassic Non-Associated Phase 2: JPF 4&5 Off-plot & Production Facilities (KD 270 million).

However, according to a recent report by MEED, projects in the tendering phase may face further delays due to the government’s resignation in January and the time it takes for the new cabinet to settle in.

Meanwhile, with the economy undergoing only a partial recovery so far the projects market is likely to remain subdued, including projects that are part of the development plan, which is experiencing delays.

A plant of Kuwait petrochemicals manufacturer Equate

Transport

According to the NBK update, the transport sector saw relatively weak activity in 4Q20, with only about KD 12 million (down nearly 92 percent q-o-q) from a single project award: The Ministry of Public Works (MPW) 6th Ring Road Motorway. Total annual awards stood at KD 250 million, mainly on account of the MPW’s Kuwait Airport Expansion (new Passenger Terminal II: Landside Works, valued at KD 165 million, which was awarded in 3Q20.)

Notable upcoming projects include several MPW projects: The Regional Road South Part Project: Central Section (KD129 million); the Crossroads for New Passenger Terminal 2 at Maqwa Road (KD120 million); and the Northern Regional Road (KD99 million), scheduled for 1H21.

Construction

The construction sector witnessed little activity in 4Q20, with just about KD 13 million in awards from a single, standalone venture: the Public Authority for Sports (PAS) Jaber Mubarak Al-Hamad Al-Sabah Stadium. Meanwhile, total 2020 construction sector awards stood at KD 322 million, down 8 per cent from 2019. According to MEED, Kuwait’s construction sector has been in recession since 2017, long before the Covid-19 pandemic began to disrupt business.

Looking ahead, the sector is poised for a recovery in 2021, with about KD 1.4 billion in planned awards, including Kuwait Authority for Partnership Projects (KAPP) and Kuwait Municipality - South Al-Jahra Labour City (KD 149 million) and MPW’s Mubarak Al-Kabeer Seaport Project (KD 271 million), along with several smaller scale projects.

Power and water

The power and water sectors saw modest activity in 4Q20, with KD 105 million awarded. This accounted for about 80 per cent of total fourth quarter awards. The awards came from the Ministry of Public Works (MPW) – Network & Water Treatment Tanks (KD76 million) and the Public Authority for Welfare and Housing (PHAW) South Al-Mutlaa Main Transformer Stations (KD29 million). Annual project awards totaled KD 588 million in 2020, representing 48 per cent of total awards, making it the leading sector by value of projects awarded. More than half of total awards came from KAPP and MPW Umm al-Hayman Wastewater Treatment Plant Expansion, valued at KD 420 million, awarded in 1Q20.

“Activity should hold steady in the power and water sectors this year, with KD 723 million in awards expected in the first three quarters of 2021,” NBK forecasts.

Notable upcoming projects include MPW – Wastewater Treatment Plant in South Al-Mutlaa Area (KD149 million), scheduled for 1Q21, and the Ministry of Electricity and Water (MEW) Doha Desalination Plant Phase 2 (KD130 million), planned for 3Q21, as well as several parts of PAHW’s Extension & Maintenance of 132kV Ground Cables at Al Mutlaa city (KD36 million), also scheduled for 1Q21.

Oil, gas and chemicals

Kuwait’s oil and gas sectors were hard hit by the pandemic fallout. The sectors saw no project awards in 2020, likely due to lockdown restrictions and as project owners reassessed projects’ future prospects and validities in light of lower oil demand and lower oil prices, which hindered project progress.

However, the sector is likely to witness some activity in 1Q21 with about KD 390 million in planned project awards, a large portion of which is contingent on Kuwait Oil Company’s (KOC) Jurassic Non-Associated Phase 2: Off-plot & Production Facilities, valued at KD 270 million. In addition, several smaller scale projects are in the pipeline for 2021, including KOC’s Enhancement of Booster Stations (KD 72 million), now planned for 3Q21 (previously 1Q21).

Kuwait’s chemical sector has seen little activity in recent years. However, with the upcoming Kuwait Integrated Petroleum Industries Company (KIPIC) – Al Zour Petrochemical Complex project (KD 2.85 billion), the sector is poised to see some highly anticipated movement in early 2022. Further delays cannot be ruled out, though, NBK said.