Local Business

Cheap oil slows projects in some GCC countries

Haseeb Haider
Filed on April 24, 2015
Cheap oil slows projects in some GCC countries

The current project pipeline for the GCC remains strong in 2015.

Abu Dhabi — There has been mixed impact of weaker oil prices in the value of projects awarded in the six oil-rich nations of the GCC during the first quarter of the year, a research note said.

The total value of GCC projects awarded in the January-March quarter rose 9.8 per cent to $40 billion. The amount was 5.5 per cent above the average level seen over the last two years.

However, the increase was from a narrow source, with Qatar where Doha Metro and utility projects led the project value by 287 per cent up quarter-on-quarter and Kuwait 72 per cent up quarter-on-quarter.

In Oman, there was a sharp decline of 43.3 per cent in projects value, followed by the UAE where values  dropped 35.6 per cent to below  two-year average, says a research note by Abu Dhabi Commercial Bank on GCC projects.

At the Cityscape Abu Dhabi 2015, which concluded here Thursday, the property developers bucking the trend showed strong confidence in the second biggest economy by unveiling residential as well as commercial realty projects.

Ten property developers revealed projects not only in Abu Dhabi, Dubai, and Sharjah but a mega housing community in Karbala, in war-hit Iraq, was also announced.  Speaking at a conference on oil and gas this week, Abdullah Nasser Al Suwaidi, director general of Abu Dhabi National Oil Company assured the market that the short-term instability in oil prices must not derail our long-term goals.” All our committed projects are in progress,” the director general.

On January 28 Sultan bin Saeed Al Mansouri, Minister for Economy said there will be no changes to the budgetary allocations made for the development expenditures in the budget for 2014-15.

The research note expected the GCC projects market to continue growing in 2015, although at a weaker pace than in 2013 and 2014, which were particularly strong years.

The plan is part of the UAE’s strategy of increasing its crude oil output potential to 3.5 million barrels per day by 2017-18. The UAE’s actual current production is around 2.8 million bpd.

In the UAE, most of the projects cancelled or placed on hold were linked to the real estate sector, with the gradual softening in property prices likely contributing, says Dr Monica Malik, who authored the note. However, the research note said, “These cancellations and postponements were largely by smaller property developers, and did not affect the larger mixed-use projects that are part of the UAE’s wider development plans.“

According to ADCB,” the data thus far is in line with our expectation of a deceleration in investment growth in 2015 on the back of lower oil prices.”

GCC countries are also progressing with large-scale core projects, which in many cases will require years to complete. The focus of these core projects varies across the GCC, though there is generally greater focus on critical infrastructure, which supports the outlook, says the ADCB report.

The current project pipeline for the GCC remains strong in 2015.

”We believe that much will depend on recovery of the oil price. Private corporate investors are generally taking a more wait and-see approach to projects than governments are,” says the ADCB note.

The note expected the project market to rise in 2015, albeit at a weaker pace than in 2013 and 2014, which were particularly strong years.

On Tuesday, a senior official at Adnoc told reporters on the sidelines of an oil and gas conference in the capital that Abu Dhabi plans to invest over $25 billion in the next five years on boosting its oil production capacity from offshore fields.


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