“New thinking for the new normal” across the Middle East is changing the face of the region’s project market, said Jennifer Aguinaldo, transport and technologies editor at MEED.
Gulf Cooperation Council, or GCC, countries have embraced the fact that oil prices will remain low for a very long time and have made adjustments in policies to ensure healthier fiscal standings. This includes considering alternative financing models for projects.
Speaking at Breakbulk Middle East, Aguinaldo said Dubai and Qatar had already created public-private partnership, or PPP, law and that the remaining GCC countries were planning or working on PPP laws to facilitate infrastructure-related projects.
“The most important factor over the last two-and-a-half years in the Middle East region has been the oil price, as the majority of countries in the region are oil exporters,” she said. “While we are seeing some level of stability in oil prices at the moment, we predict that it will stay at the US$55 per barrel level and will not likely go higher.”
Aguinaldo noted the challenging year for 2017, expecting 2018 to be one of recovery. MEED calculates that there is a US$2 trillion pipeline of planned, unawarded GCC projects and US$3.4 trillion of projects planned or underway in the Middle East Gulf, a 10.7 percent increase year-on-year.
But there are challenges and risks to the revival of the Middle East region’s project cargo industry, including rising political risks, slow pace of reforms, oil market volatility, rising costs, security issues, variable U.S. policy on the Middle East, tight cash flow, and digital disruption.
That said, while regional government spending is weaker, there seem to be better defined goals on where to direct investments, Aguinaldo added.
There are also emerging drivers for investment in oil and gas, including a renewed quest for gas and enhanced oil recovery in the region. MEED noted that Abu Dhabi National Oil Co. is investing US$109 million to raise output to 4.5 million barrels per day by 2030, KPC has confirmed a US$112 million investment program, and Aramco Is investing US$414 billion over 10 years.