The projects market in Kuwait, which witnessed record government outlays in 2015, is gearing up for a repeat performance this year with several mega-projects slated for release. Last year, successful bidders were awarded projects worth an unprecedented US$32 billion — an increase of 20 percent from the figures on capital expenditure in 2014.
The year ahead is also expected to provide a windfall for the projects market as the government prepares to sign deals worth over $55 billion before year end. The government's substantial spending on projects at a time when oil has been hovering at record lows and the country is poised to record its first actual deficit in 16 years, reflects growing awareness that supporting infrastructure developments is key to ensuring sustained economic growth. It is also a welcome departure from the years wasted, as much-needed infrastructure developments remained mired in political wrangling.
Despite being faced with an expected $13 billion deficit in fiscal year 2015/16, or about 10 percent of its GDP, and oil sinking to nearly 70 percent of its mid-2014 price, the government is taking the bold approach of more, not less, capital spending on important projects.
Some of the projects expected to come on line during 2016 in various sectors include:
Oil and Gas sector: The huge uncertainties facing the global oil and gas industry notwithstanding, Kuwait has adopted a 'full-steam ahead' approach when it comes to spending on projects in this sector. An estimated $19.8 billion worth of contracts were awarded to this sector in 2015, reiterating the country’s target of producing four million barrels of oil per day by 2020. Among the major contracts awarded in this sector during 2015 were $13 billion for the long-delayed New Refinery Project (NRP) in Al-Zour and the $4 billion contract for development of the Lower Fars Heavy Oil production facility in north Kuwait.
Authorities are keen on overhauling the country's refineries in order to improve the quality and increase the quantity of its oil products. In 2016, the state-owned downstream operator, Kuwait National Petroleum Company (KNPC) is planning to award the contract for the $3.3 billion LNG Import and Re-gasification Terminal in Al-Zour area. KNPC is also reviewing a plan to integrate an Olefins III plant into the new refinery complex; if approved, the $7 billion project is expected to be tendered by end of the year.
Meanwhile, the state's upstream operator, Kuwait Oil Company (KOC), has expedited plans to develop its oil and gas reserves situated in the north of the country. In addition to awarding a $4 billion contract to develop Phase I of the Lower Fars Heavy Oil handling facilities, KOC has also scheduled the awarding of three contracts worth around $5.7 billion for development of Jurassic Non-Associated Gas reserves.
Construction: In accordance with World Health Organization (WHO) recommendations that call for a minimum of 22 hospital beds per 10,000 citizens, Kuwait’s Ministry of Health plans to increase its hospitals’ total bed capacity to 12,000 beds by 2020.
In this regard, the Amiri Diwan commissioned in April 2015, the $1.28 billion New Al-Jahra Hospital and in October the prime minister inaugurated the Al-Razi Hospital Expansion that added a further 240 new beds to the hospital. In addition to the planned opening in September 2016 of the 1,168-bed Jaber Ahmed Al-Jaber Al-Sabah Hospital, the health ministry is also examining projects worth a further $2.9 billion. These include, reviewing the $736 million bid for the New Maternity Hospital, and a new $500 million Sabah Al-Ahmad Hospital to be constructed south of Kuwait City, the main contract for which is expected to be issued in May 2016.
Power and Water: The Kuwait Authority for Partnership Projects (KAPP), formed by the government to support Public Private Partnership (PPP) ventures, is expected to witness a landmark year in 2016. The Authority plans to award $6.6 billion worth of PPP contracts this year, including Phase II of Al-Zour North Independent Water and Power Project (IWPP). Phase I of this project was successfully completed and is expected to reach commercial production in the coming months.
Phase II of this project, with a planned budget of $2.7 billion and set for contract bid in early 2016, aims to produce 1,800 megawatts (MW) of electricity and 464,100 cubic meter a day of desalinated water. Plans are also underway to award two schemes to treat waste and realize energy through the PPP path: the $1.5 billion Umm Al-Hayman Wastewater Treatment Plant scheduled for contract in May and the Kabd Municipal Solid Waste project in July.
Housing and Transportation: With housing a pressing issue among voters, the government is keen to push ahead with its efforts to provide housing for the more than 100,000 applicants. In order to fulfill its promise of delivering 12,000 housing units annually, the government plans to speed up construction of South Mutlaa City, which aims to provide 29,000 new residential units. Contracts worth an estimated $8.7 billion have now been readied for infrastructure projects in this city, including Contract I, for the construction of main roads, which has already been tendered and contracts 2 and 3 are scheduled to be awarded in the last quarter of 2016.
In the transportation sector, in addition to awarding the $4.3 billion tender for the New Airport Terminal at Kuwait International Airport, the government has also tendered a $500 million Passenger Support Building, to cater to increasing passenger traffic over the coming years until the main terminal is completed. The bids for the Passenger Support Building are currently being reviewed by the state Audit Bureau along with the contract for the main Terminal building. An additional $1.1 billion has been allocated for smaller packages in the airport expansion project, which are also scheduled to be tendered in 2016.