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Jumeirah Palm Island, Dubai

Project Risk and Value Management

Karolina Sochacka,

Darek Batko

Warsaw, 2014

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Table of contents:

1. Introduction

2. Definition of Megaproject

3. Project description

4. Planning, development and implementation of the project

5. Risk considerations

6. Risk description

7. The future of JPI- How does it look today and what are future

expectations

8. Conclusion

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Introduction

The aim of this report is to introduce the conception of mega project called Jumeirah

Palm Island (JPI) realized in Dubai. Following number of years of feasibility studies,

the Palm Jumeirah was launched in 2001, with reclamation starting in the same

year. From the end of 2006, the island's first residences – comprising 4 000 luxury

villas and apartments were handed over during a phased period. Since then, the

tourism, leisure and retail elements of the island have been developed, creating a

spectacular, world-renowned residential and tourism destination.

In this report we will put emphasis on the problem of risk during the project

execution. We will also provide analysis of the case of Jumeirah Palm Island mega

project, discussing the ways in which the project was planned and implemented,

how Jumeirah Palm was created, what problems it had to face with and the future

consequences of it.

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Definition of term mega project

The mega project phenomenon does not have fixed definition. Moreover there is no

exact way to determine whether some projects are mega or not.

Basically we can define this term as:

• High investment expenditure of USD 250 million and more

• Involving large amounts of global/regional/national capital,

• Typically linked to global networks,

• With a life span of 50 years and more

• A global workforce may be involved in construction and operation

• New institutional forms may be involved in planning, construction and operation

• There is considerable uncertainty as regards demand forecasts and cost estimates

• Indirect benefits are shared, not solely for the benefit of the operator

So we can observe that mega projects are large-scale (typically complex) land-

based infrastructure projects. They often link local with global networks, and are

frequently perceived as national icons of development, critical to the delivery of

national and regional development strategies. The term mega project denotes

initiatives that are physical, very expensive, and public. More specifically, mega-

projects involve the creation of structures, equipment, prepared development sites

etc.

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Project description

The Jumeirah Palm Island is an artificial island located in Dubai, United Arab

Emirates, created through the process of land reclamation. It was developed during

an economic boom in Dubai, catering to the increased tourism and luxury living

requirements of the city. Design of the JPI started in 2001 and construction has since

been completed.

The JPI was designed largely to combat the problem of limited development space,

especially beachfront properties. The palm shape of the island was decided on as it

provided significant beachfront area, while remaining culturally relevant and

symbolic.

Throughout the reclamation process, geographical surveys were completed to

ensure that the island was being shaped correctly and built up to the designed

elevation. After reclamation was complete, vibrocompaction was used to compact

and strengthen the sand, making it a suitable base for construction.

With construction completed, the impacts of the JPI can be observed. Specific areas

of interest are the impacts on the island itself, the surrounding geography and the

ecosystem. Analysing these areas can give an indication of the success of the

project, and be used to develop improved methods of design and construction for

similar projects in the future.

The JPI is one of the largest artificial islands in the world, and is a significant coastal

engineering feat. Such a large-scale project is accompanied with enormous

challenges and

requirements.

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Table 1.1 Some Key Features of the JPI Mega Project

Area 5.6km2

The breakwater 11.5km

Construction Started 2001

Completion First phase 2006

Client Nakheel

Total coast until 2007 USD 6.5bln

Consultant Hill International (USA)

Coastline added 78.6km to the country's 72km

Employees working on the project

each day 40,000

Reclamation

94 million cubic metres of sand and seven million tonnes

of rock.

Hotels 40 five-star

Guests Expected to become 30,000

Visitors per day

Predicted to become 20,000, with 15 million visitors by

2010.

Residents 60,000 from more than 70 nations round the globe

The strategy for mega project development in Dubai has been adopted to expand

the urban economy, promote larger scale development, and to strive for global city

status. The establishment of mega global projects has given Dubai global attention

and status as a place which attracts visitors from different parts of the world. In

doing this, the city started to construct large national real estate companies,

adopting a mega projects dominated policy, focusing on financial flows from

government, the GCC and global investors. This has led to the creation of a huge

transformation in the economy and population of Dubai.

The coastline of Dubai is one of the few man-made features on Earth to be visible

from space, because of which it has been dubbed ‘the Eighth wonder of the world’.

The development of the JPI remains probably the largest urban operation to be

carried out in the last few years, in the world.

It involves re-imaging, to make it attractive globally, restructuring the entire urban

area through the development of sites which have become obsolete after technical

and economic change, and the involvement of private investment through new types

of partnerships.

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Figure 1.1. The Coastline of Dubai 2000

Source: Nakheel.

Figure 1.2. Recreational Mega Waterfront Projects, Planned and Under

Construction in Dubai Until 2025

Source: Nakheel

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Figure 1.3. Location of JPI on the Southern Coast of Dubai

Source: Nakheel.

The three palm islands developments will increase Dubai’s shoreline by a total of

520 km. The Palm Jumeirah development is a mixed of offshore residential, retail

and resort development on an artificial island reclaimed from the sea, in the shape

of a palm tree. It consists of a trunk, fronds connected to a central spine, and a

surrounding crescent island forming a breakwater. The total area of land that has

been created is approximately 5.6 km2, connected to the mainland by a 300

metre bridge, which extends approximately 5.1 kilometres into the sea, and is

approximately 5.3 kilometres wide.

It is surrounded by a resort style development along the beach edge, with more

commercial development, such as Internet City, Media City, and Knowledge City,

which are located inland from The Palm.

The emphasis on the creation of new beaches as part of the strategic plan gives it a

citywide significance. The development of the waterfront projects aims to add new

recreational waterfront spaces to the city.

The proposed new area was therefore partly about establishing a new spatial

balance in the city. This issue is important for the City of Dubai because it has used

all its coastal area.

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Planning, designing, implementation

All the detailed information below is written on the basis on the Research made by University of Southampton.

Planning involved studying aspects related to the project, and environmental

considerations as well as financial and economic issues within the community. The

project went through a series of stages. All schemes incorporated elements such as

project identification, design, evaluation and implementation.

JPI developed in three stages:

1) Identifification of the strategic goals of the project;

2) Project Formulation and Design;

3) Project Implementation.

The need for more coastal recreational areas, in other words, more beaches, was

very clear strategy for the city. Tourist development was experiencing an

extraordinary boom, creating demand for hotels and furnished flats. It seems that the

following rush affected the planners' thinking, to such an extent that no attention was

paid to the possibility that such massive projects could cause damage in the future.

The development of the Palm Island was part of a massive project directed to

achieve the following goals:

1. Achieving pioneer status.

2. Setting up an economy based on the tourist sector.

3. Setting up new coastal areas in the few remaining areas.

Property-led development strategy was the major motivation; it depended upon

reaching goals. The local authority showed greater effectiveness in carrying out the

massive projects than traditionally. The government agreed upon a strategy of

attracting hundreds of companies, financed by leading banks, and international

hotel companies, to carry out their investment projects.

The form of the tree was seen to offer the most potential, maximizing beachfront

areas. The local community was very supportive of the idea. The palm tree is a

powerful cultural symbol amongst all Arabs.

The next stage was the selection of the exact site and the preparation of specific

plans for each aspect of the palm island. These included the following elements: site

analysis/evaluation; palm design program; street scope network; landscape

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elements; the palm trunk; the palm crown; environmental procedures and analysis;

implementation and development; cost estimation; cost benefit analysis. These

elements were in a sequential process. Each received detailed attention and

involved numerous consultants, architects, designers, engineers, and other technical

experts.

The plan was well studied and discussed before going ahead, and was dependent

upon the initiatives and projects of the private sector. The project’s cost expectation

was much higher than expected, because of a price overrun in the materials needed

for construction.

Another factor to be considered was the island’ ground structure, as it was unlikely

be able to support skyscrapers because of fear of slippage. Therefore, several high

towers projects were cancelled in the Trunk area of the Palm Island. Indeed,

uncertainty surrounding the solidity of the island led some of the early and ambitious

architectural designs to be withdrawn.

The government had a leading role in the development of the artificial island, mainly

in financing the infrastructure. The government looked after other elements of the

island, for example, the basic foundations. In fact, rather than putting a lot of money

into carrying out the projects on the island, the local government instead managed

to offer competitive and easy investments for the private sector, relaxing taxation

and cancelling out-dated regulations. Foreign companies were the central and

major players in carrying out those projects.

The implementation of the Palm Jumeirah involved three broad phases:

Phase 1: Reclamation and Ground Improvement

Phase 2: Infrastructure and Utilities

Phase 3: Building Development

Phase 1: Reclamation and Ground Improvement

The reclamation phase took 27 months, and involved sand transfer and rock

placement to create the land foundations. During this period approximately 100

million cubic metres of sand and rock were put in place.

Van Oord started construction in August, 2001, and completed its work four months

ahead of schedule, in October, 2003.

Above sea level, the top four metres (approximately) of reclamation was achieved

using a dredging technique known as ‘rainbowing’, where the sand fill was

sprayed over the surface of the emerging island. The loose fill was then compacted

by means of vibrocompaction to form the ground surface. Vibrocompaction is a

ground improvement process used to increase

the density of loose sands, and to create stable foundations soils. Vibrocompaction

involves a combination of vibration and water saturation by jetting, whereby loose

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sand grains are re-arranged into a more compact state. This process minimises the

potential for differential land settlement across the reclaimed area.

Figure 1.4 Rainbowing

Source: Google graphics

Phase 2: Infrastructure and Utilities

The second phase of development involved the construction of the network of

infrastructure and utilities required to support development on the Palm. This

included: roads, public transport, water supply, sewerage, electricity, district

cooling and communications. The construction of the infrastructure, including

services plots, the gateway bridge and several roads, commenced in early 2004.

Phase 3: Building Development

The third phase, the construction of the proposed buildings, occurred progressively,

as the infrastructure was provided to various sections of The Palm. Fully developed,

Palm Jumeirah supports around 40 hotels, 1,800 residential beachfront villas and

2,400 apartments. The construction of villas on the first frond commenced in March,

2004. It includes marinas, a water theme park, restaurants, shopping malls, sports

facilities and commercial land use. Palm Jumeirah will support an ultimate population

of approximately 60,000 residents, 30,000 guests/transitory visitors and 20,000

employees.

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Risk Considerations

Mega projects cannot be considered as conventional projects expanded to bigger

proportions. Increasing the size to that extent creates exponential risk. The designs

and sizes are beyond previous experience of operation, capital investment, market

strategy, environmental impact and government policy. Public interest requires mega

projects to be as successful as possible.

Urban mega projects are assumed to have a short and long-term economic impact

on the host city and on the flow of tourists to it.

The main problem of mega projects is that it can cause controversy. Political

leaders join with commercial and industrial parties to promote new mega projects,

while economists, environmentalists, and social advocates stand in opposition.

They are warning about the large risks associated with mega projects. First of all

exists huge difficulty in forecasting what the final costs of projects will be and

whether they will perform as promised.

We can distinguish different types of risks in mega projects:

• Cost risk (construction, maintenance, operation)

• Demand risk (traffic forecasts, revenues);

• Financial market risk (future interest rates);

• Political risk (regulation, parallel public investment, pricing on adjacent parts of

the network);

• Many mega projects benefit global (corporate) interests more than local, even

though their patrons often (by default or design) have local and national

governments meeting the lion’s share of financial, social and environmental costs

(and risks).

• Mega projects may cause an increment in physical and social fragmentation in

urban areas

Because of great probability of risk occurrence, risk and value considerations have

big importance during project preparation and may influence the final outcome of

the project. Lack of risk and value considerations may lead to the failure of any

project. In case of such a huge project like JPI the clear understanding of numerous

risks and the factors that they are connected with is crucial to the final success of the

project. The appropriate risk analysis will prepare project managers to face the

uncertainty more effectively and will definitely help in delivering the value to the

project.

If we fail to analyze certain risks like for example with safety matters it might lead to

minor problems or even a cataclysm which can result in huge loss in capital or even

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in human lives. Lack of this kind of analysis would decrease project effectiveness

and efficiency.

In conclusion, risk and value management is one of the most important things which

project managers should really consider and be aware of during project

preparation.

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Conclusion

Building an artificial island in the Arabian Sea would seem like an overly ambitious

dream to most, but for one of the wealthiest countries in the world, it was one of

several ambitious projects that have come to make the country one of the top luxury

and tourist destinations in the world. The construction of the Palm Jumeirah was a

feat of engineering, but did not come without its challenges.

An immense amount of sand and stone was used, and it all had to be placed in

precisely the right location. The island was designed to withstand both the forces of

nature and the forces of the city being built on top of it, all within a strict deadline.

It has been speculated that the island is sinking—a claim debated by the developer

and explained as being a natural settling process that will not have any long term

negative effects. The island is, however, being eroded, and is causing increased

erosion of the surrounding geography. It has also disrupted or destroyed parts of a

naturally occurring ecosystem, and will likely continue to do so until all of the land

reclamation projects are complete.

The Palm Jumeirah is an impressive project, and should now act as a tool for other

similar projects in Dubai and the rest of the world. Knowing the challenges of

building an artificial island can be helpful in figuring out more efficient and effective

construction methods. Knowing the postconstruction impacts will give rise to future

designs and methods that help reduce these types of impacts. With these ideals in

mind, ambitious projects like the Palm Jumeirah can continue to grow and evolve,

producing even greater feats of engineering.