The Qatar Projects Market

Colin Foreman, News Editor, MEED

MEED Insight,

Doha, 18 October 2011

The GCC projects market

Key drivers of demand for projects

Fast-growing economies – average real annual GDP growth rates in GCC are 5 per cent, and 4-6 per cent in wider MENA region. By 2016 MENA GDP will be $3.6trillion compared with $2.4trillion in 2010

Rapid population growth – region’s population is expected to grow to more than 600 million by 2030 from 340 million today

Undeveloped infrastructure – especially in transportation sector, and roads

A new generation of leadership committed to diversification and modernisation of the economy

The relative failure of previous oil booms and the oil crash of 1998

Growing need for greater utility and housing capacity

Increasingly consumer-orientated society

GCC real GDP growth

MENA population growth

But the oil price is the key driver

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Comparison of oil price vs. GCC contract awards

Average annual oil price

Cumulative spend between

2005-10 was $820bn

Source: MEED Projects

There is a clear correlation between the rise in the oil price and project activity

The GCC projects market

The Qatar projects market has historically been smaller than the UAE and Saudi, having been on a stable

trend since the completion of its LNG programme. However, with the impetus provided the World Cup, capital

spending is expected to increase substantially over the coming decade. Qatar could become the second

largest regional market after KSA as the UAE market continues to contract

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GCC contract awards by country 2004-10

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2010

Source: MEED Projects

Qatar has been relatively immune to global crisis

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Budget value of on hold/cancelled GCC projects based on award or planned award date

2008

2009

2010

2011

2012

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Source: MEED Projects

Compared with other the other major markets in the region, Qatar’s projects market

has not been hit so severely. This is primarily due to a lack of exposure to

speculative real estate schemes and strong economic fundamentals

The Qatar Projects Market

Qatar’s future projects market

Source: MEED Projects

Infrastructure (transport) and construction (buildings) form the main component of

planned and un-awarded projects in the state

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Breakdown of un-awarded projects in Qatar by sector

Breakdown of planned civils projects in Qatar

Airport, Transport Terminal, $275

Apartments, Residential Construction, $5,182

Berth, Pier, Quay Wall, Marine Construction, $7,000

Bridge, Causeway, Transport Infrastructure, $1,200

Car Park, Transport

Terminal, $445

District Cooling Plant, Water Cooling, $350

Drain, Sewer, Water Transmission, $100

Dredging, Reclamation, Marine Construction, $100

Factory, Warehouse, Industrial Construction, $69

Hospital, Clinic, Healthcare Construction, $50

Hotel, Resort, Hospitality Construction, $1,040

Houses, Villas, Residential Construction, $350

Internal Roads, Utilities Network, Infrastructure Construction, $1,792

Mall, Market, Retail Construction, $1,908

Mixed-Use, Mixed-Use Construction, $7,909

Offices, Commercial Construction, $4,384

Railway, Transport Infrastructure, $28,233

Reservoir, Water Storage, $2,000

Road, Interchange, Transport Infrastructure, $5,299

Sport Facility, Stadium, Leisure Construction, $7,714

Theme Park, Leisure Construction, $275

University, School, Education Construction, $924

Breakdown of planned civils projects in Qatar ($m)

Source: MEED Projects

Railway work

forms the largest

portion of future

projects in Qatar

Rail is the largest future sector so far planned

Ras Laffan

Dukhan

West Bay CentralNDIARail Terminal

DohaWest

Port Mesaieed

Al Shamal

Camel Race Education

City

DOHA

Lusail

To Saudi Arabia

To Bahrain

Four Metro Lines and Long-distance Services

Metro Red Coast Line Golden Historic Line Green Education Line Blue City Line

1

Long distance Passenger Train Service Freight Railway System

2

General Infrastructure Passenger Stations Freight Terminals Maintenance Facilities Central Control Room

3

Source: QRC

Metro scheme to be implemented in stages

Long distance railway equally important

Roads is another area of major activity

Education City

Education City will continue

to provide considerable

opportunities for

contractors. As of mid-2011,

a further $1.2bn-worth of

contract work was either at

the contractor

prequalification or tendering

stage.

In addition, there were a

handful of other planned

projects at the design stage

that are scheduled to be

completed by 2014/15.

These include a national

data centre, an extension to

the convention centre and a

people mover

Real Estate

There are several major real estate schemes planned in Qatar:

Lusail City

Located on the east coast 15km north of Doha, Lusail City will play a central role in the 2022 World Cup, hosting both the opening ceremony and the final at its planned iconic stadium. Occupying a site of 38 sq km, it is the most ambitious non-energy project in Qatar, with the infrastructure alone estimated to cost $5bn. The city has been masterplanned into 19 integrated mixed-use districts, expected to house a resident population of about 200,000. A further 170,000 people are forecast to work in the city, while visitors to its tourism, recreational and cultural facilities are set to number 80,000.

Barwa

Barwa is the largest real estate company listed on the Qatar Exchange with a total asset capitalisation of QR38bn ($10.4bn). Its projects include: Barwa Village, Barwa City, Barwa Commercial Avenue, Barwa Financial District, and Barwa al-Khor

Dohaland

Dohaland is a subsidiary of the Qatar Foundation. It was launched on 3 March 2009 to lead real estate development in Qatar and is headed by Sheikha Mozha bint Nasser al-Misanad, wife of the emir. The company aims to align its projects with the Qatar National Vision 2030 and ‘to lead innovation in urban living through sustainability and heritage’.

Dohaland’s first project is Musheireb, which aims to transform an area representing much of the city’s original built-up area in the heart of Doha. Launched in January 2010, Musheireb’s masterplan calls for the development of a 31-hectare site. Its northern perimeter is defined by the Al-Rayyan road, which corresponds to the Doha coast before reclamation work took place in the 1970s for the new Doha corniche, while its western perimeter is defined by Al-Diwan road, adjacent to the Emiri Diwan. The southern boundary is formed by Musheireb street.

The Fifa World Cup 2022

Qatar’s bid was based on a novel approach

to hosting the event and dealing with its

legacy. It calls for almost all key event

facilities and venues to be located in a

relatively compact area within a radius of

60km. Previous World Cup finals have

involved venues in far more distant

locations; the 2010 World Cup finals in

South Africa were held in widely dispersed

sites.

Doha is also committed to having a carbon-

neutral World Cup. This is a major

challenge in a country where summer

temperatures can reach 50 degrees

centigrade and air-conditioning is necessary

in June and July.

The third novel element is the commitment

to transporting the modular sections from

stadiums to be used in the finals to

developing countries, where they will be

reassembled.

The World Cup finals plan calls for seven

host cities and 12 stadiums. Three of the

stadiums already exist and will be

renovated, while nine will be constructed

from scratch. The stadium construction and

renovation budget has been set at about

$3bn.

The Stadiums

The Stadiums

Hotels

Qatar plans to develop a total of 240

hotels and properties. All will be located

within 20km of stadiums and most will be

four star. The government has agreed to

provide over 84,000 hotel rooms, which

is more than the 60,000 that Fifa

required.

Details of the plan call for 100 existing

hotels, accommodation villages and

compounds, with a total of 44,000 rooms,

to be made available. Some of the

compounds have more than 2,000 rooms

each.

A further 140 new properties will be built.

In addition, a cruise ship with 6,000

rooms will be docked in Al-Wakra for the

duration of the event. Two-thirds of the

55,000 rooms, classified as existing or

planned, will be built in 17 projects. Of

these, 13 will be completed after 2016.

The responsibility for constructing,

managing and financing the hotels has

been accepted by the government.

According to the bid evaluation report,

the government is planning to contribute

‘substantial investment’ in new hotel

infrastructure, which is estimated at in

excess of $17bn over the next five

years.

Substantial spending increases from next year

Source: MEED Insight

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Actual and forecast contract awards in the construction, infrastructure, oil, gas, petrochemical and utilities sectors in Qatar

Power and water Petrochemicals Oil & Gas production Construction Infrastructure

The impetus from winning the World Cup hosting rights means that Qatar has to start increasing its capital

spending quickly in order to meet tight deadlines. Work on the railway sector especially is expected to

commence soon. It is worth noting that non-civils sector work will remain relatively muted at least until 2015

when the moratorium on further development of the North Field may be lifted

Capital spending is expected to

increase by 48 per cent between

2011 and 2014

The main challenges

• Increased contractor competition – in late April, 42 companies bid for a simple road

tender!

• Slow decision-making remains in both public and private sector projects;

• International contractors have found it very hard to be successful – many reported

problems due to contractual issues. Contracts in Qatar are not generally very contractor

friendly and tend to favour the client;

• Logistics issues – supply chain bottlenecks at the ports (still being built), a lack of certain

materials such as sand and a protectionist local building materials market;

• However, experienced contractors already active in Qatar which can provide quality

projects and technical expertise can potentially thrive in the market by distinguishing

themselves from lower cost and less regionally-experienced competition;

• The Qatar authorities have also stressed that they will be focusing on technical quality of

bids rather than price alone, although the regional market in general remains relatively

price-sensitive.

Conclusion

• Although many projects in the pipeline existed prior to the World Cup announcement

and would have been built anyway, the likely impact of the event is that there will be

added impetus to bring them forward and complete them faster. This is in addition to the

directly associated infrastructure opportunities that the World Cup will bring such as

stadiums and hotels;

• As such, there is expected to be a noticeable increase in capital spending in Qatar from

next year, especially in the railway sector;

• Qatar will become a regional hub of project activity over the next decade and could

overtake the UAE as the second largest projects market in the region after KSA;

• The large number of contractors now entering the market could potentially dilute the

number of opportunities and potentially have an impact on margins. However,

experienced contractors with local knowledge and technical expertise will be in a good

position to counter the increased competition;

• Qatar has bet its reputation and prestige on delivering a successful World Cup. It has

the perfect combination of a pressing need for projects and the financial firepower with

which to fund them;