Looking up
Construction activity in Kuwait is on the upswing, with increased public sector spending. The country is
looking forward to a host of new large public and oil sector projects.
01 December 2001
Construction in Kuwait is on the way up, literally. After years of a lull in the construction sector, the country is witnessing the construction of a number of high-rises. These include the Arraya Complex, which at 130 m, is expected to be the tallest tower in Kuwait City when it is completed in 2003. Another skyscraper which will see completion in mid-2002 is the 30-storey Al Aseer Tower.
A number of other commercial buildings including several headquarters buildings - including the recent Al Murabaha headquarters - are now under construction while many others are set to go ahead soon.
In addition, work is in progress on several projects in the housing, health and education sector.
Kuwait's construction industry came out of a slump in 2000 and is on its way to a healthy recovery, the National Bank of Kuwait (NBK) said in a report.
"Construction sector growth increased to 1.6 per cent after a 3.4 per cent contraction in 1999. The sector, which suffered in 1998 and 1999 due to a reduction in government investment spending, benefited from increased home-building activity and spending on public works," the NBK said. "It is expected to see a healthy recovery in coming years with indicators of a pick-up in spending on development projects," the report added.
According to the NBK, "next year promises to see the initiation of a host of new large public and oil sector projects. Given the dominance of the public sector, the increase in capital spending should be a boon for the private sector."
Kuwait's total gross domestic product (GDP) grew by almost 28 per cent in 2000 to KD11.59 billion, mainly on the back of higher oil revenues.
In May, Kuwait's parliament approved spending over a billion dollars on construction projects in the country. Adnan Abdelsamad, the head of the committee on budgets and final accounts, said the budget included KD339.22 million ($1.139 billion) for construction projects that have been already approved. The committee endorsed the draft budget for ministries and other state organisations at KD583 million.
The build-operate (BO) mechanism of awarding projects introduced in recent years is likely to get more popular with future developments and appears to be the solution that the government will opt for to get moving on the much-awaited projects in the power sector.
One of the first BO projects in the Gulf's wastewater sector was awarded earlier this year to a consortium led by the local Mohammed Abdulmohsin Kharafi & Sons.
Two ambitious plans which are expected to involve the private sector is the $5.3 billion Subiya city and the $1.5 billion causeway, the mega-city's vital link to Kuwait City.
Subiya is expected to be developed as an oil city in conjunction with the country's $7 billion Project Kuwait scheme. Under the scheme which is currently being debated in parliament, Kuwait plans to open its oil operations in its northern territory to foreign companies, who will need housing and services closer than Kuwait City. The scheme will call for foreign firms to make the investment over 20 to 25 years.
Meanwhile, the Public Authority for Housing Care (PAHC) continues its efforts to resolve the country's pressing housing shortage. It aims to distribute more than 10,000 residential plots in Jeleeb Al Sheyookh, south Al Doha and south Al Jahra, and other areas by the end of 2002.
Subiya city & causeway
Kuwait has recently signed a deal with Cowi-Consult of Denmark to design and supervise the construction of Subiya Bridge, which will link Kuwait City and Subiya, the site of a proposed city.
Minister of Public Works Fahad Al Meih said he hoped the consultant would cut the design period from 13 months to eight.
The government has completed an economic feasibility study on the project and is currently studying options on private sector participation under the build, operate and transfer (BOT) system.
Kuwait has earmarked KD282 million for building the bridge across Kuwait Bay, the minister said. The bridge will be the "second longest of its kind" in the world, Al Meih said.
He expected work on the bridge to start in about a year and be completed in three to five years. When finished, the bridge will cut the distance from the capital to Subiya to 22 km from 100 km, he said.
Subiya is expected to be developed into a city of about 250,000 people in the coming 30 years by the private sector. According to the plan, it will have an industrial area, a university, ports and its own power station.
Wastewater plant
Among the largest projects in the country is the Sulaibiya wastewater treatment and reclamation plant, which was awarded to Utilities Development Company, a venture comprising Mohammed Abdulmohsin Kharafi, Bechtel and Ionics, both of the US, and the UK's United Utilities. The $390 million BOT contract was awarded by the Central Tender Committee (CTC) after months of delays and complaints by other bidders.
Some of Kuwait's biggest trading families had formed consortia with leading western firms specialised in the field in a competition that triggered internal frictions over the project which is expected to be worth more than $1 billion over its 30-year life.
The project, under review since 1997, involves building a reverse osmosis treatment plant to produce potable-quality water for non-potable usage.
The consortium is to build the plant within three years and operate it for 25 years.
"It will be capable of reclaiming 300,000 cu m per day of water ... with the capability to be expanded to 600,000 cu m per day," Kharafi said.
On-site construction is due to begin in early 2002 on the sewage treatment plant and 600,000 cu per day pumping station at Ardiya.
Tourism/recreational facilities
Among the pioneering BOT projects initiated by Kuwait are the waterfront development projects. Among the most recent of these developments to get under way is the fifth phase of the Kuwait waterfront project. United Real Estate Company (UREC) signed an agreement in early 1998 with Kuwait Municipality for development of phase five, involving an investment of KD50 million ($161 million) over a 24 years.
The project calls for the construction of commercial space, a government office, a mosque complex and parking and recreational facilities over a 68,000 sq m inland site area located between Salem Al Mubarak and Gulf Streets as well as a 3 km long coastal site along the Gulf Street.
It also involves carrying out dredging and marine works of the waterfront, beach development, reclamation of land using about 1.2 million cu m of fill, concrete and rock works, sheet piling and associated civil works.
Marine works are in progress on the project which is expected to be completed in February 2004. Ahmadiah Contracting & Trading is the main contractor.
UREC successfully floated bonds worth KD15 million in July to finance construction of retail and entertainment outlets and a hotel.
Tenders have been invited for the estimated $45 million Feheheel Waterfront development project which is being developed by Tamdeen Real Estate Company near Al Dabbous Street. The project is expected to be completed in 2004. The project involves construction of a commercial and recreational facilities and a beachfront/promenade which extends along the full 1.6 km sea frontage of the project (see page 31).
A local real estate development company plans to develop a major tourism and residential project in south Kuwait near the border with Saudi Arabia. The La'Ala Al-Kuwait Real Estate Company has already issued tenders for the first package for the project, which will be known as Pearl City. A contract award for the reclamation package is expected shortly.
The project, to be developed in stages over a total area of 6,500 hectares, is planned to be home for 100,000 residents. It will be located on the beachfront between the Al-Khiran resort and the King Fahd bin Abdulaziz expressway.
Another project which is expected to draw in private sector funding is a plan to develop Abdullah Al Ahmed Street into a tourist, entertainment and commercial hotspot on the lines of the Champs D' Elysses in Paris, France.
Kuwait's planners have allocated funds for the KD22 million ($73 million) downtown development in its capital. It is expected to become the focal point of the city, and it will be undertaken in phases.
Meanwhile, plans to develop Failaka Island into a tourist resort have been given the go-ahead. The project involves the construction of chalets, hotels, commercial areas, heritage and recreational facilities over a 43 sq km area. Tenders are expected to be invited by the end of this year and work on the project is expected start next year. Kuwait has for years looked at redeveloping Failaka.
Bubiyan is also to be developed as a tourist island. The 530 sq km scheme involves construction of hotels, chalets and recreational facilities.
Municipal authorities have given the green light for the development of the Al Sulaibhikhat coast. They have also approved the Subiya Park project, which will cover a 90,000 sq m plot of land on the northern shore of Kuwait. The park will include a major hotel with 230 rooms and 150 chalets, with 40 of them to be built near the sea. The park will also have a conference centre, a major hall, several playgrounds, a restaurant and a swimming pool.
The new Kuwait Hilton Hotel & Resort is expected to be completed by the end of January 2002. Located in the Mangaf area, the hotel will have 150 rooms and 144 chalets along its 1,600 m of beachfront.
Power & water
Parsons Brinckerhoff International (PB) has recently been awarded a contract to provide consulting engineering services for the development of new power stations in Kuwait.
The new facilities entail a 2,500 MW steam turbine station at Azzour North which will be located adjacent to the existing Azzour South Power Station, about 100 km south of Kuwait City, and gasfired plants located on two sites, Shuaiba and Subiya. The Azzour North project is estimated to cost KD683 million ($2.2 billion) and is scheduled to be operational in the second half of 2006.
The two other plants - a 600-MW complex in Shuaiba and a 400-MW plant in Subiya -will require a total investment of KD133 million ($420 million) and are targeted to go on stream in mid-2003.
PB will assist in determining the most suitable power unit capacities for the facilities, prepare specifications and tender documents, and carry out tender analysis, culminating in the supervision of the construction works on site.
The firm was owner's engineer for the 2,400 MW Subiya power station, completed in August 2000. The new power plants will use natural gas as feedstock, which will be sourced from the proposed Qatar-Kuwait pipeline. Kuwait plans to import 800-1,400 million cu ft a day from Qatar's North Field.
In the water sector, contractors have been invited to prequalify for the estimated of KD145 million ($467 million) first phase of the proposed Subiya water storage and distribution scheme.
The 30-month, two-phase project will be tendered in six packages. It involves the supply of up to 96 million gallons per day (gpd) of water to residents and industries in Subiya and Mutla, in northern Kuwait, and west Funaitees, south of Kuwait City. The project is related to the construction of a 96 million-gpd desalination plant to be set up at Subiya in two stages of 48 million gpd each.
Tenders are also to be floated for establishing the first stage of water distillation units at the North Zour power station and water desalination plant with a capacity of 48 million gpd of desalinated water a day.
The new units are expected to be commissioned in 2005 and that the ministry aims to increase the strategic reserve of potable water to be used only in case of an emergency or during peak consumption periods.
A number of minor projects to supply South Surra, West Jleeb Al Shuyoukh and South Doha with pure water are also being undertaken and KD60 million has been allocated for them. The ministry plans to replace all the country's water network made of asbestos with pipes made of ductile iron by 2004.
Among other projects in the pipeline are ones to boost water supplies to Wafra, as part of the government's KD40 million initiative to increase agriculture and cultivation in the country. In this regard, a new pipeline from Al Zour water desalination plant to Wafra will be installed at a cost of KD17 million. This project which is expected to take three years to complete.
The ministry will put out for tender another project to increase the quantity of treated water distributed to Abdali and Wafra. The project is estimated to cost KD23 million.
Kuwait has unveiled an ambitious $2.5 billion plan to import water by pipeline in Iran. A London-based multinational group Gulf Utilities, which is spearheading the project, said the Kuwaiti Cabinet had finally approved the deal after more than a year of talks on the pipeline. The pipeline would carry water from the Karkeh dam in northern Iran to Kuwait some 650 km to the south. The pipeline will extend 330 km across Iranian territory and then via a 210 km pipeline under the Gulf to the Kuwaiti shoreline, thus avoiding Iraqi territory.
Oil & gas
Last July, the Supreme Petroleum Council approved a $2 billion project to build the country's second olefins plant, Equate 2 and a long-awaited aromatics plant, costing $1.4 billion.
Equate 2 will be designed to produce 850,000 tonnes per year (tpy) of ethylene, 450,000 tpy of low-density polyethylene, and 650,000 tpy of ethylene glycol.
The plant will also manufacture around 70,000 tpy of propylene to be absorbed by Kuwait's 100,000 tpy polypropylene factory after its expansion.
KPC subsidiary Petrochemicals Industries Company is to team up with an international petrochemicals giant to execute the project as it did with Union Carbide to establish the $2 billion Equate 1 which was launched at Shuaiba in 1997.
Explosion-damaged Mina Al Ahmadi refinery, Kuwait's largest, is expected to be restored to its full capacity of around 430,000 million barrels a day by October 2002. Work is under way on repairing a major distillation unit which was damaged in an explosion in June 2000.
Mina Al Ahmadi refinery is run by state-owned Kuwait National Petroleum Company (KNPC). Fluor Daniel and Korea's Sunkyong Engineering (SK) were picked by the Swiss insurance firm Robertson and Company to rebuild the refinery under an initial cost of around $298 million. Kuwait plans to upgrade the refinery in terms of technology in the rebuilding process.
Some KD250 million is expected be spent over the coming years on projects to upgrade the country's crude export facilities including the construction of new tank farms for oil storage. A separate project to build a new export pier and associated facilities in Mina AlAhmadi refinery at a cost of KD100.5 million has been awarded to South Korea's Hyundai Engineering & Construction.
There are a number of projects that are being discussed as possible ventures in coming years, including a new grassroots refinery in the south. An initial feasibility study has already been made for the refinery.
Other projects on the drawing board include construction of a pipeline to link the oil fields in the north to those in the southern part of the country and two pipelines to import natural gas from Qatar and Iran.
Other projects
The package, estimated to be worth $35 million, will cover the construction of an 840 m breakwater, jetties, pontoons and quays for nine naval vessels and a disposal area, dredging of about 117,000 cu m, and related civil, mechanical, electrical and plumbing works. The facilities will be built on Umm Al-Maradem island. The second and third packages, estimated to be worth a total of $23 million, will be built on the islands of Auhah and Garoh. Tender documents for these are expected early next year.
Other projects include the College of Technological Studies, which is due for completion in July next year (see page 41).
The contractor is set to complete work this month on Kuwait Oil Company's (KOC) headquarters in Ahmadi and a residential project for the Commercial Real Estate Company (CRC).
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