Gulf Construction Online - Back to big spending

Kuwait

The 70-storey Al Hamra Tower ... set to rise on the city skyline.

Back to big spending

A high investor confidence and liquidity in the market is translating into massive real estate developments throughout the country. Hand in hand with this growth, Kuwait – buoyed by the soaring oil prices and budget surpluses – has now unleashed a string of billion-dollar projects aimed at boosting its infrastructure.

01 December 2005

Kuwait is back to its big spending ways, buoyed by the massive surge in oil revenues and new dynamism in the private sector.

Armed with a huge budget surplus, the Opec member has moved towards improving the infrastructure with a $51 billion spending plan to cater to the needs of a growing population. The country is keen to regain the status it enjoyed pre-1990.
The private sector too is keen to match the vibrancy seen in the rest of the region and $8 billion worth of investments are set to flow into real estate development alone.
It is not just in Kuwait that the country’s investors are focusing, they are pouring money into real estate projects all over the region.
According to Public Works Minister Badr Al Humaidi, the $51 billion fund will go into:
• The construction of four new planned cities to house thousands of Kuwaitis;
• The Subiya causeway and a linked motorway;
• Upgrade works on key ring roads around the capital and the country’s sewage network;
• A regionally-competitive commercial seaport at Bubiyan, including a free-trade zone to serve as a link between Asia and the Mediterranean and beyond.
Plans for the Bubiyan port, however, have suffered delays and two bodies set up specifically to spearhead the project – the Divided Zone Agreements and Kuwait Mega Projects Developments (Dizart) and its successor the Mega Projects Agency (MPA) – having been dissolved over the past year.
While massive investments continue to be made in the hydrocarbons sector including the construction of one of the largest oil refineries in the world, the oil-dependent state expects to attract direct foreign investments of about $10 billion in industrial projects such as the multi-billion-dollar Olefins II petrochemicals project.
The government has opened up 11 sectors to foreign investors, including education, health, banking, telecommunications, petrochemicals, hotels and insurance, according to Trade and Industry Minister Abdullah Al Tawil. The planned $8.5 billion Project Kuwait – a project designed to open up the oil sector to foreign investment, which has been languishing since 1998 – has received new momentum and the government expected to receive parliamentary go-ahead for the plan next month.
The country, which has been riding high on the wave of a real estate boom over the past two years, witnessed a dip in activity in September. However, developers are reaching for the skies in terms of high-rise development. While 50 storeys appeared to be the heights that the sector was aspiring for last year, the country is now seeing the development of at least three 70-storey towers: the Gate of Kuwait, the Al Asima (Capital City Block) and Al Hamra Tower. Most of these are being developed in response to the phenomenal demand for office, commercial and residential space from companies eyeing prospects in Iraq in the post-Saddam period. Now that Iraq has not blossomed into a land of opportunity that many had hoped for, it remains to be seen how the demand-and-supply situation will be two years on.

Failaka & Bubiyan
Kuwait’s ambitious plans for the development of the estimated $3 billion Failaka Island tourism scheme and the $2 billion state-of-the-art Bubiyan seaport project are now under the purview of the Ministry of Public Works.
The 26-sq-km Failaka project aims to transform the island off Kuwaiti coast into a major tourist attraction, complete with hotels, chalets and entertainment facilities on the basis of build-operate-transfer (BOT) agreements.
Kuwait has recently extended the deadline for a design-and-build contract covering the first phase of a port on Bubiyan Island to the end of February. Estimated to be worth $200 million, the first phase covers transport access to the port, calling for the construction of a 34-km-long road from the planned port’s location on the east side of Bubiyan to Khor Subiya in the west. The project, which is to be executed in five stages in 16 years, is designed to be the main port serving Kuwait, Iran and Iraq. Bubiyan – the largest of the emirate's nine islands – will also include a free zone, storage area, oil depot and recreational services.
The private sector will be responsible for building quays, piers, container docks and transport systems such as a possible railroad, bridges and highways.

Airport
Kuwait has recently unveiled its masterplan for the expansion of Kuwait International Airport (KIA). The estimated $600 million to $1 billion development will increase the airport's annual capacity to 20 million passengers from six million, as well as modernise facilities and enable it to receive the new Airbus A380.
The expansion – covering a total area of 85,000 sq m – will involve the construction of a new terminal building with a capacity of around 14 million passengers. It will be linked to the existing terminal via a tunnel and connected to a new access road from the south. The masterplan also calls for the construction of a hotel, car parks and associated aprons and remote stands.
Meanwhile, work has started on a private jet terminal at the KIA. The terminal, to be constructed in two years, will accommodate 33 private planes and will be constructed by Jet Aviation Kuwait on a BOT basis.

Housing & townships
Housing has been a major problem that has dogged the nation over a number of years. However, concerted efforts are being made to address the issue with the construction of the four new cities at Jaber, Subiya, Khiran and Arifjan, which will be self-contained, with branches of government departments, health, education, sports, commercial and entertainment services. Subiya will be north of Kuwait City, while Arifjan will be 55 km to the south of the capital and Khiran – which will have 26,000 housing units – will be further south.
Work has already begun on Jaber City to the north of Kuwait City, which will include 13,000 homes and be ready by end-2007.

Oil & gas
Kuwait is moving ahead with plans to build one of the largest refineries in the world at an estimated cost of $6.2 billion. The prequalification process for bidders for the planned 615,000-barrel-per-day (bpd) refinery is expected to be completed by the year-end. The work is expected to be divided into three to five engineering, procurement and construction (EPC) contracts, which are expected to be awarded by December next year. The US-based Fluor Corporation is acting as project manager.
The refinery – Kuwait’s fourth – is scheduled to start commercial operations in 2010. The complex will reportedly cover 7 million sq m in the Zour area and will also supply lower sulphur fuel oil for water and electricity generating plants. Once complete, it will replace the aging 200,000-bpd Shuaiba plant.
Progress is also being made on the $4.1 billion modernisation and upgrade programme at the state’s three existing refineries at Mina Abdulla, Mina Al Ahmadi, and Shuaiba. Plans include the construction of the fourth liquefied petroleum gas (LPG) plant at Mina Al Ahmadi.
Among other developments in the sector, South Korea’s Hyundai Heavy Industries (HHI) has won Kuwait Oil Company's (KOC) $1.2 billion EPC contract to build new crude export facilities at Ahmadi. The project will increase KOC's storage capacity by 11.4 million barrels and is designed to support sustainable production levels of three million barrels per day.
Its sister firm Hyundai Engineering & Construction Company has the $138 million contract to expand the existing oil pier at Mina Al Ahmadi.
Industry
Among the largest petrochemical ventures that are moving ahead is the $2 billion Olefins II petrochemical complex at Shuaiba being developed by a joint venture of Dow Chemical Company and Petrochemical Industries Company (PIC).
The project will include the construction of an 850,000-tonne-per-year (tpy) cracker, a 600,000 tpy ethylene glycol unit, a 450,000 tpy ethyl benzene/ styrene monomer unit and a debottleneck expansion of an additional 225,000 tpy of polyethylene capacity at the existing complex.
The completed facility will double the capacity at the existing olefins complex. Fluor Corporation is to provide EPC management services for the utilities and infrastructure portion of the project. While Technip has signed a deal to build the ethylene plant, contract awards are imminent on the remaining downstream process packages which include the styrene monomer and ethylene oxide/ethylene glycol (EO/EG) and the polyethylene (PE) expansion.
An associated but separate aromatics project is being developed by the Kuwait Aromatics Company (Karo) on the same site. Revised prices have recently been opened by the Central Tenders Committee for the EPC package on the estimated $1 billion complex.
Another significant project is a 350,000-tonne calcining plant for Petroleum Coke Industries Company (PCIC) of Kuwait. FFE Minerals India, a private limited company of FL Smidth Group, has signed a BOT deal for the project. Rain Calcining India, which has 11.5 per cent stake in PCIC, will supervise the construction of the $150 million project and manage the plant for seven years. Bhagwati Designs, another FL Smidth Group company, has received the civil, structural and architectural design contract for the plant.

Power & water
The surging demand for electricity has forced the state to fast track the construction of a 1,500-MW power station at Subiya and a contract award is expected early next year. Four international contractors – France’s Alstom; GE Power Systems of the US; Japan's Mitsubishi Heavy Industries (MHI); and Germany’s Siemens – were due to submit bids by the end of last month for the estimated $1 billion EPC contract for the combined-cycle plant.
Meanwhile, a $263 million EPC contract to build phase III expansion of the Subiya desalination complex went out to South Korea’s Doosan Heavy Industries & Construction Company, which was working on the first and second phases of the plant. Construction of four 12.5 million-gallon-per-day (gpd) multi-stage flash (MSF) desalination units is due to be completed by December, 2007.
Another South Korean firm Hyundai Engineering & Construction Company has just received a $38.5 million order to build four electrical substations in Salmiya, Hawaly and Sulaikhat areas.

Roads & bridges
A multitude of transportation infrastructure projects and upgrades worth more than $4 billion have been planned for Kuwait over the next few years.
These include the 36-km causeway across the Gulf from Kuwait City to Subiya. Tenders for this long-awaited scheme are imminent. About eight groups have been prequalified for the estimated $1.5 billion design-and-build contract, which has been delayed over political debate on whether the project should be tendered on a build-operate-transfer (BOT) basis. Denmar’s Cowi is the consultant.
A second project involves a 72-km motorway from the capital to the planned city of Subiya to the north costing some KD85 million.
In addition, Kuwait has earmarked millions of dinars for road infrastructure over the next five years. These include projects in and around the capital such as a KD90 million plan to extend and upgrade the First Ring Road, a KD60 million project to develop and overhaul the Fourth Ring Road, a KD35 million extension and upgrade of the Fifth Ring Road and works on the Second and Third Ring Roads to be finished by 2010.
A local/Greek joint venture of Copri Construction Enterprises and Aktor has been awarded the long-awaited phase 1 package on the first ring-road upgrade project. The scheme, the first of three packages on programme, calls for the upgrade of 2.5 km of carriageway, 10 bridges and diversion of the existing underground utilities.
Another major project is the $100 million plan to upgrade the existing 350-km-long road network in the KOC operational area. Salem Al Marzouk and Sabah Abi-Hanna (SSH) of Kuwait and Hyder Consulting of the UK have been appointed to conduct a study on the project.
In addition, there are plans for a KD500 million, 35-km underground public rail network around Kuwait City, to be expanded later to the suburbs of Salmiya and Farwaniya.

Real estate
Excavation, shoring and dewatering works have been launched on one of the tallest mixed-use towers in the country - the 70-storey Gate of Kuwait on Al-Sour Street, which will have a built-up area of 127,000 sq m. The estimated $200 million development will have a five-star luxury hotel, offices, a conference centre and 5,000 sq m of retail space as well as a 1,600-slot car park. The client is the local Al Shaya Group. The scheme has been designed by a South African/local team of the GLH Partnership and KEO International Consultants.
Another South African design firm, DSA, is drawing up designs for Al Shaya for a $138 million luxury retail and hotel resort complex in Salwa.
Leading realty developer Salihiya Real Estate Company is looking to develop its Al Asima and Super Block projects in Kuwait City. Al Asima, which includes a 70-storey office tower, will comprise retail outlets, cafes, restaurants, cinema hall, health club and hotel apartments. The Super Block will cover a 3,605 sq m area in Fahd Al-Salem Street .
Ahmadiah Contracting and Trading Company has started construction work on two skyscrapers – Al Hamra Tower, a 400-m high 70-storey building, which will provide a built-up area of 300,000 sq m and Arraya 2, a 56-floor, 300-m high tower, which is located next to the recently completed Arraya Tower in Sharq.
The Kuwait-based Commercial Real Estate Company (CRC) has launched work on two major projects: The 45-storey Kuwait Trade Centre and the Symphony Complex. The local Burhan International Construction Company has started mobilising on an estimated $97 million contract for the mixed-use Symphony Complex located on the Salmiya waterfront. The complex – which will have a built-up area of more than 80,000 sq m over an 11,750 sq m site – includes three towers and a shopping mall. The first is a 20-storey, five-star hotel, which will be managed and operated by the Cerruti brand of Brussels-based Radisson SAS, the second is a 16-storey residential tower while the third is a 12-storey office tower.
The local Tamdeen Real Estate Company’s subsidiary Tamdeen Shopping Centre Development Company has launched two new mall projects, which are estimated to cost more than $517 million. They include the Mall of Kuwait, which is designed to be the largest mixed-use commercial development in Kuwait when it opens in 2009. With a gross leasable area of 131,000 sq m, the mall will include a hypermarket, a multi-storey car park with space for 8,000 vehicles, an Imax cinema complex and a multi-purpose convention hall. The second project is called 360° Kuwait. Located on the sixth ring-road, the mall will feature a 59,000-sq m shopping area, a hypermarket, a multi-storey car park with space for 3,000 vehicles and a 15-screen Imax cinema.
Other landmark developments include the $301.2 million Capital City Tower, being developed by the Al Dar National Real Estate Company, which will include commercial offices and a hotel; the $90 million Kuwait Business City comprising office towers, hotel, a commercial market and restaurants area, which is being built by Al-Mazaya Holding Company; and the Emerald Towers to be developed by International real estate company Al-Arjan.

Other projects
• The local Al-Hani Construction & Trading Company has begun mobilisation work on its $42 million contract, which calls for the construction of the new four-storey national library adjacent to the existing national museum on Arabian Gulf Street.
• Local investment group Alamara Projects is pressing ahead with plans to build a boutique hotel catering to business travellers in Kuwait City. The estimated $100 million project involves the construction of an 18-storey, 127-room property, a library and associated entertainment facilities.
• State-owned Kuwait Oil Tankers Company (KOTC) has launched plans to build its new headquarters in the Sharq district of Kuwait City, which is estimated to cost around $52 million.
• A US/local architectural team of HOK and Seif Engineering Consultants is preparing designs for an estimated $69 million extension to the National Assembly building on the corniche in Kuwait City. Tenders for the main construction packages are expected by the year-end.
• A new headquarters is to be built for the Central Bank of Kuwait (CBK) on Gulf Street in the heart of the capital. The estimated $103.4 million office building will be housed in a 40-storey triangular-shaped tower.