Kuwait - Entering a new era
For the first time in three decades, Kuwait is without the threat of Saddam Hussein hanging over it. The
construction market already healthy after three years of high oil prices has seen activities accelerate even
further since the removal of Saddam Hussein.
Oil dominates government revenues, which dictates the pace of public sector building activity.
The Ministry of Public Works (MPW) continues to be the mainstay of such work and has been allotted an
additional $ 290 million for the fiscal year 2003/04, taking the department’s total budget to $ 900 Million. The biggest project on MPW’s books is the $ 1500 Million scheme to build a 26-kilometer causeway over Kuwait Bay to Subiya, where a new town is planned. UAE-based COWI has prepared the conceptual designs.
Popular approach
MPW is considering whether to go down the Build-Operate-Transfer (BOT) route, which is becoming increasingly popular in Kuwait, with BOT projects valued at more than $ 11,000 Million in the pipeline. By far, the largest of these are the Bubiyan and Failaka islands tourist resorts, costing $ 6600 million and $3320 million respectively, being developed by the recently created Executive Authority for the Development of Kuwaiti Islands, Divided Zone and Major Projects. For Bubiyan, the Project Management bids are under evaluation.
Major Healthcare and Housing projects are also on the table to meet the needs of a rapidly rising population.Five new hospitals are planned. The largest is an 800-bed facility at South Surra, for which pre-qualification applications were submitted in July 2003. Two housing schemes are under way at Al-Khiran. A tender is due in early 2004 for a package on the Pearl City development, calling for construction of 1,000 chalets plus schools and other facilities.
The uninhabited Bubiyan Island is the site of an $800 million scheme to build a new port to serve the export/import requirements for the reconstruction of Iraq. An initial feasibility study has been prepared for Kuwait Ports Authority (KPA). Increased throughput in the light of events in Iraq is also a factor in the other major KPA project on the cards – in December 2003, companies were invited to pre-qualify for four contracts to upgrade and redevelop Shuwaikh and Shuaiba ports.
Lucrative Work
Local contractors are perfectly placed to pick up lucrative reconstruction works in Iraq. So far they have held back, waiting improved security and occupied with plenty of work at home. The country’s main role in the rebuilding has been a source of, and conduit for, materials. Local construction firms have seen the prices of their inputs rise steeply in the months since the war.
Iraq Reconstruction – KBR, Parsons get RIO-2
The US Army Corps of Engineers (USACE) awarded in mid-January 2004, two contracts for the second phase of the Reconstruction of Iraq Oil (RIO-2) program to Kellog Brown & Root (KBR) of US and a joint venture of the Parsons Corporation of US with Worley Group of Australia.
The 24-month indefinite delivery/indefinite quantity (ID/IQ) contracts, which have a minimum value of $500,000 and include three one-year options, are for the repair and upgrade of oil infrastructure in the northern and southern oil fields of Iraq. The southern contract, worth a maximum of $1200 million was awarded to KBR, while the Parsons/Worley team will be responsible for work in the north worth up to $800 million. Under the contracts, the firms are guaranteed a 2 per cent fee, but can earn as much as a 7 per cent profit margin, depending on performance.
KBR, which was awarded in March 2003 the contract for the first phase of RIO program, has more than 50 engineers deployed in both northern and southern Iraq working on the scheme, and by November awarded subcontracts worth a total of $1280 Million. Although the original contract was awarded directly to KBR, the RIO Phase-2 awards were based on “full and open competition”, according to USACE. Parsons is expected to take over in north within two months.
According to the Oil Ministry, crude production is now at about 2.2 million barrels a day (b/d), of which about 1.8 million b/d is exported (close to pre-war export levels).USACE has said that it will continue to assist the oil sector with the aim of raising production to 3 million b/d by January 2005. Coalition Provisional Authority officials say it may cost as much as $16000 million to fully modernize the country’s oil industry.
High level Iraqi oil delegation visits Kuwait for talks
A senior delegation from South Oil Company (SOC) of Iraq and Iraq’s Oil Ministry visited Kuwait in mid- January 2004 to discuss possible areas of cooperation with Kuwait Oil Company (KOC). The committee has been established by the Ministry, SOC and KOC to look into ways of cooperating on future development of Iraq’s hydrocarbons sector. SOC is pressing ahead with the restoration of its fields and infrastructure despite a lack of funds for investment. SOC has reached a production capacity of about 2 million barrels per day and still have the water injection scheme and the gas utilization scheme to complete. They are trying to complete the development of their existing fields before they break new ground. A lot depends on the investment and funding they receive before they develop new areas.
The Ministry is working on the final details of an investment plan. However, the progress may be curtailed by a shortage of investment. If the SOC completes the water injection projects, they will be capable of sustaining 2 million b/d and increasing output. But in Iraq, with the present situation, one can never draw a line, but can only say that there is an improvement.
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