A flare for tracking the Gulf's energy

Taking advantage of their energy riches, Gulf states have unleashed a raft of energy projects that suppliers and contractors are eyeing with relish.

Saudi Arabia has at least 93 projects worth $129 billion under way in the oil, gas, refining and petrochemicals sector.

These include Saudi Aramco's $16 billion Ras Tanura refinery and petrochemical project and the $12 billion Khurais oil field project, both of which are in different stages of development, according to the Zawya Project Monitor, which tracks more than 300 active energy projects in the Gulf throughout their life cycle.

"There are tremendous opportunities in the region in the construction, energy and infrastructure sectors. We are keen to keep an eye out for the various projects that are in the pipeline," says Harvey Kim, General Manager of Samsung Corporation, Dubai. "We oversee developments from the concept to the execution stage, which makes project tracking critical to our needs."

Project tracking has become critical for project owners and developers not least due to rising costs. Reportedly, the Ras Tanura project may exceed $22 billion, denting Saudi Arabia's plans to raise crude oil production capacity by a third and refining capacity by about 35 per cent.

High costs across the region have led to the cancellation of the estimated $7 billion ExxonMobil GTL plant in Qatar.

Meanwhile, the $6.3 billion Al Zour refinery in Kuwait is also set to undergo a fresh bidding process after project costs doubled from original estimates, according to the Projects Monitor, which aims to cover 'live' projects in excess of $100 million, primarily in the area of energy, infrastructure and construction, combined with Zawya's other research.

Investment licences

"Costs are becoming a major issue and all those who have pending projects and investment licences for those projects are getting worried," says Alawi H Al Shurafa, senior finance associate at Saudi Chevron Phillips, which is developing a $4.3 billion petrochemical complex at Jubail, set for a 2010 completion date.

"Difficulty in sourcing labour, heavy equipment and commodities is raising costs for the projects that are under way," says Al Shurafa.

"Having said that, the region - and Saudi Arabia specifically - remains the best place for developing petrochemical projects. The cyclical pattern of this industry makes it hard to shelve feasible projects because you have to be in the market at the right time."

The surge in projects is driven not only by global demand but also rising domestic energy consumption.

The GCC has one of the world's highest per capita rates of energy consumption, with the regional economy consuming nearly 17 per cent of oil production, and demand growing at 4.5 per cent per year.

Given the energy dynamics, it is not surprising that Qatar has emerged as the second biggest 'live' development site for ongoing energy projects in the Gulf, with 66 developments worth a combined $75 billion, according to Zawya research.

Qatar sits on the third largest gas reserves in the world and aims to become the gas-to-liquids (GTL) capital of the world. More than 33 of these projects are already in engineering, procurement and construction (EPC) phase, which reflects the intensity of developments under way.

Qatar is looking to develop these projects first before announcing new ones.

"Qatar has issued a moratorium on new gas projects in its North gas field developments till 2009, so new LNG, GTL plans will need to wait," says Abdul Gafour, manager of Zawya Projects Monitor.

Parallel to these developments are large-scale power and water projects such as the $3 billion Ras Laffan C IWPP, which will generate 2600 megawatts of power and 40 million gallons per day of water.

With global and regional thirst for energy unabated and Gulf states embarking on their own energy-centric plans, the Zawya Projects Monitor aims to be the one-window tracker, keeping an eye on the projects' status and, equally important, costs.

The writer is managing editor, ABQ Zawya LLC.