The price of crude oil has dropped by more than half in the last 6 months. For those of us filling up our cars in the UK, this is music to our ears. However to the construction industry in the Middle East, this has potentially damaging effects.
You may not read it in the Middle Eastern press too much but there has been growing concern about the decline in oil prices and the knock on effect this would have on planned construction work in the Middle East region.
Numerous clients have raised suspicions that recent delays to projects in locations such as the UAE and Saudi Arabia are linked to the fall in oil prices.
Qatar To Remain Unaffected
However the Qatari Prime Minister and Finance Minister have both made it clear this month that Qatar will not be slowing its spending when it comes to Education, Health and Infrastructure in the run up to the 2022 FIFA World Cup.
The Qatar construction market has outperformed the likes of Dubai, Abu Dhabi, Oman and Bahrain in the last 12 - 18 months and shows no signs of slowing down.
Qatar's Unique Issues
Qatar has a unique problem compared to the rest of the Middle East; its population is increasing at a phenomenal rate. In 2006 the Qatar population was approximately 800,000. The latest figures published in February 2015 record the current population as 2,334,029. When you look at a 1,500,000 increase in population alone, that is a significant number. When you look at this as a percentage, it becomes even more staggering.
Qatar faces well-documented problems such as congestion on the roads and a lack of schooling places. There are also big improvements needed to its power and utilities networks.
To add to these issues, Qatar also has a major World event to host in 2022 in the FIFA World Cup. This 2022 date will becomes a deadline to get a large portion of these planned improvements complete.
Qatar On Track
Despite its issues, it's fair to say that these improvements are well underway. Qatar has spent huge sums of money already on large scale projects such as the Hamad International Airport, The New Port, The Doha Metro, Lusail and the Doha Expressway and many other significant roads schemes under construction. This is just a sample of some of the larger projects underway in Qatar.
I'm not hearing much frustration about critical projects in Qatar being significantly delayed like I am in other areas of the region. Qatar seems to be going ahead at full steam with the critical planned infrastructure work.
Where movement has been slightly slower is specifically relating to the stadiums and hospitality projects needed to host the World Cup. This is understandable in that until recently, there were still fears that Qatar may have the World Cup stripped from them due to their inability to host the tournament in the summer months. It was announced this month that the tournament will go ahead as planned in Qatar but in the Winter, finally putting an end to any speculation that Qatar would not be hosting the 2022 tournament.
With seven and a half years left to prepare for the tournament, don't expect stadiums and hotels to start popping up overnight in Qatar, however I'm sure there will be more movement going forward now that any doubts surrounding the tournament have now gone away.
Whilst the oil price seems a hot topic in the Middle East at present, there does not seem to a be a real fear that this will have a long term effect on construction in the Middle East. It seems more of a short term frustration to those companies tendering for particular projects which can be described as 'non-essential' developments which may not be awarded on time.
However the cost of oil is largely a ‘man made problem’ and there are theories that the price has been deliberately lowered by oil companies in the Gulf for political reasons. This has been denied, however the point is that with a lack of supply of oil (ie the oil companies producing less) the cost will rise again. Therefore the price is in the oil producers own hands to a large extent if they were to work together.
Regardless of this, Qatar looks set to continue as planned with its huge spending on infrastructure which is estimated to be circa £200 Bn before the start of the World Cup and MEED has predicted that $30 Bn will be spent in 2015 alone.
Come and be a part of Qatar’s massive construction plans!
Middle East Region