Massive Delays Plague Middle East Construction, Oil Expansion Drive - Emirates Business

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The total budget for construction projects under way in the Middle East reached almost $1 trillion (Dh3.67trn) last year, according to UAE-based industry intelligence provider Proleads. But the region-wide expansion drive is being hit by massive delays. In addition, soaring engineering, procurement and construction (EPC) contract costs have prompted most project sponsors to postpone or even cancel some of their capital projects on the grounds of expected lower returns. The number of projects has declined by 10 per cent across the region, except in the UAE.

More than 240 projects with a combined project value exceeding $150 billion were awarded in 2007, figures from Proleads show. The bulk of these were in Saudi Arabia ($75bn) followed by the UAE ($30bn) and Qatar ($18bn). The majority of these were in the oil, gas and petrochemical sectors with more than 160 projects valued at $120bn.

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n addition, an estimated 40 per cent of industry employers worldwide report difficulties in filling skilled-worker positions, says a recent report prepared by consulting firm Booz Allen Hamilton. “The cost to organisations for skilled workers are increasing,” said Dr Raed Kombargi of Booz Allen Hamilton. “The salary of a geologist with 10 years experience increased more than 25 per cent between 2003 and 2006. Salaries for oil drilling rig jobs increased by 60 per cent during the same period.” Companies have been driven to hire retiring staff at twice the price, he added. Due to these problems delays have become common in the energy construction business. EPC contractors undertake to hand over the keys to a project at an agreed price. But delays and rocketing EPC costs are haunting mega projects in the region.

A Saudi mega project scheme has joined the growing number of delayed projects in the region due to an overheating market. The development of the 500,000 barrels per day (bpd) Khursaniyah oil production facility, which is a key part of Saudi Aramco’s drive to boost crude production from 10.8 to 12.5 million bpd by 2009, has missed its December 2007 deadline. The development will now be finished in March 2008 or even later.

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http://www.business24-7.ae/cs/article_show_mainh1_story.aspx?HeadlineID=1467

[patch1234]

1. the S.A. numbers seem hard to believe

Saudi is currently pumping 9 million barrels per day.

12.5 million per day in 2009?