The MEED Kuwait Projects Conference
The MEED Kuwait Projects conference was held at The Regency Hotel in Kuwait City on 24-25 November 2014. It was attended by 300 VIPs, speakers, guests and delegates representing business and government in Kuwait, the wider GCC and the world beyond. The event was addressed by more than 50 speakers and panelists.
The conference heard:
- Kuwait is one of the world’s most creditworthy economies with the capacity to continue to promote a high rate of real economic growth and solid social progress
- Kuwait’s economy depends upon high oil prices and growth in crude oil and refined product exports. The fall in oil prices since the summer of 2015 and signs that demand for Kuwaiti oil will grow modestly in the years to 2020 are raising questions about the long-term viability of a model that has helped make Kuwait one of the world’s most successful economies
- Kuwait has embarked on unprecedented investment in major capital projects encompassing:
- Upstream oil and gas production
- Crude oil refining and distribution
- Electricity and water production capacity
- Airport and seaport capacity
- The domestic road and highway network
- Mass public transport including a metro for Kuwait City
- A national railway network that will link with the GCC railway which is due to open in 2018
- Social infrastructure including hospitals and a world-class university
- Housing and supporting facilities.
MEED estimates that the value of construction contracts placed in 2014 reached a record of $30bn and a similar figure will be confirmed in 2014. More than $100bn worth of contracts are to be placed in the Kuwaiti market in the next five-10 years.
- Delivering these projects will present an unprecedented challenge to the Kuwait projects supply chain. The issues include:
- Quantifying the megaproject market to 2030 and the material, financial and human resources to complete these projects
- Strengthening the supply chain, particularly the capacity of government clients to make effective decisions and of the local construction industry to manage megaproject risk
- Procurement models. The conference recommended that Kuwait develop innovative procurement models and welcomed revisions to the PPP law
- Developing partnerships. The conference called for more action to stimulate the creation of partnerships between and among local businesses and their foreign counterparts, more effective private-public collaboration and greater interaction between those involved with delivering megaprojects and the Kuwaiti community.
- The conference called for the government of Kuwait to continue to provide inspiring and effective leadership in the implementation of the Kuwait megaproject programme.
The MEED Kuwait Projects Conference was organised with the support of the Ministry of Public Works, the Kuwait Direct Investment Promotion Authority and the Public Authority for Housing Welfare. Silver sponsor was Al-Tijari. Bronze sponsor was Al Tamimi & Company. Conference sponsors were Aconex; Al Ruwayeh & Partners; Ali Alghanim & Sons Group General Trading & Contracting and Drake & Scull and PACE. Associate sponsor was Al Oula Shamal Azzour. Networking sponsor was Mushrif Trading & Contracting Company.
Economic prospects in Kuwait and the Kuwait projects market
IMF deputy division chief and mission chief for Kuwait and Oman A Prasad, said that Kuwait was heavily dependent upon oil exports and revenues. Kuwait is also heavily dependent upon expatriate labour, with more than 80 per cent of those working in the country coming from overseas.
The approach taken by Kuwait has, however, resulted in strong real growth which averaged 4 per cent a year in 1994-2003 and more than 4 per cent in 2004-13.
This has been accompanied by steady progress in social indicators. In 1990, Kuwait had the lowest infant mortality rate in the Middle East and this has continued to fall since then. In 1980, it had he region’s highest life expectancy, but this has actually fallen since 2000.
Kuwait’s more recent economic performance has included some weaknesses. Annual growth averaged just under 7 per cent in 1980-2010, but total factor productivity has fallen over the same period by 5 per cent a year. Relative average worker productivity fell sharply in 1970-89 and has been flat or in decline since then.
Kuwait’s growth since 2002 has been more unstable and on average lower than other GCC states. Total public investment has also been significantly lower as a proportion of GDP in 2000-14 than it has been on average in other GCC states. Government current spending on the other hand has been growing robustly and is forecast to rise to KD 25bn in 2019.
The consequence is that Kuwait’s infrastructure has failed to keep pace with developments in other GCC states and with trends in advanced economies.
The efficiency of public investment is higher than the average for Middle East oil exporters, but below that recorded in comparable emerging economies. A further weakness is that a very low proportion of the Kuwaiti labour force is employed in the private sector generally and in SMEs in particular. Only about 1 per cent of Kuwaitis are self-employed. Public expenditure on education was under 4 per cent in 2012, less than in Oman and Saudi Arabia.
The public sector wage bill as a percentage of GDP was almost 11 per cent in 2013. This was the second highest figure in the GCC. About 13 per cent of the labour force is employed by the public sector. This is creating fiscal vulnerabilities for Kuwait in the form of a very high government deficit after oil income is removed from the budget. Prasad said the era of high oil prices is now past and that Kuwait needs to adopt new policies to reflect the new realities. Policy recommendations will be contained in the IMF’s Article IV report which is due out in early December.
These will say that Kuwait should focus on:
- Macroeconomic stability
- mproving the business environment, including legal and regulatory reforms; promoting SMEs and encouraging investment
- Strengthening education
- Strengthening incentives for firms to work in the private sector
- Limiting government employment
- Strengthening social safety nets
- Matching education and training needs with skills needed for high-value industries
- Removing barriers that inhibit incentives for firms to move into tradable production and increasing competition among firms
- Identify specific measures to encourage firms to export
- Promoting venture capital
- Developing linkages between state-owned enterprises and SMEs to promote development of tradables and exports
- Developing a competition policy
- Promoting labour mobility.
“There have to be macroeconomic and structural reforms and realignment of incentives for workers and companies,” Prasad said. “The economic model relies on oil. The government is the dominant force in Kuwait. It’s been receiving oil export receipts and distributing them.”
“This model has served the country well so far, but with oil price uncertainties it might not work in the future,” Prasad said. “It is not that this model has not met its objectives. It’s the future that we need to worry about.”
Prasad said the figures show that the labour productivity in all GCC countries has declined. He said that Kuwait’s been spending less on capital investment than other GCC members.
“Current spending has risen and this has gone into wages and subsidies,” Prasad said. He said the government is looking at wage policy to temper these trends.
“The quality of infrastructure in Kuwait is low: in roads, port transport and airport transport infrastructure,” Prasad said. “Efficiency and productivity need to increase.”
He also said the number of Kuwaitis working in SMEs was low.
“The wage structure does not encourage people to work in the private sector,” Prasad said. “This has to change. All this is raising the fiscal gap.”
“More needs to be done about labour regulations and to educate the workforce and reduce government bureaucracy,” Prasad said. “The effectiveness of investment in education needs to be monitored.
“At present, producing non-tradables is less risky and more profitable for firms because they can benefit from cheap low-wage foreign labour and the rapid increase in government spending,” Prasad said. “The SME policy has to be dynamic and it has to have linkages with some state owned enterprises.”
Trends and prospects in the Kuwait projects market
MEED Projects analyst Ed James said that about $9bn worth of contracts was awarded in Kuwait each year on average in 2007-13. This was about half the figure recorded in Qatar in the same period and substantially below that recorded in Saudi Arabia and the UAE.
Construction, including real estate, was the most buoyant sector in 2009-13, accounting for 30 per cent of the total contracts placed in this period. More than $10,500 million worth of power contracts was awarded (see chart below).
James said that the value of contracts likely to be awarded in 2014-18 will be 130 per cent more than the figure recorded in 2009-13. He said that the figure could rise to $113bn in total.
MEED Projects’ data show that construction accounts for the largest share of planned and unawarded contracts in Kuwait followed by transport, oil and power. It also shows that the value of contracts to be awarded in 2014 is likely to hit $30bn, a record high for the Kuwait projects market. A similar figure is expected in 2015.
Keynote addresses and awards
Ministerial keynote address: Kuwait on course to expand the role of the private sector
Kuwait is on course to increase private sector activity in sectors including power, water and oil, according to Minister of State for Planning and Development affairs, HE Hind Al Subaih.
“We cannot ignore the role of the huge capital venture and the private sector” she said in an opening keynote address at the MEED Kuwait Projects conference.
“We are planning to expand the role of the private sector in electricity, oil, housing, desalination and health projects,” she said.
Al Subaih’s comments come in the wake of the publication of the country’s 2015-2020 development plan in August that cited expansion of the private sector as a key objective.
The five-year plan also said that pushing through a number of delayed megaprojects was also an objective. The New Refinery Project in Az Zour is one of the key schemes.
Al Subaih said she was confident that the new five-year plan would be implemented successfully, saying that lessons had been learned from the previous plan which saw a low project implementation rate.
“The previous plan helped us identify some problems and structural weaknesses,” she said. “The new plan comes in the midst of a lot of challenges, when everyone is looking for concrete achievements in line with the capacity of the state and the ambitions of Kuwait’s citizens.”
Providing land for urban expansion, integrating education with the jobs market, supporting small and medium-sized enterprises (SMEs) and creating more jobs in the private sector are all priorities.
KNPC gets MEED Kuwait Projects Leadership award
The annual MEED Kuwait Projects Leadership Award was presented to Kuwait National Petroleum Company (KNPC) chief executive officer Mohammad Ghazi Al Mutairi during the opening session of the MEED Kuwait Projects conference.
“MEED and its customers have decided to recognise each year an organisation or individual that has made or is making a decisive contribution to the development of Kuwait’s projects market,” MEED Events chairman Edmund O’Sullivan said. “We are looking for unambiguous evidence of vision plus competence and effectiveness in the delivery of projects that support the development of the economy and society of Kuwait. We are looking for an organisation that has made a real difference. The KNPC is that company.”
The KNPC was founded as a joint venture in October 1960.
“The company was then the only one of its kind in Arabia controlled by the people and government of the region,” O’Sullivan said. “In this, and in so much else, Kuwait was an inspiring model that the rest of the region has emulated.”
“The vision was of a fully-integrated oil refining and distribution company that could rival established giants and not just here in Kuwait or in the region, but across the world,” O’Sullivan said.
Six years later, the KNPC became the first national oil company in the region to complete a major oil refinery: the Shuaiba refinery which now produces 200,000 b/d of refined products. The Mina Abdullah refinery was transferred to KNPC in 1978 and Mina Abdullah in 1980, along with all refined product distribution assets.
“The company had become a global oil refining and distribution giant,” O’Sullivan said. “Its refining capacity is now almost 1m b/d, about half of Kuwait’s total oil production. More than half is exported.”
In 1980, the Kuwait Petroleum Corporation (KPC) was established as the national oil company of Kuwait and the KNPC became one of the corporation’s subsidiaries. The following year, KNPC became responsible for the oil refining and gas liquefaction industry in addition to the marketing of petroleum products in Kuwait through a chain of filling stations.
O’Sullivan said that this set the scene for massive investment in KNPC’s assets. The Mina Al-Ahmadi Refinery Modernization Project (RMP) was completed in 1984 and the Further Upgrading Project (FUP) was finished in 1986. Two years later Mina Abdullah Refinery modernisation project (MAB) was completed to create one of the world’s largest integrated refining complexes.
“The KNPC, overcoming many challenges and difficulties, has continued to maintain the highest standards in its approach to major project delivery,” O’Sullivan said. “It is now poised to implement the largest and most important refinery investment programme Kuwait has ever seen: the construction of a new fourth refinery and the extraordinary and seminal Clean Fuels Project which we will hear about in a moment. It’s a giant undertaking but one that the KNPC is ready for.”
“KNPC and KPC have also played a critical role in upgrading the skills and talents of the people of Kuwait in a far-reaching and highly-effective human-resource development programme,” O’Sullivan said. “The company now employs more than 5,500 people of which more than 75 per cent are Kuwaitis.”
Oil and gas projects
KNPC CEO sets out Kuwait’s refinery expansion and modernisation programme
The MEED Kuwait Projects Conference was told that the multi-billion dollar Clean Fuels Project (CFP) was on schedule, EPC contracts for the 4th refinery in Az Zour should be awarded by early 2015 and plans for the refinery to be developed to produce petrochemicals are under study.
KNPC CEO Mohammad Ghazi Al Mutairi said that KNPC’s crude capacity will be 1.4 million barrels a day (b/d), a figure 52 per cent above the present level, after the completion of the CFP and the Az Zour refinery.
“As part of KPC’s (Kuwait Petroleum Corporation’s) long-term strategic plan, KNPC has embarked on an ambitious programme to implement many megaprojects with an investment outlay of $40bn,” KNPC chief executive Mohammad Al Mutairi said.
Al Mutairi said that the CFP is at the EPC execution stage. He said its expected completion date is April 2018.
The EPC contracts in the 615,000 barrel a day (b/d) Az Zour refinery are now under tender. “EPC tenders were issued to bidders in April and June and we expect to complete this process early next year,” Al Mutairi said. He said the project will meet the low sulphur fuel requirements of local power stations and process heavy crude oil. Its expected completion date is May 2019.
Other major projects include:
- The Az Zour LNG import facilities project. This is planned to have capacity of 3,000bn BTU a day. “The FEED is in progress and expected to be completed shortly,” Al Mutairi said. The project’s due for completion in February 2021
- The Az Zour integrated refinery-petrochemical project is now under study
- The 5th gas train project. This was approved by the KNPC and KPC board early this year. Bids for the EPC contracts were invited in September. The project’s due for completion by July 2019.
Al Mutairi said the 4th and 5th gas trains will raise domestic gas processing capacity to 3,880 million cubic feet a day (cfd) from 1,680 million cfd.
Al Mutairi said companies with EPC contracts in the CFP are required to spend a minimum of 20 per cent of the project budget locally.
The clean fuel project
Engineer Wael Hussein Ibrahim Aljasem, team leader for project management at KNPC said the CFP calls for investment to upgrade and expand KNPC’s existing Mina Al-Ahmadi (MAA) and Mina Abdullah (MAB) refineries into an integrated merchant refining complex meeting the future diversified market requirements while maintaining high safety and environmental standards. It is due to start operating in April 2018.
The CFP will meet year 2020 market demand and specifications for local and international markets. The key priorities are:
- Enhance the environmental and safety performance of KNPC refineries
- Major upgrade of MAA and MAB refineries to convert high sulphur fuel oil to higher value products
- Provide new employment opportunities for Kuwaitis in the refining sector
- Support the country of Kuwait economic growth.
The projects will led to:
- The refining of 800,000 b/d of Kuwaiti crudes. The feedstock will be 776,000 of Kuwait export crude and 24,000 b/d of eocene
- The retirement of the Shuaiba refinery haracteriza with the opening of the Az Zour refinery and clean fuel startup schedule
- Utilisation of the Shuaiba refinery off-sites and marine facilities for the CFP
- Gas and power is to be available to support refineries operations
- Project execution to be on a lump-sum turnkey contract basis through the Central Tender Committee (CTC).
After the project, the joint MAA and MAB refineries will be a fully integrated merchant complex with minimum fuel oil production. A new crude distillation unit of 264,000 b/d will be added to replace the retired old crude units. The project will include conversion units (two HCR units and one coker). CCR/Isomer units are added for the increased production of mogas.
Key project highlights of KOC’s capital investment programme
Mohammed Al-Abduljaleel, manager of KOC’s capital project planning, said KOC’s 2030 strategic objective is to reach a production capacity of 3.65 million b/d by 2020 and to maintain it till 2030. In addition, it aims to produce 2bn cubic feet a day of non-associated gas by 2030.
The programmes to achieve these targets are:
- Upgrading existing facilities and building new ones
- Increasing the recovery factor from existing reservoirs
- Developing new areas: exploration, heavy oil and non-associated gas.
“The KOC will seek the necessary technical assistance by engaging IOCs through an Enhanced Technical Service Agreement (ETSA) approach,” Abduljaleel said.
KOC’s projects include are:
- Four new gas centres and revamping of existing ones to increase water-handling capacity and process sour crude and gas
- One new BS and enhancement of existing ones
- New effluent water treatment and injection plant. The effluent water treatment will be 950 million b/d and water injection plant capacity will be 500 million b/d
- Expand crude export facilities to increase storage capacity and enhance HSE conditions by 2021/22
- Upgrade marine facilities and increase the marine fleet
- New power substations and associated electrical network to meet demand from new electrical submersible pumps
- Extended the drilling programme to increase recovery in existing reservoirs. This will involve increasing the number of horizontal, directional and multilateral wells and new technology applications
- The Wara PMP additional train to inject up to 670 million b/d and increase production from 150 million b/d to 300 million b/d by 2025
- An artificial lift programme
- Geophysical solutions for E&PD
- Non-associated gas production from North Kuwait/Jurassic to reach 600 million cubic feet a day by 2019/20 and up to 1bn feet a day by 2020/21
- Heavy oil development phase I to produce 60,000 b/d by 2019/20, including cyclic steam stimulation, steamflood and cold production pilots.
The heavy oil development programme
The drivers behind the heavy oil development phase I are:
- Conventional oil production is expected to decline over time
- New technologies and unconventional resources can act as gap fillers
- The emergence of drilling and completion technologies has made the development of unconventional resources economically viable
- Processing technology and production optimization have contributed to reduction of operating costs
- Fuel substitute to downstream customers
Heavy oil phase I is currently under bid. Tender bids have been received, evaluated and recommendation for award is under preparation. The award is expected to be announced in December 2014. The contract is to be signed in February 2015. Commissioning is to start on August 2018 and turnover of the project in May 2019.
The Jurassic gas project
The Jurassic gas project is the first non-associated gas discovery in Kuwait and this reservoir has the following characteristics:
- Naturally fractured-tight deep carbonates
- HP/HT and sour environment
- Unconventional reservoirs
- Variable fluid characteristics ranging from volatile oil to gas condensate
- Drilling and completion complications including Gotnia drilling to reach reservoir section
- Severe surface congestion due to simultaneous operations and farms.
The Jurassic gas development is envisioned in three phases:
- Phase I: already in production, with the focus on increasing efficiency and plant integrity by 2015/16
- Phase II: entering the FEED stage. The commissioning date is 2019/20, enabling KOC to reach production capacity of 600 million cubic feet a day and 220,000 b/d
- Phase III: this will include further appraisal of the unconventional Jurassic layers to achieve the production capacity of 1bn cubic feet a day and 300,000 b/d in 2020/21.
The West Kuwait solar Plant
KOC has initiated its first clean development mechanism project in the West Kuwait field. According to a study by the French Institute for International relations, 8.6 per cent of Kuwait’s oil is consumed in power generation.
- The contract was awarded to Gestamp Solar
- The PV plant capacity will be 5MW minimum, 10MW peak
- The contract value is $27,950,000
- Contract was signed in August 2014
- Construction is to start in December 2014. Commissioning is expected in July 2015.
The ETSA programme
KPC and KOC have a strategic plan to achieve 4 million b/d of crude oil production capacity by 2020. International oil company assistance is needed to overcome the human resource, technological and business challenges to achieve such ambitious objectives. In 2005, the KOC-developed TSA arrangements were not attractive enough to maintain IOCs working in Kuwait.
This led to the development of the Enhanced Technical Service Agreement (ETSA).
- ETSA is a new form of contract in the upstream oil and gas contracting business and an initiative started by KOC
- ETSA principles comprise:
- KOC is the operator and makes all strategic and operating decisions with the advice and support of the IOC
- ETSA is not a manpower supply agreement; it is focused on achieving KOC’s strategic targets through defined tasks for each agreement year
- IOC compensation is paid on a fee per man-hours basis
- Under this new approach, KOC intends to call Britain’s BP, France’s Total, Royal Dutch Shell, ExxonMobil and Chevron for a brainstorming / workshop on an expression of interest for the Northern Ratqa heavy oil field, the Jurassic gas development as well as some areas in the north and south and east Kuwait fields
- Al-Abduljaleel said the multibillion-dollar Lower Fars heavy oil (LFHO) development projectwill be awarded in December. It will be signed by February 2015, with commissioning due to start in August 2018. Proposals were submitted on 15 July, with the UK’s Petrofac offering the low bid of $4.3bn.
The single EPC tender is for the first phase of the project’s development and includes the construction of a steam injection facility, production facilities, a support complex, tank farms and a 270,000 barrel-a-day (b/d) pipeline to transport the heavy crude to the planned new refinery at Al-Zour, in the south of Kuwait.
Winning oil and gas contracts and maintaining winning partnerships in Kuwait as a foreign contractor
Dr Mohammed Sammur, executive vice president at Larsen & Toubro Hydrocarbon International said the company is executing the $850 million Gathering Centre 30 project on an EPC basis on behalf of KOC. L&T Kuwait Construction Company is a general construction joint with the Bader Al Mulla Group. It will produce 100,000 b/d of crude oil and 62.5 million cubic feet a day of gas. About 240,000 b/d of water will also be produced.
The Kuwait Environmental remediation programme
Saad AlSaad, former chairman of the KPC Higher Tender Committee and senior technical consultant at the Kuwait National Focal Point for Environmental Projects said that Kuwait sustained significant environmental damage during Iraq’s invasion and occupation in 1990/91. This included igniting oil well fires that caused oil to spread over a large land area and the formation of oil lakes.
The UN Compensation Commission (UNCC) was established to oversee reparations to affected parties. In 2005, it laid out the rules and guidelines for planning and implementing environmental remediation projects. The UNCC also called for the creation of the Kuwait National Focal Point (KNFP) to supervise restoration projects and to liaise with UNCC.
In 2011, the UNCC issued decision 269 which established its Governing Council’s mandate over the programme.
The Kuwait National Focal Point (KNFP) was formed in June 2006, to be responsible for coordinating and overseeing the implementation of the Kuwait Environmental Remediation Program (KERP). KNFP appointed the Kuwait Institute for Scientific Research (KISR) as the technical programme manager for the first phase (2012-2014).
Four stakeholders are responsible for implementation: KOC, MEW, the Public Authority for Agriculture & Fish Resources (PAAF) and the Ministry of Defence. Kuwait’s Environmental Protection Agency (KEPA) is responsible for environmental regulation and monitoring. KNFP oversees and co-ordinates the efforts of the various stakeholders ensuring compliance with the UNCC’s decisions and the appropriate use of the funds.
Six contracts with a total budget of about $2.96bn were granted by UNCC to cover:
- Remediation of contaminated groundwater
- Remediation to coastal oil contaminated areas (Sulaibikhat Bay)
- Remediation of damaged terrestrial resources (military fortification, well head pits, areas damaged by tarcrete and the re-vegetation of restored areas)
- Oil lakes remediation
- Marine and coastal resource rehabilitation
- Remediation of damage at open burning and open detonation sites.
The project involves dealing with:
- 2 million square metres of wet oil lakes areas comprising 181 features
- 4 million square metres of dry oil lakes areas comprising of 612 features
- 2 million square metres of contaminated soil piles comprising of 466 features.
The need for qualified and experienced contractors to handle such mission and the availability of permits to import detonating explosives were major challenges.
Features of individual projects
- The remediation to coastal oil contaminated areas by KOC
- Survey and clearance of UXO
- Removal of contaminated soil to north Kuwait landfill. (about 36,000 M3)
- Remediation of damaged terrestrial resources by PAAF
- Site preparation
- UXO clearance and removal of about 900 blocks and 36 concrete structures
- Vegetation of selected areas.
- Remediation of areas in and around wellhead pits by KOC
- Site haracterization
- Excavation and transportation of contaminated soil and clean closure of the pits. This involves 175,000 cubic metres of contaminated soil from 65 wellhead pits over fresh water aquifers in north Kuwait and 98 wellhead pits over brackish water in south-east Kuwait.
- Remediation of 271.500 square metres of areas covered by tarcrete by KOC
- Site characterization
- UXO survey and clearance
- Excavation and transportation of contaminated soil.
- Remediation of damaged terrestrial ecosystems by PAAF
- UXO clearance
- Fencing and patrolling for five protected areas with a total area of 1,679,000 square metres
- Re-vegetation works including greenhouses, irrigation systems and seeding.
- Remediation of oil lakes by KOC
- Construction of landfills
- Excavation and transportation of 3.58 million cubic metres of wet lakes and 6 million cubic metres of dry lakes in the south and 0.98 million cubic metres of wet lakes and 2.91 million cubic metres of dry lakes in the north
- Demonstration technologies such as alternative treatment to replace landfills
- Remediation of Wadi Al Batin.
- Marine protected areas (Sulaibikhat Bay) by PAAF
- Two-year monitoring plan
- Long-term monitoring plan.
- Damage to terrestrial resources (Um Al Rus) by PAAF
- Grading of soil
- Installation of drip irrigation system and planting.
Status of projects
- Remediation of groundwater resources: 10.25 per cent complete.
Expected completion: December 2016
- Remediation of coastal oil contaminated areas: 21.16 per cent complete
Expected completion: December 2016
- Remediation of damaged terrestrial resources
Military fortification: 7.9 per cent complete
Expected completion 2022
- Wellhead pits: 9 per cent complete
Expected completion January 2017
- Areas damaged by Tarcrete: 1 per cent complete
Expected completion 2021
- Re-vegetation of five protected areas: 14.17 per cent
Expected completion 2024
- Remediation of oil lakes: 14.01 per cent
Expected completion 2024
- Compensatory projects for shoreline resources (Marine Preserve): 4 per cent complete
Expected completion 2028
- Opening burning/open detonation (Umm Al-Rus)
The PPP challenge
Kuwait on target to meet privatisation law deadline
The MEED Kuwait Projects Conference was told this morning that action is on track to complete the conversion of the Kuwait’s Partnerships Technical Bureau (PTB) into an executive authority.
“The new PPP law 116/2014 passed in August changes the structure and role of the PTB,” general manager of the new Kuwait Public Authority for Public Private Partnerships (KAPP) Adel Alroumi said. “Under the new law, the PTB will become an authority attached to the minister of finance, thus benefitting from increased autonomy.”
The PTB was established under article 12 of law number 7 of 2008. It serves as the main body responsible for public-private partnership (PPP) projects implementation.
“We are finalising draft executive regulations for the new law; 80 per cent is finished and we shall complete this within the time allowed within the law which is 6 months,” Alroumi said. Alroumi was president of the PTB.
Alroumi said the PPP pipeline comprises:
- Second stage of the Al-Zour North independent water and power project (IWPP)
- The Al-Khiran IWPP
- The Al Abdaliyah integrated solar combined cycle (ISCC) plant
- Umm al-Hayman wastewater treatment plant. “The RFP is ready,” Alroumi said
- The Kuwait Schools Development programme for nine schools, one Olympic-sized swimming pool and one residential building for school faculty
- The Kabd treatment plant which is designed to treat 50 per cent of total municipal solid waste generated in Kuwait (576,615 tones)
- The Failaka Island development to transform the island. “We are working with consultants on this project,” Alroumi said
- A commercial/recreational centre on Abdullah Al Ahmed Street for a multi-floor cultural, recreational, commercial and sports centre
- Rest homes and Doha chalet centres. This calls for the development of 17 rest houses on five main highways and two chalet service centres comprising commercial spaces
- The South Jahra Labour city. This will be the first city to house expatriate labour. It includes residential units, public and commercial facilities.
“Changes called for the law include the stipulation that PPPs are no longer limited to BOTs or BOOTs but may also include projects without a build component, for example operation or rehabilitation of a service or an infrastructure project,” Alroumi said. “Projects can now include infrastructure and land preparation/rehabilitation works within the PPP package. “
“It empowers the higher committee to grant the successful investor certain incentives including exemption from income tax as other taxes, custom duties and fees,” Alroumi said. “This is in addition to other benefits provided for under law number 11.”
Understanding the new PPP law
Partner and head of the Kuwait office of Tamimi & Company Alex Saleh said that the old PPP legislation was based on:
- law number 7 of 2008, Regarding the Organisation of Build, Operate & Transfer and Similar Systems (“PPP”)
- the amendment of law number 10 of 1980, Regarding the System of State Properties plus
- law number 256 of 2008, Regarding the issuance of the executive regulations of the PPP law.
The new PPP Law was passed on 17 August 2014. The old PPP law (together with its executive regulations) continues as the main legislative framework governing PPP Projects. The exceptions are articles 11 and 12 of the old law, which relate to the Higher Committee and the PTB. They have now been superseded by Articles 2-6 of the new PPP law, which relate to the Supreme Committee and the Public Authority for the Public-Private Sectors Partnerships Projects (KAPPP).
Other portions of the new PPP Law will come into effect when the new PPP law’s executive regulations are published within six months of the date that the new PPP law was published in the official gazette. Contracts concluded prior to the effective date of the new PPP law shall continue to be valid. Such contracts shall be terminated upon expiry of its term and cannot be extended, renewed or amended in violation of the provisions of the new PPP law.
There are no “grandfathering” arrangements for projects currently in procurement but not concluded, such as the Um Al Hayman project.
Articles two and three of the new law set out the formation of the new Supreme Committee for PPP projects.
The new Supreme Committee will replace the Supreme Committee Projects constructed on the state’s real estate properties, which was formed by decree 145 of 2008. It shall undertake the functions and powers of the authority board of directors.
The public authority, which is by the law as the PPP Projects Authority, is to be attached to the Ministry of Finance and shall replace PTB.
The functions of the new authority are materially consistent with the role currently undertaken by the PTB. It will be responsible for:
- Conducting all preliminary studies relating to PPP projects
- Preparing a new PPP guidebook
- Preparing the legal drafting of PPP agreements
- Submitting recommendations to the Higher Committee
- Incorporating joint stock companies.
On warehousing of shares
Saleh said the old PPP law was silent about the warehousing of shares approach, although other projects in Kuwait implemented a warehousing approach (notably the Az Zour North IWPP). This created uncertainty over the legality of warehousing of shares and the procedures by which it should be carried out.
The new PPP law expressly allows shares to be warehoused. The new authority can hold the shares allocated for the public and the public entities until the project becomes operational.
On unsubscribed shares
The old law was not clear as to what exactly is intended to happen to any shares that remain unsubscribed in the event that the IPO process is unsuccessful. Any unsubscribed shares would subsequently have to have been placed back to auction.
The new PPP law allows broader discretion for the new authority to decide what to do with the unsubscribed shares. It can sell the unsubscribed shares at market prices to public entities; the investor; or on the stock exchange.
On the incorporation of the project company
The old law was unclear as to which party was responsible for incorporating the project company and the timing of incorporation.
The new law allows the successful investor to incorporate the project company or consortium company for projects not exceeding KD 60 million. Incorporation by KAPPP exceeding KD 60 million will take place after offering the project to the successful investor.
The new Supreme Committee has the discretion to determine whether an unsolicited proposal should be classified as an initiative or a distinctive project.
If classified as distinctive, the originator or initiator will be able to recover costs of the study plus the lesser of 10 per cent or KD 100,000. If classified as an initiative, the originator/initiator is entitled to:
- recover costs of the study plus the lesser of 20 per cent or KD 200,000
- 5 per cent of the value of the best bid
- 10 per cent of the shares of the project company at par plus issuing fees if the project company is organized as a public joint stock company.
An aggrieved party can raise their grievance with the Grievance Committee, an independent body made up of various legal, financial and technical experts empowered to provide an effective recourse. The Grievance Committee has the power to consider all grievances regarding decrees passed in violation of any provision of the new PPP law and its executive regulations and any errors made by the new authority or by the supreme committee. Article 32 of the new law sets a specific mechanism for the aggrieved party and the Grievance Committee shall follow.
Article 34 of the new PPP law exempts winning foreign consortium companies from foreign ownership restrictions. Further to article 34, initial boards of directors are exempted from having to own shares. There are possible exceptions from income tax and other taxes.
Panel session: the Kuwaitisation Debate: Is delayed decision-making the main threat facing Kuwait’s projects programme?
The members of the panel were:
- Adel Alroumi, general manager of the Kuwait Public Authority for Public Private Partnerships (KAPPP)
- Khaled Tubaileh, deputy CEO of Khalid Ali Al-Kharafi & Brothers Company (Kharafi Steel)
- Dr Meshaal Jaber Al Ahmad Al Sabah, chief of the Kuwait Direct Investment Promotion Authority
- Saad Alsaad, former chairman of the KPC Higher Tender Committee and senior technical consultant in the Kuwait National Focal Point for Environmental Projects
- Dr Qutaiba A Razouqi, director of the Kuwait University Construction Program (KUCP)
- Tarek Hamid Shuaib, managing partner of Pace.
Saad Alsaad said the solution to the PPP and megaproject challenge is a strong and fair commitment and actions that support the projects
Qutaiba Razouqi said disproportionate effort is invested in protecting profits.
“The main issue is time,” said. “Time is not given value. The problem is that no one is taking responsibility for this issue.”
Alroumi said KAPPP has been interacting with the key stakeholders in PPP projects.
“We are involved in a dialogue with all the bidders right from the beginning,” he said. “I haven’t heard from any of the international companies involved with Az Zour North of any unfair or non-transparent things that happened. They have expressed their opinion that this was one of the most transparent and fairest bidding processes in the region.”
“Most of our projects cannot be done locally,” he said. “They have to be done with international investors. I might go further and say that I think in Kuwait things are changing. The government took a stand very strongly on Az Zour North and there was not even one point in the process of even thinking about cancelling it. I have nothing but respect for the government about the way they supported the project.”
Shouaib said more needs to be done to strengthen management structures for major projects. “Half the time the reporting up the line is poor,” he said.
Dr Meshaal said that Kuwaitisation is moving ahead. “There are positive examples,” he said. “I am still optimistic. You can sense change is coming.”
Government procurement of megaprojects under PPPs: making them happen from the UN’s perspective
Jan van Schoonhoven, executive program leader at the UNECE PPP Center of Excellence Economic Cooperation and Integration Division Office in the UN Economic Commission for Europe said good governance is the basis of any project.
“PPP needs, solid, organised projects and a future pipeline,” he said.
He suggested that Kuwait should:
- develop models that will support national development and R&D with the private sector that fits Kuwait
- Implement these models with private sector.
“Kuwait’s model is not unique,” Shoonhoven said. “Middle East countries are facing the same challenge. Kuwait could be the hub for these PPP models in this area.”
Schoonhoven suggested the UN should set up a specialist PPP centre for the region.
The Shamal Az Zour Al Oula project: Kuwait’s first IWPP
Roger Hale, construction director at Shamal Az Zour Al Oula KSC, and Quentin des Cressonnieres, chief financial officer of the company, said that the project reached financial close in January 2014. It is on schedule to generate first power in June 2015
The project comprises a greenfield BOT with 40-year Energy Conversion & Water Purchase Agreement (ECWPA) with the State of Kuwait represented by the MEW as the single off-taker. The site is about 100 kilometres south of Kuwait city. It is expected eventually to host five phases, with total targeted capacity of 4.8GW of power and 280 million gallons a day (g/d) of water. The Az Zour North phase 1 has capacity of 1,539MW and 107 million g/d of net output. The turnkey EPC is with an EPC consortium of Hyundai Heavy Industries and SIDEM.
The project comprises:
- Power Island and associated facilities (excluding sub-station)
- 1,539.2MW net contracted power capacity
- Cobmined-cycle gas turbine with natural gas as main fuel and gas oil as back-up fuel
- Five GE GTG 9F-3 (225.8MW gross) units with five single pressure heat-recovery steam generators
- Two GE STG D1 (251MW gross, back-pressure)
- Water Island and associated facilities
- 107 million g/d of net water output, using MED technology
- 10 SIDEM MED units (10.84 million b/d gross)
- Connection to water
- Shared Facilities (for Az Zour North site future phases):
- A common gas pipeline
- A gas oil receiving station
- A gas oil storage area
- A common discharge basin, seawater outfall culverts
- Product water common header and downstream pipes.
“The progress of the construction is perhaps a little bit ahead of schedule,” Hale said. “The first installation of the gas turbine was in July. The project as a whole is about two thirds of the way through. On site, we are about one third of the way through. The big focus is to get the infrastructure for the first three units.”
Panel session: transferring key lessons learnt from Kuwait’s first IWPP project to accelerate future PPPs and foreign participation
Moderator: Philip Kotsis, partner at Al Tamimi & Company.
- Abdulaziz Al Hudeib, Project Manager for Az Zour North IWPP at the KAPPP
- Akusa Batwala, senior associate at ASAR – Al Ruwayeh & Partners
- Alex Saleh, partner and head of Office at Al Tamimi & Company
- Naoki Tamaki, chief representative for Middle East in Dubai at the Japan Bank for International Cooperation.
Al Hudeib said Kuwait has taken the initiative to improve existing legislation to enhance the procurement process for PPP and IWPPs. The law has been amended to minimise challenging aspects and make it very clear.
“I think we have managed to increase the transparency and adopt best practice for IWPPs and PPPs,” he said.
“The difference from other countries doing IWPPs and IPPs in the region is the offtaker,” Al Hudeib said. “The MEW supplies the large company with gas and then they are offtaker. In other countries in the region, government is there as guaranteed provider or shareholder in offtaker. This is the most robust part of the project.”
“How do we make these bankable projects,” Al Hudeib said. “What we have done is sat together to find the solution. We changed some clauses in the agreement. We had to follow local law, but make it more in line with the international standard model.”
Alex Saleh said the two years to complete Az Zour North IWPP Phase an educational process.
“From a project finance standpoint, it was a question of trying to maintain the necessity of ensuring these assets are for Kuwait’s future and at the same time to incentivise lenders and investors,” he said. “The government land is a Kuwait asset, but the project built on top is now mortgageable. This is going to be a game-changer. This is going to be huge.”
From a finance perspective, we thought there would be four sources of loans: export credit agencies, international banks, local banks and Sharia-compliant financial institutions,” Saleh said. “Because the assets on the site were not mortgageable, this ensured Islamic lenders couldn’t be involved. The door has now been opened to Islamic lenders. This makes complete sense. Five of the local banks are Sharia-compliant. There are a plethora of Islamic lending techniques that could be brought in.”
“The PTB did a great job in amending the law,” Saleh said. “The executive regulations are coming out shortly. I would propose that maybe it would be good to take input of whole community about what’s going into the regulations before they are issued. We went through the wars for Az Zour North phase I and we came up with a great solution: working together to ensure that the regulations address the problems that came up. We don’t want to see a deal taking a long time to close. Getting more input into the regulations to cover other outstanding points would be a great way to ensure deals are done quicker.”
Batwala said Law 7 of 2008 was too broad. “Law 39 of 2010, which was specific for power projects. made things easier,” he said. “Law 39 was amended by the law of 2013.”
“What you can see is the willingness of the government to develop legislation to deal with the situation,” Batwala said. “If we have same kind of momentum and willingness to change and a desire to move towards international standards, we shall make great progress.”
Naoki agreed. “This will help us a lot. Japanese companies are involved heavily and our commitment is there,” he said.
Financing Kuwait’s vision
The panellists were:
- Elie N Hani, deputy CEO of Ahmadiah Contracting & Trading Company
- Ibrahim Sattout, Partner at ASAR – Al Ruwayeh & Partners
- Tat Thong Tan, general manager for strategy and planning and acting general manager for international banking and syndication at Commercial Bank of Kuwait.
The panel agreed that Kuwait is highly-creditworthy and is capable of raising all the finance required for its megaproject programme from domestic government and private sector sources. Kuwait, however, should seek to diversify its sources of finance to encompass regional and international investors.
“Local banking may not be able to absorb this,” said Tat Thong Tan. “We’re calling for tie-ups with Chinese banks, as Chinese EPC contractors come forward.”
Cooperation between local lenders and the EXIM Bank of China, a state owned bank chartered to promote the export of Chinese products and services, is one option the Commercial Bank of Kuwait is looking into, Tan said.
“The entire universe of banks would have a role as well as venture capitalists,” said Tan. He sovereign wealth funds, international banks, and sharia compliant entities could all have a role to play in providing finance for Kuwait’s project market.
“Given the size and complexity of these projects we need to upgrade ability to understand the projects and the risks involved.”
The immediate challenge is the bonding requirements for megaprojects and the single-borrower limit imposed on local banks. This is encouraging local banks to increase their capital and this might encompass the issue of dinar-dominated bonds.
One of the biggest issues is the impediment to borrowing in Kuwaiti dinars, which is more expensive than borrowing in dollars. This is reducing the extent to which clients will be able to tap domestic liquidity. The panel supported developments in the PPP programme, including the new PPP law.
Panel session: ensuring the successful delivery of megaprojects by improving co-ordination of entities and stakeholders
Moderated by Jeff de Lange, advisor at Gulf Consult
- Alan Haslop, director of sales (EMEA) at Aconex
- Ali Dashti, senior vice president at KEO International Consultants
- Elie N Hani at deputy CEO at Ahmadiah Contracting & Trading Company
- Dr Mohammed Sammur, executive vice president at Larsen & Toubro Hydrocarbon International.
De Lange said there is no official classification of consultants. “It is left in the hands of individual ministries whether they are qualified or not,” he said. “The MPW has registered consultants but no grading.”
“In our opinion, there is much room for improvement,” Dashti said. “If you talk about megaprojects, the one thing that needs improvement is standardisation and using internationally recognised standards of contract and procurement. There are vast sources of information like FIDIC. Some companies are using them but there is room for improvement.”
“There are 50-60 grade one contractors,” Dashti said. “There is a need of going through a prequalification process which is lengthy or enhancing or doing a proper grading of contractors. RFPs in government sectors are different. Every entity has their own terms of reference (TOs) and requests for proposal (RFPs) and attaches conditions of engagement. It would make sense for government to use internationally-recognised contract forms. This would reduce a lot of risk in terms of engagement.”
Dashti said there is a need for a new procurement model to shorten the approval model. “This will take off when the local government entities have a lot of training in delivering projects,” he said. “It is important to have government support.”
“There are now design-build projects in healthcare,” Dashti said. “We have managed to do three in that way. We are trying to develop a new delivery process but we’ve not seen the result of that yet.”
Haslop said his firm specialises in helping consultants manage their work. “We are supporting a lot of project owners in the region,” he said. “One or the common issues is managing co-ordination of people working in different packages. As a result of that, there is a minimal sharing of information. The owner has difficulty co-ordinating the efforts.”
“Project owners are beginning to realise there need to common standards across megaprojects,” Haslop said. “One of the things is the lack of coherent understanding and agreement among the multiple stakeholders in a major project about how to communicate with each other. Unless there is an agreement about how people are to work together, there is a going to be a problem.|”
“Project owners are realising that they need to use BIM, a visualization technology,” Haslop said. “It is one of the things that they are now seeing as very important to make megaprojects finish on time.”
Sammur said one of the big issues is the availability of resources. “As work peaks, the demand for resources increases,” he said. “Do we have the logistical means to mobilise these resources? This is a great challenge.”
“We need support in those areas where we need to look how we improve our ability in Kuwait to be able to recruit and mobilise and address the demands for Kuwait,” Sammur said. “All these projects are coming together. There will be the demand for the same resources. Will we be able to meet these demands at the same time? It requires tens of thousands of construction workers perhaps 60,000-80,000. No single company in Kuwait has the means of dealing with such demand.”
Hani said private sector demand has recently picked up.
“And the public sector has had a lot of megaprojects,” he said. “The largest challenge in public sector is housing. There are still lots more projects to come.”
“The procurement law and classification of contractors are issues,” Hani said. “The other issue is the ministry’s capability or the public authority’s capability to be able to managing work increasing by 20 per cent every year for the next two-three years.”
PPP update: the Umm Al Hayman wastewater project
Fatimah Al Kindari, senior engineer at the KAPPP said the project is ready for requests for proposal (RFPs). They will be released when the new PPP law’s executive regulations are finalised and approved. This is due by the end of February.
“Once the bye-law is issued, we will requalify all interested parties,” Al Kindari said.
PPP update: the Az Zour North IWPP stage II and the Al Khiran IWPP
Abdulaziz Al Hudeib, project manager for the Az Zour North IWPP at KAPPP said bids will be invited for both projects as soon as the executive regulations are finalised.
“We are now at request for quotation stage,” he said. “This will take two months. We are ready to float the project and we are waiting for bye-law and executive regulations. As soon as this done, RFQs will go.”
PPP update: the Al-Abdliyah Integrated Solar Combined Cycle plant
Abdullah Al Muhanna, senior architect at KAPP said the project was the first PPP that is due to an unsolicited proposal. A special purpose vehicle will be developed by Japanese companies and this will form a Kuwaiti joint stock company that will float shares in the local market.
“The project is complex,” he said. “It is a gas turbine plant coupled with steam in a combined cycle arrangement and this will be is coupled with CSP solar power technology.”
The capacity is 280MW of which 60MW will be solar.
“The project’s feasibility is being reviewed and the drafting of the RFQ and RFP has been partly completed,” Al Muhanna said.
Ministry of Electricity & Water’s power and water outlook
Engineer Suhaila Marafi, director of the department of studies and research at the Ministry of Electricity & Water (MEW), said Kuwait will need 10,000MW of additional power by 2030. This will meet demand from the following:
- KOC: 850MW for upstream purposes
- Housing: 6,000MW
- New university: 250MW
- Commercial and industrial needs: 800MW
- KNPC: 800MW
- Boubyan Island: 450MW
|MW||Peak load including projects demand||Available plus expected capacity|
Kuwait will need 350 million gallons a day (g/d) of water by 2030. The new demand will come from:
- Boubyan Island and the new university. 50 million g/d
- 100 million g/d
- Industry and oil: 100 million g/d.
|M g/d||Maximum demand including projects||Available and expected capacity|
- The 100 million g/d Doha desalination plant.
“Phase 1 is for 50 million g/d,” Marafi said. “Documents are with CTC. Phase II is for 50 million g/d and will be tendered in April 2015.”
- Emergency RO mobile units.
The project will comprise30 units each with 100,000 gallons production capacity plus of storage. The project is to be tendered soon.
- Az Zour North IWPP Phases II and III
- Al Khiran
- Al Nuwaiseeb steam turbines.
This project is in design and should be put to tender in 2015/16.
- The expansion of the transmission and distribution network
This will involve:
- 10 400kV substations
- Seven 300kV substations
- 36 132kV substations.
- Expansion of the Subiya power station
Bids were due at end of December for phase two gas turbines for a total of 500MW
Bids for phase three will be invited in December.
- Alternative energy
The target is 15 per cent of total power production by 2030. The MEW and the MPW has started operating rooftop PV units. Total power production will be 1MW
- The Kuwait towers parking PV project which is producing 117kW
- Water reservoirs. The MEW has completed a feasibility study to apply solar PV at 25 locations of MEW ground water reservoirs. Total power generation shall be 300MW. Prequalification started in November
- The Ash Shaqayah alternative energy project. This calls for 10MW of wind power; 10MW of PV and 50MW of CSP. Proposals are under evaluation this is going to be done by BOT
- Al-Abdliyah ISCC project
- Model project to generate solar electricity in houses. KFAS signed a contract with KISR on 29 September for a model project for solar energy for PW on 150 houses.
Public works, the new university, healthcare, housing and the seaport
MPW major future projects have total value of KD 8.5bn
The Ministry of Public Works (MPW), the Kuwait government’s specialist project delivery agency, has a total of 129 projects with a combined value of KD 8,496.7 million ($21,945 million).
MPW assistant undersecretary for planning and development Abdul Mohsen Khaled said they comprise sanitation, road, construction and megaproject schemes (see table below). They include:
- The KD 335 million north district ministries complex in Jahra, which is due to go to tender in January 2015. It calls for four buildings, a theatre with capacity for 500 people, training halls, banks and other facilities
- The KD 428.1 million Ministry of Education special needs school complex in Al Jahra. Work on the project is due to start in January 2016
- The KD 70 million General Department of Criminal Evidence Office in Hawalli. The ministry is preparing the project for tender
- The KD 170 million Ministry of Interior Kuwait correctional facilities complex. This will comprise four buildings with capacity to accommodate 6,000 inmates. The project is being prepared for tender
- The KD 97.5 million ring road 6.5. The project involves constructing a highway road of about 18 kilometres and includes the improvement and development of the existing road 602 between Jeleeb al-Shuyoukh and the new university city in Al-Shadadiya. It’s designed to have eight interchanges and nine pedestrian bridges. The project is due to go to tender in December
- The KD 165.5 million Nawaseeb road in Al Ahmadi governorate. It will be 45 kilometres long and will have nine interchanges. The project is due to go to tender in December
- The KD 173 million north part of the regional road. The first stage calls for 173 kilometres of road and 20 interchanges. The project is at pre-implementation stage
- The 102 kilometre second stage of the north part of the region road. This will include 13 interchanges and two camel crossings
- The KD 235.5 million south part of the regional road. This will be delivered in two stages: one with length of 127 kilometres and 14 interchanges and one with length of 93 kilometres and 18 interchanges
- The KD 212.2 million upgrading of the road network in the south Surra governmental zone. It calls for 30 kilometres of road. The project is at the pre-implementation stage
- The KD 217.7 million improvement programme for the road network between Sabah Al Ahmed city and Al Khiran city. The project is at pre-implementation stage.
Kuwait: MPW future projects
Sector Number of projects Total cost (KD million)
Sanitary 27 251.1
Roads 44 2,941.3
Construction 38 2,839.3
Megaprojects 20 2,465.0
Total 129 8,496.7
Source: MPW, 24 November 2014, presented at the MEED Kuwait Projects Conference, Kuwait
The Sabah Al-Salem University City project
Director of the Kuwait University Construction Programme (KUCP) Dr Qutaiba A Razouqi said the Sabah Al-Salem University City is located to the south-west of Kuwait City, where a 6 million square meters plot was allocated to the project. The new University City is designed on east west axis, with main campus on east and health sciences campus on the west.
The project is due to be completed in 2019.
It is broken into two parts: main campus and medical campus. The campus masterplan was prepared by Canadian Consortium Architects (CCA) and Buro Happold in association with SSH in 2005. In 2008, it was changed to include public shelters, decking parking and the addition of Cup. In 2010, there was another change. “It took about seven years to finish the masterplan,” Razouqi said.
The campus will comprise two elements: the 2.5 million square metre main campus and the 1 million square metre medical campus. Others features of the project are:
- Administration staff: 3,000
- Total car parking in main campus: about 21,000
- Total length of main utility tunnels: 5 kilometres
- 11 colleges
- Five medical colleges
- 39 buildings other buildings
- 29 shelters
“The infrastructure was divided into nine packages,” Razouqi said. “Seven of them are in construction. Two are now under tender. The preparation of the area is now complete.”
The two remaining infrastructure packages are for the third central utilities plant which is due to go to tender in the first quarter of 2015 and the continuation of the ring road to the medical campus. This is at the design stage.
“Most of these infrastructure projects are due to be finished in 2015 and 2016,” Razouqi said. “The challenge for project management is to be able to align the projects and make sure none of them are delayed.”
Work is now starting on buildings
- Design stage
- Administration facilities. This was due to be put out to tender by the end of 2014
- Tendering stage:
- Student Activities & Athletic Facilities (SAAF). The SAAF will include athletics facilities, a gymnasium, a football field with seating for 15,000 spectators, a covered tennis court and other elements.
- Academic Support Facilities (ACSF).
- Award stage:
- Colleges of Social Science, Sharia & Law (CSSL)
- Construction Stage:
- College of Engineering & Petroleum (COEP). This is due for completion in 2015.
- Colleges of Business & Women (COBW)
- Colleges of Art & Education (COAE)
- College of Science (COSC).
- Pre-construction Stage:
- Integration of Main Campus ICT systems
- College of Architecture and College of Computer Science Engineering
- Medical Campus. This will occupy one-third of the built-up area. It will include an educational and general hospital and five medical colleges. Razouqi said consortia of consultants are being shortlisted for the project. Invitations to bid for construction contracts will be invited by mid-2016. Work is due to start in 2017. The completion date is 2022.
Razouqi said there is a separate prequalification process for KUCP projects, but adjudication of bidding competitions will be through the CTC.
Future landscape of the Kuwaiti healthcare system
Engineer Samir Al-Asfour, assistant undersecretary for services affairs at the Ministry of Health said there were 19 hospital projects that will create 11,200 beds:
- Ministry of Health: eight Hospitals with 4,600 beds
- MPW: two hospitals with a total of 1,500 beds plus the Jaber Hospital with 1,200 beds
- Ministry of Interior: one hospital 500 beds
- Amiri Diwan: one hospital with 1,200 beds
- Kuwait Oil Company: one hospital with 350 beds
- Kuwait University: one hospital with 600 beds
- Kuwait Health Assurance Company: three hospitals with 700 beds and
- Public Institute for Social Security: The Medical City hospital with 500 beds
- The MOH replaces and expands eight hospitals with 4,600 beds and 150 operation rooms and 500 outpatient clients. A total of 1,350 million square metres in built up area.
The Ministry of Health’s programme calls for the construction and/or eight hospitals by adding:
- about 4,600 beds
- about 150 operating rooms
- about 500 outpatient clinics
- the full array of clinical and non-clinical support services
The total built-up areas will be 1.35 million square metres. The budget is KD 1,150 million.The projects will be procured through a single tender/ single contract Design, Build, Equip & Maintain methodology involving prequalified consortia. The delivery will be in four phases:
Design . This will be done by an international healthcare design
Build. This will involve international and/or local contractors with verifiable, healthcare specific, design/build experience.
Equip. This will be on a turnkey basis for medical, non-medical and related services. There will be a single accountable source.
Maintain. This will be under a five-year contract with a single accountable source.
“We are also working with two MPW hospitals on a design, build, equip and maintain basis,” Al-Asfour said.
The township commitment: progress of PAHW’s future cities and low-cost housing initiatives and how to get involved
Engineer Ali Al Hubail, deputy director general and assistant undersecretary for planning and design at the Public Authority for Housing Welfare (PAHW) said that law number 113 of 2014 provides new powers to the authority:
- The right to develop direct contracting tenders and contracts. This shall be for contracts worth no more than KD 10 million
- Provide land to the private sector, including commercial and investment developers, to develop housing plots of 400 square metres a plot to eligible residential tenants.
“The number of requests for housing’s been rising by 1.5 per cent a year and is forecast to hit 115,000 this year,” Al Hubail said.
Three PAHW projects are under construction. They are:
Sabah Al Ahmad City. The project is 65 kilometres south of Kuwait city and has an area of 4,000 hectares. It comprises
- 10,499 units, of which
- 2,201 houses
- 7,373 plots with area of 600 square metres
- 925 apartments with area of 385 square metres.
Jaber Al Ahmad City. The project is 22 kilometres west of Kuwait city. It has a project area of 1,245 hectares. It comprises
- 6,679 units, of which
- 1,475 houses
- 4,494 plots with area of 400 square metres
- 710 apartments
The North-West Sulaibikhat city. This is 20 kilometres west of Kuwait city and has an area of 243 hectares
- 1,736 units
- 396 houses
- 1,030 plots with area of 400 square metres
- 310 apartments with area of 385 square metres.
The Al Wafra city extension project. This will have 2,426 plots.
Two projects are at the planning and design stage.
West Abdullah al Mubarak city. The project is 20 kilometres from Jahra and has 902 hectares. It comprises 5,201 plots with area of 400 square metres each. Plans call for the city to have 26 schools, 23 mosques, two district centres and other facilities.
Al Mutlaa city. The project is 40 kilometres north of Kuwait. It covers 9,000 hectares and is designed to have 29,000 housing units comprising of 5,000 houses and 24,000 plots with an area of 400 square metres each. There will be 119 schools, 100 mosques and other facilities.
Low-cost housing. The project is 40 kilometres north of Kuwait city. It will cover 842 hectares and provide 9,696 homes. The project is designed to meet the needs of non-Kuwaitis. The PAHW is working on the procedures for establishing a Kuwaiti joint stock company to implement the project under PPP.
South Saad Al Abdullah project. This will cover 5,900 hectares and have 40,000 units. The site has been submitted to the PAHW. A shared committee with Kuwait Municipality has been established to remove the obstructions from the site. The authority is preparing the terms of reference and the documents offer for tender by international consulting firms.
Madinat Al Khiran. The project will be 80 kilometres south of Kuwait City and will cover 14,000 hectares. Plans call for 35,130 housing units comprising 9,934 houses, 22,061 plots of 600 square metres each and 3,135 apartments with an area of 385 square metres.
Nawaf Al Ahmad City. The project is 60 kilometres west of Kuwait. It covers an area of 12,200 hectares and will have 52,000 homes.
Al-Sabriya project. The project, which will be opposite Boubyan Island, will cover 48,890 hectares and have 53,000 units
- Olympics village in Jaber Al Ahmed City
- Islamic Centre in Jaber Al Ahmed City
- Cultural Centre in Sabah al-Ahmed City
- Islamic Centre in Sabah al-Ahmad City
“We will optimise the use of water and electricity, solar energy and green energy in these projects,” Al-Hubai said. “We shall develop smart home systems and methods for collecting waste and take advantage of LEED systems and international standards.”
Panel session: bridging the housing gap
Moderated by Ed James, Director of Analysis, MEED Projects
- Dr Adnan A Alhomoud, senior consultant at the Kuwait Institute for Scientific Research (KISR)
- Akram Ogaily, senior vice president at Hill International
- Akshat Mannan, general manager for Kuwait at Atkins
- Tarek Hamid Shuaib, managing partner at Pac.
Dr Alhomoud said the MEW’s R-6/2014 code calls for comprehensive action to improve the sustainability of the built environment in Kuwait. New measures call for:
- Mandatory glazing standard for government buildings
- Mandatory use of partial cool storage
- The mandatory use of alternative water for water-cooled central plants
- Mandatory building automation systems for all buildings with cooling production capacity of 500 RT and above. Residential homes are exempted.
- The use of LED lighting for government buildings.
“In addition to what has to be introduced for PAHW, we are seeing PAHW is really is going green,” Alhmoud said. This involves developing:
- Green city designs
- PV powered LED
- District cooling and heating
- Clean energy resources and waste heat recycling is being considered
- More efficient housing design
- Plans to put LED lighting into the houses they build.
“My most interest is getting an efficient design that will consume no more than 60 per cent of the energy used in existing buildings,” Alhomoud said.
“There is a housing crisis but what is the cause?,” he said. “The issue of land and the issue of finance are in the past. Land has been released and funds are available.”
“But the issue is now really bureaucracy and the second is energy,” Alhomoud said. “Even if bureaucracy is resolved, energy is not resolved. That is the major cause of the delay. The other thing is the social aspect of the building. Kuwaitis are not used to apartments; they are used to individual living.”
Ogaily said there was a housing crisis, particularly for low income people.
“The problem here is demand which is something in the range of 116,000 a year and expected to grow by 8,000 annually,” Ogaily said. “There is something missing here. There needs to be a strategic plan for housing whether it’s for low or middle income.”
“I believe the major challenge is how to build awareness socially of the benefits of living in apartments,” he said. “This is the responsibility of architects and designers. The major requirement of any project is privacy and open space.”
Shuaib said there neededf to be a balanced strategy that improves the city centre as well as unlocking the land supply outside the city.
“We need to ensure the finance arrangements for the private sector; retrofitting of existing buildings and a balance for all those items,” he said. “Not just new developments in new areas.”
“For Jaber al Ahmad city, we built more open space,” Shuaib said. “This was quite a challenge. It is important to make places attractive to live in and comfortable. So why not use some of the planning guidelines from the past?”
Panel session: land release, affordability and overcoming other constraints to let the Kuwait’s real estate market flourish
Moderated by Jeff de Lange, advisor at Gulf Consult
- Rashed I Al-Rashed, local real estate manager at Dimah Capital
- Khaled Al Meshaan, CEO of Alargan International Real Estate Company
- Milad A Elia, vice president at Kuwait Financial Centre (Markaz)
- Rawaf I Bourisli, general manager at Action Real Estate Company (AREC).
Elia said that obstacles to real estate investment include the fact that foreclosure sometimes takes five years.
“This makes it impossible for a bank to finance your specific project,” Elia said. “This is the first thing that can be easily addressed. You have to go through painful trials to get your file found and then processed to be able to sell it. A third regulatory issue is the inexistence of strata law. The smallest property value is in the range of KD 2 million. So you can’t offload it unless you have large investors coming to buy it off you. Sale of individual properties hasn’t flourished because of the absence of strata law.”
“You create demand by upgrading the living experience in Kuwait and by encouraging people to come here and pay higher rents,” Elia said.
Al-Rashed said the high price of real estate was a key issue. The result is that Kuwaiti real estate companies are investing outside the country.
“Kuwait projects’ problem is providing enough energy for real estate projects,” he said. “Constraints on water and power supplies adversely affect projects.”
Bourisli said the building code is more clear in Kuwait than in any other GCC countries with the exception of Dubai.
”Saudi Arabia and Bahrain have the same constraints as we have in Kuwait,” he said. “Power is a problem. Before you start a contract you have to have no-objection certificates from the ministry that say it has capacity.”
Bourisli said 60 per cent of the buildings in Kuwait are in conflict with the building code.
“Financing is an issue for the residential market due to legislation which banned companies from developing private residential real estate,” he said. “Opening the door to allow internationals and expatriates to own homes will intensify house price increases. The main issues is that the KOC owns 95 per cent of the country.”
“The real estate market is looked at as a commodity because of the lack of investment tools,” he said. “Vacant land in the city centre is traded as a commodity. Everyone knows there isn’t more supply to come in the near future. “
Al Meshaan said real estate developers faced challenges due to the work of the special project committee. “It is the bottleneck that all developers and the government face,” he said. “How do we make this a vibrant market. Today, the government is the main owner of the land. There has not been a release of land to the private sector since the early 1980s. There is a lack of supply of land against huge demand. This will continue until the government releases land to the private sector.”
“The PAHW is the only authority authorised by law to release land for housing purposes,” he said. “The government has realised this and passed law 113 which will allow a partnership between government and private sector.”
“The new law in August will allow some investors to come in and develop land through the housing authority,” Al Meshaan said. “The master developer will be the PAHW until the end of 2015. The private sector will be allowed to develop projects on a zoned basis.”
“We have been literally driven out,” Al Meshaan said. “We develop homes for middle income but our last development was in 2004. Until the 2000 and 2001, we were able to buy land from private sector. After that it stopped making sense. There are lots of opportunities around us and that is why we are working outside Kuwait and will continue to see serious change. Land values in the city were getting so high that it was impossible to continue investment unless you had owned the land for many years. In Kuwait, land will account for 70 per cent of the cost of the project.”
Key success factors contributed to delivering Kuwait’s Mubarak Al Kabeer phase 1, stage 2 seaport project on time and within budget
Ozgur Balaban, engineer’s representative and project manager at URS, said that URS was the design, audit and construction supervision consultant representing the MPW from October 2010 until July 2014.
Phase 1, stage 1 which involves building the road and rail connection and to the port, is ongoing. Design and studies for dredging are also ongoing. The phase 1, stage 2 quay wall and reclamation project has been completed. The phase 1, stage 2 topside design project is now under bid. Future phases and packages are being studied by the MPW.
Mega project procurement and delivery models that work – Dubai Metro case study
Abdulredha Alhassan, director of the rail planning and project development department at Dubai’s Roads & Transport Authority RTA provides and update of the Dubai Metro and Dubai Tram programme. He said the successful delivery of the project so far was due to:
- The close monitoring and support of the higher authority
- Emphasis on co-ordination and integration with stakeholders at early stages of the project
- Intensive involvement of client’s staff in all stages of the rail project,
- Involvement of operators in the project at early stages
- The creation of a service co-ordination unit to manage no-objection certificate requirements at the early stage of the project
- The recruitment of a strong technical and managerial team from the start of the project.
- Securing land and rights of way required for rail projects prior to the construction stage
- Giving priority to rail alignment against any other development projects
- Encouraging the involvement of local sub-contractors in the project. They are advantaged because they have familiarity with laws and regulations; know the social and physical environment; understand local markets and have more intimate relations with local stakeholders.