Transport Forecasts Reveal Direction Of Growth

BMI View: Our new forecasts for Qatar's transport infrastructure industry value suggest that the transport segment is now a key driver of growth in the infrastructure sector, something which will only increase in the run up to the Fifa 2022 World Cup. Our new forecasts are tied to and corroborated by our Key Projects Databases, which highlights the major upcoming opportunities in the ports and railways sector in particular, with the New Doha Port Project and Doha Metro set to drive growth over the medium term. One area of weakness going forward will be the airports sector, as the Hamad International Airport reaches completion in 2014, with no major projects to replace it. We forecast that with US$55.6bn of transport projects in our Key Projects Database at the planning stage or under construction, real growth will average 4.7% up to the end of our forecast period in 2023.

Qatar has entered a phase of unprecedented spending on transport infrastructure; the development of the country's network has the dual aims of stimulating the economy's diversification, by better connecting Qatar to global trade networks, and also to facilitate the preparations for the Fifa World Cup. Qatar, like its regional peers in the Gulf Cooperation Council (GCC) has invested heavily in airports and is continuing to invest in its new port so as to capture a share of the lucrative transhipment opportunities in the region. Likewise, with Qatar's economy and population growing and an expected influx of visitors for the World Cup, the existing transport network is to be placed under increasing pressure and as such the country is developing its road and rail networks. We forecast that across the sector, with US$55.6bn of transport projects in our Key Projects Database at the planning stage or under construction, real growth will reach 6.9% year-on-year (y-o-y) in 2014, and average 4.7% up to the end of our forecast period in 2023.

We note that while risks in the transport sector are few as the government has the budget to see projects realised, the potential for delays and cost overruns is increasing and unlikely to get better over the medium term. The reliance Qatar has for foreign project management and international construction firms, especially for the more technically challenging projects, has led to a shortage of consultant-level labour. Subsequently, there have been delays in bringing projects to the construction phase and labour prices have inflated - a trend we expect to continue over the short-term at least as more projects move into the construction phase.

Transport Key Piece Of Infrastructure Puzzle
Transport Infrastructure Industry Value (QARbn) and Real Growth (% Change y-o-y)

BMI View: Our new forecasts for Qatar's transport infrastructure industry value suggest that the transport segment is now a key driver of growth in the infrastructure sector, something which will only increase in the run up to the Fifa 2022 World Cup. Our new forecasts are tied to and corroborated by our Key Projects Databases, which highlights the major upcoming opportunities in the ports and railways sector in particular, with the New Doha Port Project and Doha Metro set to drive growth over the medium term. One area of weakness going forward will be the airports sector, as the Hamad International Airport reaches completion in 2014, with no major projects to replace it. We forecast that with US$55.6bn of transport projects in our Key Projects Database at the planning stage or under construction, real growth will average 4.7% up to the end of our forecast period in 2023.

Qatar has entered a phase of unprecedented spending on transport infrastructure; the development of the country's network has the dual aims of stimulating the economy's diversification, by better connecting Qatar to global trade networks, and also to facilitate the preparations for the Fifa World Cup. Qatar, like its regional peers in the Gulf Cooperation Council (GCC) has invested heavily in airports and is continuing to invest in its new port so as to capture a share of the lucrative transhipment opportunities in the region. Likewise, with Qatar's economy and population growing and an expected influx of visitors for the World Cup, the existing transport network is to be placed under increasing pressure and as such the country is developing its road and rail networks. We forecast that across the sector, with US$55.6bn of transport projects in our Key Projects Database at the planning stage or under construction, real growth will reach 6.9% year-on-year (y-o-y) in 2014, and average 4.7% up to the end of our forecast period in 2023.

We note that while risks in the transport sector are few as the government has the budget to see projects realised, the potential for delays and cost overruns is increasing and unlikely to get better over the medium term. The reliance Qatar has for foreign project management and international construction firms, especially for the more technically challenging projects, has led to a shortage of consultant-level labour. Subsequently, there have been delays in bringing projects to the construction phase and labour prices have inflated - a trend we expect to continue over the short-term at least as more projects move into the construction phase.

Transport Key Piece Of Infrastructure Puzzle
Transport Infrastructure Industry Value (QARbn) and Real Growth (% Change y-o-y)

Highway To Growth

Over the short-term, the road subsector will see some of the strongest growth - forecast to expand by 8% in real terms in 2014. Although Qatar's road network is currently the most developed transport network in the country, heavy congestion in and around Doha is a major issue and needs to be addressed.

In 2013, the Qatari government initiated a major infrastructure upgrade of the road, which we said would yield major contracts over the coming quarters. This has played out and the country now has one of the busiest road markets in the GCC. In February 2013 the government initiated US$8.1bn of road projects, with contacts awarded so far being valued at more than US$1.8bn, according to Qatari officials. US-based KBR is the programme manager for Ashghal's expressway programme, which is expected to yield 900km of new roads. Two major contracts were awarded in 2012, propping the country's road market. A US$961mn contract was awarded to South Korea's Hyundai Engineering & Construction for the Lusail Expressway, and a US$640mn deal was awarded to UAE's Al Jaber Group for package 13 on the Doha Expressway.

Qatar To Close The Road Gap
World Economic Forum's Quality of Infrastructure Scores*

More contracts on the expressway programme were awarded in June 2013, when Ashghal awarded 20 new contracts for the development of the Doha Expressway - in total worth more than US$2bn. Halcrow won the US$131mn site supervision contract along the expressway's east-west corridor to the south of the city, which will entail the construction of 10km of dual five-lane carriageways. Hyder Consulting has announced consultancy deals for four packages worth US$112mn. Parsons Brinckerhoff landed US$87.9mn worth of consultancy deals for the Wholesale Market Street, Mesaimeer Road and E Ring Road projects, and CDM Smith Inc secured deals worth U$87.9mn for the Al Sadd/Rashida/Mohammed Bin Ahmed/Al Khufoos Street project and the Furosiya Street project. The two construction packages on the East-West corridor project were awarded to China Harbour Engineering and a joint venture between contractor J&P and Avax.

Expressways Driving Growth
Road Infrastructure Industry Value (QARbn) and Real Growth (% change y-o-y)

In early January, Ashghal awarded contracts for the design and construction of the first phase (45km) of the ambitious US$895mn, 180km 'New Orbital Highway', to a joint-venture between J&P Overseas Ltd and J&P Avax SA. At the same time, the contracts for the two sections of the redevelopment and upgrade of Al Rayyan Road were awarded to a joint venture between Six Construct Qatar Limited and Boom Construction Company and Dogus Holdings and Onur. The projects are worth US$274mn and US$942mn respectively, and will be completed by 2017.

Given this ongoing activity and the awarding of major contracts, we forecast that the road sub-sector will continue to provide growth in the construction industry over the long-term. We forecast that average annual growth over the 2014 to 2023 period will stand at 5.5%.

Rail Infrastructure Rolling Ahead

Like the majority of other GCC states, Qatar does not yet have an operational rail network; although in 2009 the Qatar Rail Company and Deutsche Bahn formed a joint venture called the Qatar Railways Development Company (QRDC). Through that body, Qatar now has a US$40bn rail development plan. The project entails four metro lines in Doha, tram routes in West Bay and Lusail, a high-speed line and dedicated freight railways. The first phase of the project is scheduled to become operational in Q419.

The first project to move forward is the Doha metro. The US$2.02bn Red Line South, between Msheireb in Doha city centre and the new Hamad International Airport, has been awarded to a consortium of Qatari Diar, Vinci, GS Engineering and Construction, and Darwish Engineering. The US$ 2.4bn Red Line North, which in addition to the 13km track entails the construction of seven underground stations, has been awarded to Impregilo, SK Engineering and Construction and Galfar Engineering and Contracting. Finally the 12km US$2bn Green Line has been awarded to Porr, the Saudi Binladin Group and HBK Contracting, which is the same group that carried out the US$79mn enabling works for the line. The major interchange stations of Msheireb and Education City, worth an estimated US$1.5bn, have also been awarded to a consortium of Samsung C&T, OHL and Qatar Building Company.

Work on the first phase of Doha Metro Project is progressing rapidly, with the preparations and site clearance for the drilling of the metro tunnels and work on 80% of stations having begun over 2013, according to Qatar Rail officials. The Gold Line is still to be awarded with a view to also being complete in time for the World Cup and a Blue Line, designed to intersect all other lines, will be built post 2022. Qatar's plans also include an east coast passenger and freight rail link between Ras Laffan and Mesaieed via Doha and Lusail city's own light rail network.

Investment On Track, Growth To Come
Railways Infrastructure Industry Value (QARbn) and Real Growth (% Change y-o-y)

Given the level of investment being poured into Doha's metro, and the tight time schedule the project needs to be completed in, we expect growth in the railways sector to outperform. While only expected to grow in real terms by 6% y-o-y in 2014, growth in the railways sector ramps up to average 11.5% over our forecast period.

A major project for both the rail and road sectors is the Bahrain-Qatar Causeway, commonly referred to as the Friendship Bridge. The causeway is planned to comprise a suspension bridge, a four-lane highway and high-speed passenger and freight rail lines. The causeway will link Qatar directly with Bahrain via Zubarah on the west coast of Qatar and the east coast of Bahrain, just south of the capital of Manama. Upon completion, it would be the world's longest marine causeway, at 45km.

However, this ambitious project has been hit by delays to the start of construction and rising costs. Work on the causeway was due to be completed by 2011; however, as a consequence of various setbacks - including the addition of high-speed rail tracks - this was pushed back. In April 2013 it was reported that the causeway entered the redesign phase for a third time in the 12-year history of the project. The revised cost of the project now stands at US$2.9bn, and while the redesign shows that the project is still a live one and there have been financing agreements made between Qatar and Bahrain - with both having committed US$500mn to the project - the huge demand for workers and construction supplies from other infrastructure projects catering for the World Cup may see this project suffer more delays. As such, the project does not factor into our forecasts.

Airports Grounded

The development of the New Doha International Airport, now known as Hamad International Airport, has provided major growth over previous years and is now nearing completion. The contract for the main construction works was awarded to Bechtel, with an initial cost estimate of US$11bn. The airport has been built on an area the size of Doha city, with half of this formed of reclaimed land. Capacity will be 24mn passengers and 750,000 tonnes of cargo annually. During its development, the cost of the airport has increased substantially, to US$15.5bn. At the same time, the opening of the new airport has been subject to delays, with the opening date pushed back a number of times. The end-of-2013 deadline is likely to be missed, and no reasons for the extra delay or new completion date were given. Early 2014 has been suggested by local news sources.

Hard Landing For Airport Infrastructure
Airport Infrastructure Industry Value (QARbn) and Real Growth (% Change y-o-y)

With no other airport projects in the pipeline, we do not see many opportunities in Qatar's airport infrastructure sector over our forecast period. Maintenance is likely to be the main producer of value and as such, considering the massive capital outlay involved in the Hamad International Airport, we expect a significant period of negative growth in the sector over our forecast period. Between 2014 and 2023, we forecast average real growth will stand at -1.9%.

Port Infrastructure Setting Sail

Qatar has three main ports: Port of Doha, Port of RasLaffan and Port of Mesaieed. Qatar is undertaking the world's largest greenfield port development project to replace Doha Port. The New Doha Port project is being constructed at an estimated cost of US$8bn. The port is to be constructed in three phases, the first being the new port, followed by a naval base, and finally an accompanying economic zone (QEZ3); the initial phase is due for completion in 2014 and the final stage in 2025. A large portion of the development is located offshore, with a bridge connecting it to the mainline. The port will have five cargo terminals and four container terminals.

Major Construction Elements of Doha Port Project
Project Company Project Start/Tender Due Estimated Completion Date
Awarded
Port Basin and Inner Breakwaters CHEC Q1 2011 Q3 2015
Dredging, Reclamation & Breakwater Construction MEDCO Q1 2012 Q1 2016
Container Terminal infrastructure and Utility Buildings Teyseer Contracting Company W.L.L/Consolidated Contractors Group S.A.L(Offshore)(CCC) Q1 2013 Q1 2016
QEZ3 Canal Excavation Quay Walls and Channel Dredging Hyundai Engineering and Construction Co. Ltd / Boskalis Westminster Middle East Ltd. Consortium Q3 2013 Q1 2016
Commercial Terminals Infrastructure & Buildings HBK / Afcons Q3 2013 Q1 2016
Pre/In Tender
Naval Base Quay Wall and Basin Revetments Q1 2014 Q2 2016
Naval Base Access Bridge Q2 2014 Q3 2016
Naval Base Infrastructure and Utility Buildings Q2 2014 Q4 2016
Port Buildings and Infrastructure Q4 2014 Q2 2016
Planned Tenders
Naval Base Buildings Q2 2014
Source: Qatar New Port Project/BMI

Considering the sizeable value of work still left to begin construction, or even begin construction, our port infrastructure growth forecasts are buoyant. 2014 will see real growth of 12.5% y-o-y and average growth over our forecast period will be 7.9%. There is potential upside to the long-term forecast, as more elements of the port project are brought online after the initial phases are complete.

New Port Project Provides Buoyant Growth
Port Infrastructure Industry Value (QARbn) and Real Growth (% Change y-o-y)

In January 2011, Chinese engineering contractor China Harbour Engineering Company started construction on foundations and breakwater. The project, valued at around US$880mn, entails building a container wharf, general cargo wharf, naval forces wharf and breakwater at the port. The project will take around four-and-a-half years to complete.

In April 2013, project managers AECOM announced that around US$3.3bn in contracts would be awarded over the year. Hyundai Engineering and Construction, Royal Boskalis Westminster N.V. and Construtora OAS have been awarded a US$301mn contract. The work has been commissioned by the Qatari New Port Project Steering Committee and will see the building of berths for small-sized and medium-sized vessels and connecting passageways in the QEZ3 section of No. 3 economic zone. The tender for the 1.3km-long bridge linking the port to the mainland will be floated after the development of the port's economic zone is tendered. Once the first phase of the port becomes operational, there is the potential it will allow for a redevelopment of both the current port and naval base in the centre of Doha.

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Related sectors of this article: Infrastructure, Transport Infrastructure, Railways, Roads and Bridges, Ports, Airports
Geography: Qatar
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