The Boom Goes On

Under the 2013/2014 budget, the Qatari government is set to spend $57.8 billion on construction, some 30% of which is meant for infrastructure. Ongoing developments include such mega projects as the $40 billion Qatar Rail Development Program (QRDP), the $15.5 billion Hamid International Airport (HIA), and the $8 billion New Port Project (NPP).

ON THE RAILS

The brainchild of Qatar Rail, which is a joint venture of Deutsche Bahn (49%) and Qatari Diar (51%), QRDP is the by far the biggest project currently being executed on Qatari soil. It consists of the Doha Metro, the Light Rail Transit (LRT), and the Long Distance Passenger and Freight Rail.

Covering the Greater Doha area, the metro network will consist of four lines with a total length of 254 kilometers. In May 2013, a consortium led by Italian construction firm Impregilo was awarded a $2 billion contract for the Doha Metro’s Red Line.

Ever since, contracts worth over $8 billion were signed for three more metro lines, while by the end of 2013, works were underway on 20 of a total of 25 subway stations. The Doha Metro is due to be operational by 2019.

“The Doha Metro will be one of the most state-of-the-art systems in the world and it will change the shape of the city,” said Abdulla Al Subaie, CEO of the Barwa Real Estate Group. “Qatar’s reliance on personal cars for transport is creating environmental and social problems, as it does around the world. There must be an alternative means of transportation.”

The Light Rail Transit (LRT) will be the main means of public transport in Lusail City. The $18 billion coastal development, by far the largest real estate project in Qatar, is set to eventually house some 200,000 people. The LRT’s first phase is expected to be operational by 2016.

Finally, the QRDP foresees connecting the country by mixed high-speed trains, which is part of a $15.5 billion plan to connect the entire Gulf region by rail. However, the regional network will not be completed before 2018 at best, while for Qatar to be connected by rail to Bahrain, the $5 billion Qatar Bahrain Causeway will have to be built.

“Qatar Rail will significantly increase trading between the GCC countries, because each train will remove some 300 trucks from the road,” said Al Subaie. “It will also give each country access to the three seas: the Arabian Sea, the Gulf, and the Red Sea.”

AIR OPTIONS

Following a string of delays, the HIA is finally set to open its doors in early 2014, according to a statement issued by the Ministry of Transport in October 2013. The HIA will have an initial capacity of 29 million passengers, which is set to grow to some 50 million, making it one of the world’s largest airports.

While construction started in 2006, the completion date was postponed on numerous occasions, partly due to the fact that the project has considerably grown in size. The latest delay occurred on April 1, 2013, when the Qatari authorities concluded the HIA failed to meet the latest safety and security regulations set by the Civil Defense Department.

MARITIME & ROADS

Located just south of Doha, the NPP will consist of three container terminals with a combined annual capacity of over 6 million TEUs. As a comparison, the current Doha port has an annual capacity of 300,000 TEUs. In addition, the NPP has a multi-use terminal for specialized goods including grain, vehicles, and livestock. Construction started in 2008 and is set to be finalized in 2016.

Finally, Qatar’s Public Works Authority, Ashghal, on January 12, 2014, awarded seven contracts worth some $3.5 billion for roads and expressways throughout the country. An estimated $20 billion will be invested over five years in Qatar’s road infrastructure. This includes the spectacular $5 billion Sharq Crossing, a series of tunnels and bridges formerly known as the Doha Bay Crossing.

Of course, construction in Qatar is not all about infrastructure. The country is also building complete new cities, including The Pearl-Qatar and Lusail City, commercial projects such as QP District, and mega-malls such as Festival City and the Mall of Qatar. Furthermore, dozens of hotels will need to be built in preparation for the 2022 FIFA World Cup and, of course, the stadiums themselves need to appear on the landscape.

Regarding the latter, Hassan Al Thawadi, Secretary-General of the Qatar 2022 Supreme Committee, on November 17, 2013, announced that tenders for five World Cup stadiums will be issued in early 2014, as Qatar plans to build nine and renovate three stadiums at a cost of some $3 billion.

“The market is promising more than it is delivering,” said Cameron Gillanders, Operating Center Manager at GHD. “There has been a lot of talk about upcoming construction that we are still waiting to see. It will have to happen in the near future. If not, there will be bottlenecks in delivering what is needed by 2022. The first pressure point will be the supply chain, and keeping goods and materials flowing through to work phases. There will also be issues over the supply of skilled labor.”

SUPPLY SIDE

The construction sector currently contributes an estimated 9% to Qatar’s GDP and is the country’s largest employer. Nearly 36% of Qatar’s workforce of some 1.3 million is active in construction, some 94% of whom are foreign workers.

Qatar’s cement production capacity in 2013 stood at some 6.2 million tons a year (Mt/y), which currently meets the country’s demand, while the price regulated by the government stood at some $70 per ton. However, Global Investment House (GIH) estimated that demand could amount up to 10.0 Mt/y between 2017 and 2020. While the Qatar cement industry is set to increase its capacity, most of the demand surplus will have to be imported.

The 2013 EC Harris Annual International Construction Cost Report estimated that the Qatar construction materials market could be worth some $6 billion to $9 billion over the next few years, most of which will have to be imported. While there is enough capacity increase planned by means of the new seaport and airport, they may not be fully operational by the time the construction frenzy reaches its peak. Also, the distribution routes between Qatar and Saudi Arabia have the potential to create bottlenecks.

EC Harris further warned that inflation of the prices of construction materials could reach 18% annually during the expected construction boom between 2016 and 2019. However, the consultancy firm also stressed that there was enough time to mitigate the risk.

The explosive cocktail of executing numerous projects at the same time leading to booming demand and price inflation is not new to Qatar. That is exactly what happened in 2007 and 2008, when the import capacity of the current Doha Port could not meet demand for steel and cement, which led to major price hikes. That is why the timely completion of the NPP is of such crucial importance, certainly with an eye on the deadline of the World Cup.