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Are oil prices hurting GCC's dewatering sector?

Despite a somewhat downbeat outlook for construction in the Gulf region, dewatering companies are optimistic about the market in 2016

SPECIAL REPORTS, Projects, Dewatering, Dewatering projects, Gcc, GCC region, Oil, Oil prices

Significant emphasis is placed on the design and structure of buildings, but we tend to turn a blind eye to what lies beneath. One of the most important pre-construction tasks is the effective treatment of groundwater from project sites, which is necessary for both practical and environmental reasons.

It may surprise you to learn that although the GCC countries are located in a desert, the water table often sits very close to the surface during construction. In this region, groundwater is typically within one or two meters of the surface, which means that it has to be removed in order to smoothly facilitate the project implementation. Even in this arid land, groundwater conditions represent an important consideration when it comes to the stability of foundations.

Despite the low oil price, megaprojects are being built across the GCC. According to Deloitte Middle East’s annual report, the total value of infrastructure and capital projects planned and underway in 2015 was valued at $172bn – the highest figure ever recorded. With this level of development, dewatering firms look set to benefit from a continuous flow of work.

Jabi John, general manager of National Dewatering and Land Draining Co, a division of National Group, says that he expects his company to perform better in 2016 than 2015.

“As far as we are concerned, we are one of the largest dewatering companies in the UAE. Year on year, we have seen 10%-12% revenue growth, which we expect to increase further,” he adds.

John expects 15% revenue growth this year, owing to some sizeable projects in the pipeline. “With some megaprojects coming up, we are positive for 2016,” he says.

National Dewatering has worked on some of the largest projects in the UAE, including Nakheel Mall on Dubai’s Palm Jumeirah by United Engineering Construction and Actco General Contracting Company; Al Maktoum Hospital Site Redevelopment Phase 2 in Naif for main contractor Shapoorji Pallonji; and Habtoor Palace on Sheikh Zayed Road for HLG STFA Soil Group (HSSG).

Its ongoing projects include One at Palm Jumeirah by Brookfield Multiplex; Crescent Resort Hotel in Palm Jumeirah by China State Construction Engineering Corporation (CSCEC); and Saadiyat Island Resort Development Project by Ghantoot Transport & General Contracting.

Talks between National Dewatering and a Dubai-based contractor, concerning dewatering services to support infrastructure works at Nakheel’s Deira Islands (formerly known as Palm Deira), are at an advanced stage.

Ayubkhan Sardar, regional business manager for construction technique at Atlas Copco, echoes the notion that fast, reliable dewatering is of the utmost importance for construction in the Gulf.

“Due to the high water table in this region, often you need to get rid of it before any of the construction begins in a project,” he tells Construction Week.

In a bid to boost its dewatering capabilities, Atlas Copco acquired Varisco, an Italian pump producer that designs and manufactures systems for the removal of unwanted water – or other liquids – in the construction, mining, and oil and gas sectors. Varisco products are also used in industrial process plants and for emergency services in case of floods.

Atlas Copco itself also offers a wide range of dewatering products, including electric, pneumatic, and hydraulic submersible pumps. Moreover, it has worked with a broad array of the region’s largest construction outfits.

“A growing number of companies in the Middle East construction industry are now relying on our pumps,” claims Sardar.

But managing director of Action International Services, Padraig Nagle, points out that the decline in global oil prices has negatively affected construction activities in the GCC.

“Along with the decrease in the oil prices, there has been a decrease in government spending on infrastructure,” he says.

Even so, Nagle’s firm has been busy expanding its regional footprint, entering Oman, Bahrain, Qatar, and Saudi Arabia. Action International has already secured work on major projects outside the UAE, including Qatar’s Doha Metro and New Port Project, and Saudi’s Riyadh Metro.

“Each market is completely different from the other. We are heavily involved in all the major infrastructure across the region, including Riyadh Metro where we are one of the principal dewatering companies, and some big infrastructure projects in Dubai and Abu Dhabi,” he says.

When operations commence in 2019, Doha Metro will become one of the world’s most advanced rail transit systems. Extensive dewatering works are necessary at the site, which features vast stretches of underground rail.

Action International is providing dewatering services at a number of station sites along the Red Line South portion of the project. Looking ahead, Nagle wants to see the company establish itself as a leader in dewatering. He believes says that his team has “a firm footing in what they do”.

The company is now eyeing private developments that are going to be constructed along the Dubai Water Canal project. “We are quite optimistic about 2016 and 2017 as well, since we have quite a diverse revenue stream,” he concludes.

Cash-flow concerns

With the ongoing fall in the price of oil, sustained investment in the Middle East’s large-scale projects is not a certainty.

A highly competitive regional construction market, coupled with a decrease in government spending on infrastructure, could bring about a fresh challenge in the form of a cash-flow crunch.

National Dewatering’s John says: “We know the pulse of the market. Decreased oil prices and reduced government spending will [bring about] a cash-flow shortage.”

Action International’s Nagle agrees.

“A cash-flow crunch [would] definitely a big challenge for everyone right now,” he says. “Diversification is the only solution. Expand your footing across the region and be optimistic.”

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