Contractors discuss the Gulf’s challenging marine projects market

Neha Bhatia finds that sustainability and market competition are altering the marine contracting sector’s dyanamics in the Middle East

SPECIAL REPORTS, Sectors, Marine contracting sector, Marine project market, Marine projects, Oman ministry of tourism, The Tower

This April, Oman’s Ministry of Tourism signed an agreement with Amouage Hotels and Resorts for the development of an integrated tourism complex (ITC)  in Muscat. The Naseem A’Sabah project is worth $1.03bn (OMR400m), ONA reported.

In a country where projects such as Mina Sultan Qaboos and The Waterfront, Muscat, are already under development, some may question the role that Naseem A’Sabah will play in Oman’s waterfront real estate sector.

However, as Ahmed bin Nasser al-Meherzi, Oman’s Minister of Tourism, pointed out, Naseem A’Sabah fits within a portfolio of ITC projects that are necessary to achieve the Oman Tourism Strategy 2040’s target of doubling visitor numbers to five million.

Indeed, tourism is a major driver of marine construction, not only in the sultanate but across the Gulf – as is perhaps best evidenced by the UAE. Harbour Gate and The Tower, among Emaar Properties’ biggest launches over the past year, are waterfront properties situated within the Dubai Creek Harbour master development.

Not far from The Tower, Jewel of the Creek is being built for partial completion by 2019. Construction of the $1.1bn (AED4bn) waterfront development in Dubai’s Port Saeed area is being managed by Dubai International Real Estate’s Roda Hotels.

MMFX Steel DMCC provided its ChromX 9100 material as steel reinforcement for Jewel of the Creek’s 750m protection walls, replacing the Grade 316 stainless steel reinforcing originally specified for the structure. The walls, designed at 460 mega pascal (MPa), are directly exposed to seawater and have been constructed to protect the internal basement walls of the project’s towers.

MMFX manufactures a corrosion-resistant product that has been produced by adding chromium to increase its intrinsic strength and adjust its microstructure.

Dr Salem Faza, president of MMFX Steel DMCC, says the early involvement of materials experts supports the development of stronger marine structures.

Speaking to Construction Week, Faza points out the company’s preference for working with project consultants, since these teams typically “specify the materials to be used” in the development, and are able to most accurately convey a client’s expectations of its project’s life cycle.

He continues: “Collaborating with consultants allows us to come up with different schemes to offer the right level of corrosion protection, and deliver it for the right amount of time. Because we provide a high-strength product, consultants are also able to reduce the quantity of steel required in the development, and this is an advantage for the client. Additionally, we don’t replace black steel; instead, we see ourselves as an alternative to corrosion-resistance systems.

“Sustainability is becoming a priority in the regional construction sector,” Faza says, adding that the energy-efficiency of building materials is now gaining greater traction across the Middle East.

Energy-consciousness is also dictating regional marine development and contracting practices in the region. Lachlan Jackson, managing director of Ecocoast Contracting, says the significance of coastal protection in the Gulf means contractors must now focus on environment-friendly methods and materials.

Ecocoast provides marine, coastal protection, and demarcation services, and designs, manufactures, and globally distributes Ecobarrier marine barriers. Its portfolio includes marine piling delivery at Louvre Abu Dhabi, Jumana Island, and Port Rashid.

“Over the past three to four years, we have seen a trend of contractors resisting [sustainable] construction practices and opting for low-cost and low–quality [methods]. Instead, contractors now favour high-quality and well-engineered designs and materials that will last longer and do the job properly,” Jackson explains.

“Coastal protection is a trend that is here to stay. Moving forward, the focus will not just be on leveraging coastal assets, but balancing it with marine- and coastal-protection efforts to ensure the long-term sustainability of these assets,” Jackson says.

Sustainability is also driving the uptake of greener materials in the marine contracting sector, he adds. Ecocoast’s piling division, for instance, is now “working more regularly” to install marine sleeves that can prolong the lifespan of piles.

Jackson explains: “Sleeved piles typically have a lifespan of 50 to 100 years, and never suffer corrosion.

“Unlike traditional methods, such as heavy metal coatings, sleeves do not contain toxins that could leach into ecosystems or negatively impact water quality, thus making them the ultimate environment-friendly solution.  Moreover, sleeves are approximately a third of the cost of a full pile replacement, and can increase the lifespan by three to four times.”

However, increased competition is driving down margins in the Middle East’s marine contracting sector, Jackson says. Regional marine contractors must also contend with payment issues in a market where some project awards are being delayed.

General contractors with limited experience of marine works are among the major sources of competition for specialist outfits, Jackson notes, adding: “We have also observed a slowdown in spending, delays in project awards, and [delayed] payments. Under these conditions, cash flow and liquidity [can become] be a major challenge.

“Moreover, many projects are still proceeding with marine elements designed by non-marine engineering companies. This creates a number of complications for contractors during the bidding and post-award phases,” Jackson tells Construction Week.

Howard McDonagh, Middle East marine works operations manager at BAM International, agrees, noting that receiving timely payments and “overly ambitious client schedules” are significant obstacles to look out for within the regional marine contracting sector.

BAM International has worked on marine projects through construct-only; engineering, procurement, and construction (EPC); and public-private partnership (PPP) arrangements across the Middle East and North Africa (MENA) region. The firm’s portfolio includes the design and build of the Jebel Ali Terminal 4 deep-water berth with associated causeways and multi-span bridge access for DP World. It has also worked on a liquefied natural gas (LNG) terminal for Jordan’s Aqaba Development Corporation and an iron ore distribution centre for Malaysia’s Vale Strategic Procurement.

Echoing Jackson’s views, McDonagh says: “Competition for a limited number of projects, [which results] in low bidding, is a challenge. Too many employer and design risks – such as ground condition risks, permitting risks, changes in legislation, dealing with unchartered existing services, and so on – are often transferred to the contractor. We  also find incomplete front-end engineering design (FEED) documents.”

The future holds new financing models for the regional marine development sector, with contractors potentially combining EPC and export finance models to offer clients a “total solution”, McDonagh says, adding that BAM offers an EPC + UK Export Finance (UKEF) package around the world.

“[We may see] contractors offering export finance options in tenders to remain competitive, while still being able to financially deliver the project,” he ends.

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