Despite falling oil prices, industrial activity keeps resilient in the GCC

The fall in oil price and commodity prices has hit hard international basic industries and supporting businesses. Projects around the globe are being postponed or scaled down. Some reserves hailed previously with optimism and about their future potential such as Norwegian Continental Shelf, UK continental Shelf, shale gas and deep sea drilling have become less viable economically. The Arctic exploration has been nearly stopped all together.

The overall slowing down in fabrication and construction has been felt much less in the Middle East than elsewhere in the world. At least 66% of proven reserves of oil are located in the Middle East and the region has relatively low technical cost of extraction. In addition, regional governments have until recently kept up the production rates despite of the shrinking price. GCC countries will host in the near future a number of greenfield projects in refineries, oil fields, transportation and construction. On top of that, there are number of turnaround projects in order to maintain capacity in energy and basic industries. This makes the GCC countries and the UAE in particular probably the most resilient industrial market in 2016.

Major projects such as airports, refineries and smelters which have been long in the backlog in Kuwait and Bahrain will start very likely in 2016. Investments in Saudi Arabia in housing, industrial cities and new oilfields may be slowed down, but eventually will create a healthy demand for investment goods and services. Also, Oman will invest into power generation, distribution, industrial hubs and port infrastructure.

The Expo 2020 in Dubai and Qatar World cup 2022 have also massive infrastructure and construction projects undertaken in a very short time window, creating needs for both construction materials and innovations in engineering.

A great variety of the industrial activity in Abu Dhabi and Dubai is revolving around oil industries and process industries. However, currently the non- oil sector accounts for 70% of the GDP and the aim is to increase the figure to 80% in the coming years.

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