SPONSORED BY THE FUTURE OF PROJECT DELIVERY TECHNOLOGY TRENDS SHAPING CONSTRUCTION AND ENGINEERING IN THE MIDDLE EAST NOVEMBER 2020 The Future of Project Delivery 1 2 The Future of Project Delivery PREFACE TRANSITION POINT he coming years will see a transformation in the way that projects are delivered in the Middle East and North Africa (Mena) as pro- T ject sponsors reshape their plans to reflect the changing social and economic needs of the region. In a market that is seeing change across a wide range of areas, includ- ing a slowdown in real estate demand, localisation of content, and more stringent welfare requirements in response to Covid-19, the two biggest factors that are forcing project owners to adapt their development plans are climate change, and the long-term slowdown in demand for oil. The drive to reduce carbon dioxide and other greenhouse gas emissions to hit the targets set out in the 2015 Paris Agreement is seeing govern- ments demanding the decarbonisation of projects through a greener approach to building and infrastructure design, construction and delivery. Meanwhile, project clients are seeking greater social and economic val- ue from their project investments, as the Covid-19 pandemic and lower oil prices squeeze balance sheets. Private sector real estate investors and developers are delaying or downsizing their investment plans in response to declining demand for many asset classes, while governments are seeking to reduce their capital spending commitments through alternative delivery mechanisms such as public-private partnerships (PPP), on critical infrastructure projects The key to achieving these objectives is the digital transformation of construction, engineering and operation of projects in the region. A call for greater use of advanced building information modelling (BIM) by project clients is forcing designers, contractors, suppliers and end-user operators to integrate information through cloud-based digital twins. The earlier engagement of downstream contractors, suppliers and operators in design that this enables will reduce on site clashes and late-stage varia- tions that lead to delays and disputes. The drive to reduce mistakes and improve safety will see increasing adoption of modular construction techniques, while the development of sensor technology in combination with artificial intelligence will enable real time monitoring of assets during construction and operation, allow- ing for more efficient utilisation of the asset, more efficient maintenance procedures, and optimisation of services. With some $3.5tn of major projects planned across the Mena region, the pipeline of future projects is bigger than the $3.1tn combined value of all of the project contracts awarded in the region since 2004. So the potential for the region’s incredible growth story to continue is immense. However, unlocking that opportunity depends entirely on the ability of the region’s projects industry to deliver its digital transformation. The Future of Project Delivery 3 4 The Future of Project Delivery CONTENTS 06-09 20-21 30-31 MARKET OVERVIEW CASE STUDY CLOUD The state of the projects Construction as a manu- Mining operations benefit market in the Middle East facturing process optimis- from the integrated and North Africa region es project delivery workflow approach 10-11 22-23 32-33 FROM THE EXPERT 0IL 4.0 COLLABORATION Digitalisation is transform- Adnoc’s smart growth Common data environ- ing project delivery in the strategy is underpinned ments can aid in Middle East by digital technology streamlining insights 12-15 24-25 34-35 SURVEY DECARBONISATION LEISURE Insights from the people The need for net-zero Creating a seamless at the heart of the con- carbon reform in the customer experience struction sector construction sector through digitalisation 16-17 26-27 36-37 MEGASTRUCTURES DIGITAL TWINS MACHINE LEARNING Technology will be pivotal Advancing building infor- AI-driven transformation in Ciel Tower’s record- mation modelling in the is underway across the breaking ambitions virtual space construction sector 18-19 28-29 SUPPLY CHAIN MANUFACTURING Real-time visibility offers Emirates Global Alumnium improved efficiency and turns to digital twins to lowered costs optimise performance The Future of Project Delivery 5 MARKET OVERVIEW Projects planned or underway in the Mena region ($bn) THE REGION’S 1,381 0.23 0.4 10.2 11.5 28.9 30.4 TIPPING POINT 49.6 838.9 65.9 163 AFTER TWO The most significant projects market 175.8 DECADES trend in 2020 has been a slump in the 232.3 476.8 OF GROWTH value of contract awards as a result 243.6 DRIVEN BY REAL of the disruption of the coronavirus 371.3 244.6 (Covid-19) pandemic. The impact of the ESTATE AND Saudi Arabia Iran Algeria Tunisia INFRASTRUCTURE pandemic is profound, changing the eco- UAE Kuwait Bahrain Libya nomic priorities for governments, and PROJECTS, Egypt Qatar Morocco Lebanon investment plans of private developers. Iraq Oman Jordan Yemen 2020 HAS SEEN For project stakeholders, it changes Syria SIGNIFICANT the direction of the market, in the short Mena project contract awards, 2011-2020 ($bn) CHANGES IN term at least, and it is imperative that 250.8 THE MIDDLE companies adapt quickly. 266.4 EAST PROJECTS A five-year slowdown in contract 170.6 MARKET awards following the 2014-2016 crash in oil prices, had already put the re- 243.7 gion’s projects industry under stress, 196.5 even before 2020 and Covid-19. In the four years since 2015, the average annual value of project contract 172.1 196.1 awards in the Middle East and North 153.6 198.7 Africa (Mena) region was about $173bn 77 a year, according to projects tracking 2011 2013 2015 2017 2019 database MEED Projects. This repre- 2012 2014 2016 2018 2020* sents a 28 per cent cut on the $240bn *= 2020 figures cover 10 months from Jan-Oct 2020 average annual value of contract awards in the four years from 2012 to 2015. Mena project contract awards 2018 vs 2019 vs In 2020, the value of awards has 2020, by country ($bn) Total crashed. In the first ten months of the UAE 98.4 year, Mena project contract awards Saudi Arabia 94.9 reached only $77bn as governments Egypt 65.6 and private developers reigned in Qatar 33.9 spending in response to the pandemic. Iraq 28.4 The biggest falls have come in the Iran 17.2 biggest markets, with the UAE, Saudi Oman 16.5 Arabia and Egypt set to record year-on- Kuwait 13.1 year falls in 2020 of about half the value Algeria 12.8 of awards in 2019. Bahrain 9.9 By sector, building and real estate Morocco 7.4 projects, traditionally the biggest seg- Jordan 2.5 ment of the region’s projects market, Lebanon 2 have seen the biggest slowdown in Syria 0.1 Yemen 0.05 awards in 2020, with the value of con- 0.04 struction contract awards reaching only Libya about $24bn in the first ten months Source: MEED Projects Nov 2020 2018 2019 2020 6 The Future of Project Delivery • DATA INSIGHTS Mena project contract awards 2018 vs 2019 vs 2020, by sector ($bn) of 2020, compared to over $50bn of Total awards for the full year in 2019. Construction 137.96 Transport project contract awards have also slumped in 2020, with the Transport 66.6 value of awards reaching only about Oil 53.63 $16.7bn in the first ten months of 2020, compared to about $26.8bn of awards Power 50.96 for the full year in 2019. Water 29.5 Project pipeline Despite the devastating impact of Gas 29.38 Covid-19, the potential for new oppor- Chemical 20.17 tunities remains vast. At the start of November 2020, an estimated $4.3tn of Industrial 14.58 major projects were planned or under construction across the Mena region, 2018 2019 2020 according to MEED Projects. Status of known projects in the Mena region (%) This total includes long-term mas- terplans that promise to deliver project opportunities for decades to come, such 23% 29% as Saudi Arabia’s $500bn Neom develop- ment, as well as thousands of standalone projects and subprojects that are part of larger programmes. 9% Accounting for about $2.9tn of projects, the six oil-rich states of the 3% GCC account for two thirds of all 3% 27% 2% projects planned or underway in the 4% Mena region with Saudi Arabia being the biggest market with about $1.4tn On hold Design Main Contract PQ of projects. The UAE is the region’s Execution Main Contract Bid FEED second-biggest market with $839bn of Study Bid evaluation projects in planning or under execution. The region’s third biggest projects Value of projects in execution by country ($bn) market, and the biggest outside the 0.05 225.5 GCC, is Egypt, which had about $477bn 0.18 2.2 of projects planned or underway at the 3.7 start of November 2020. The Egyptian 3.8 182.9 17.6 projects market has expanded rapidly 18.6 since 2015, as Cairo has invested in 37 infrastructure and new city develop- 40.7 ment as part of the country’s post-Arab Spring recovery plan. 47.7 85.23 Removing the as-yet unknown aspects 48.5 of the region’s long-term masterplans 78.2 72.3 and ‘gigaprojects’, and also the $959bn Saudi Arabia Iran Oman Jordan of projects that are currently on hold, re- UAE Kuwait Morocco Tunisia veals a Mena project market with about Egypt Iraq Bahrain Syria $2.3tn of projects planned or underway. Qatar Algeria Lebanon Yemen While many of the projects that are Source: MEED Projects Nov 2020 officially ‘on hold’ have effectively been The Future of Project Delivery 7 cancelled, never to return, many others Value of projects in execution, by sector ($bn) are simply stalled, the victims of the 169 deteriorating market conditions caused by the pandemic.