USD40 billion investments in GCC ports at risk

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Aug 2009

Khaleej Times reported that planned investments worth almost USD 40 billion to expand the cargo handling capacity at seaports in the Gulf could now be at risk due to a steep decline in regional oil revenues and a possible continuation of the financial crisis. Governments and businesses began planning many of these ambitious port expansion projects at a time when they were flush with cash from oil surpluses. Crude prices peaked last year at around USD 147 per barrel but have retreated sharply since then and are hovering now at close to USD 73 per barrel.
Mr MR Raghu Senior VP for Research at the Kuwait Financial Centre said that this halving of their main source of revenues could force some Gulf oil exporting countries to cancel or at least postpone some of their port projects. Lower oil prices are of particular concern because governments in the Gulf generate an average of 80% of their financial resources from the sale of hydrocarbons.
Mr Raghu said in an interview earlier this week that “A longer slowdown in the global economy would continue to throttle demand for ocean going freight and commodities. Container ports throughout the Gulf suffer already from overcapacity due to the recent plunge in maritime trade volumes.”
Kuwait Financial Centre said in a report that countries in the region plan to enlarge or modernize 35 ports including some that aren't yet built. Of 20 projects that have been announced work is in progress on 12. Several involve public-private partnerships.
The Kingdom of Saudi Arabia and the UAE have each planned 5 port projects. Construction work is underway on all those in the UAE, while 2 projects in Saudi Arabia are still in the planning and design stage. Total investments already made in the region's port projects totalled USD 38.2 billion as of the end of 2007. The UAE accounted for the biggest share of this amount with around USD 23 billion.
The report said that an additional USD 843 million worth of projects was completed from January 2008 through July 2009. The total value of upcoming projects planned in the Gulf is USD 38.57 billion.
The study said that the volume of shipments to and from GCC ports has grown by an average of around 12% annually over each of the last 5 years. Imports comprise 30% of this total volume while exports account for 70%.

Source: Khaleej Times