Some Mideast Construction Projects Halted as Construction Firms Steel for Impacts of War

“The scale and duration of a price spike will depend on how much oil is kept off the market—and for how long—due to danger in the strait, higher shipping insurance rates or damaged Gulf infrastructure,” analysts at S&P Global Energy CERA said in a note March 5.

Some engineering and construction firms working in the region have noted disruptions, particularly in energy projects, although they declined to specify impacts or project locations. Industry observers have speculated hiw a conflict lasting months will have broader impacts on other construction sectors such as transportation and building development. 

Saudi Arabia’s Energy Ministry confirmed March 2 there was sustained “limited” damage at unspecified energy production sites after the interception of two drones. 

State-owned QatarEnergy said it was halting production of liquefied natural gas after military attacks on two facilities, including the giant Ras Laffan facility. It has also declared force majeure at that site as a protection against contract obligations. About 20% of global LNG comes from Qatar. 

While there are some media reports that QatarEnergy’s broad halt on LNG production also affects its gas field expansion efforts, a spokesperson for Italy-based contractor Saipem working on that project told ENR that the firm is not affected by a declared force majeure, He declined to confirm whether work is proceeding on the expansion project or those of its other region clients. Saipem announced in February award of a $500-million contract from Saudi Aramco for work to further expand the state-owned firm’s giant Safaniyah offshore oilfield under an existing long-term agreement, online publication Upstream reported. Work involves engineering, procurement, construction and installation of a 48-in.-dia., 77-km onshore and offshore trunkline at the oilfield and other subsea structures, Saipem said. The field produces 1.3 million barrels per day.

Israel said it shut down some of its offshore natural gas production at two Mediterranean Sea sites, while Bahrain’s news agency confirmed Iranian drone strikes had hit a major refinery in the country. Iraq temporarily closed its Basra refinery after the country was hit by a nationwide blackout on March 4, while oil storage and bunkering activities at the United Arab Emirates port of Fujairah were suspended due to a fire caused by an intercepted drone, reported multiple media outlets. Missile and drone strikes also were reported at Dubai International Airport and at Teheran’s Mehrabad Airport, with extent of infrastructure damage unclear.

“ I do not think there’s precedent for this kind of region-wide conflict with facilities coming under attack from all kinds of methods, over a wide era, and all types of facilities at basically the same time,” said Robin Mills, CEO of Qamar Energy, an energy consultant based in Dubai in a National Public Radio report.

Supply Chain Impacts

Cargo ships are not exempt from these wartime dangers. Insurance companies have either hiked or canceled their war-risk coverage and freight rates are soaring, making the shipment of essential construction materials and equipment to the region much more costly.

Steel, special rebar grades, aluminum, heavy machinery, engineered components, and virtually all other supplies arrive by sea at ports that are now targets, including Saudi Arabia’s King Abdulaziz Port in Dammam and the Jubail commercial port. 

Delays in deliveries are reportedly already forcing schedule changes in construction projects. Anything that touches the supply chain, from the Gulf states’ much touted renewable energy projects to their latest theme parks, are expecting to see escalating costs and delays, with developers already recalibrating scope and schedule.

Saudi Vision 2030—the country’s plan for a modernized, artificial intelligence-driven, renewable energy-powered future—wass already getting a rethink. Prior to the war on Iran, Saudi Arabia’s NEOM project—a huge, futurist city planned on the Red Sea coast—was under reviewed for a reduction in scope. NEOM includes Oxagon, a partly floating industrial city; Trojena, a mountain tourism resort geared toward luxury and The Line, a planned 170-km strip of ultra-modern city, 200 meters wide and 500 meters tall. 

The UAE has halted plans to expand its aviation hubs of Dubai International Airport and Zayed International Airport, both of which have suffered damage from Iranian drones. The expansion project at Jebel Airport has also been suspended. The Emirates’ railway company, Etihad Rail, could also face trouble with its planned expansion with connections to Saudi Arabia and Oman, as well as plans to begin a high-speed rail project. Desalination projects powered by renewable energy in Kuwait and Qatar are also facing concerns over delayed equipment deliveries.

Global engineering and construction firms shared little, if any, detail on their projects’ exposure to the wartime disruptions in the region.

‘At this time, impacts to McDermott operations are isolated. While we have taken precautionary measures in parts of the Middle East, McDermott’s global operations continue to function,” said a company statement provided to ENR. “Fabrication assets in the [conflict] region have been temporarily closed, and crew disembarked from quayside marine assets. The safety of our people remains our top priority.”

A company spokeswoman declined to confirm if force majeure steps have been taken at its jobsites. “This is a fluid situation,” she said. “We are working closely with our customers to assess and mitigate potential impacts and ensure safe operations.”

A spokesperson for Worley did not confirm if its projects in the region had suffered damage or were shut down, saying only that the contractor “is closely monitoring developments in the Middle East” and that it “continues to work with customers to manage any potential risks or disruptions in line with established protocols.”  A Bechtel spokeswoman said only that the firm has “assisted colleagues in relocating from the UAE to safer locations.”

UK-based engineer-builder Wood, which had announced in December it had secured more than $1 billion in regional contracts, also declined response on the status of its facility operations or project construction.A spokesperson said that “the safety and wellbeing of our people is our absolute
priority,” and that the firm is “monitoring the situation closely.” 

Announced awards include an EPCM contract, set to generate $400 million in revenue, to expand the Habshan gas processing plant in Abu Dhabi for UAE state owned national energy company ADNOC, and projcct management awards at the West Qurna 1 oilfield in southern Iraq and on UAE’s first methanol production facility in Al Ruwais Industrial City, Abu Dhabi. 

A spokesman for heavy contractor Keller did not confirm comments reported by British industry publication Building that several of its jobs in UAE and Bahrain have been paused, although not in Saudi Arabia. The firm has about 500 employees in those three countries, Building noted. Keller CEO James Wroath, who assumed the role last year, told analysts on a March 3 investor call that its business in the Middle East accounts for around 5% of its global revenue and profit contribution. “We’re hoping the political and military situation calms down and allows us to get back to work,” he said.