More Gulf industrial projects at risk after Dow

By Luke Pachymuthu - Analysis

DUBAI (Reuters) - More Gulf projects may go the way of Kuwait's aborted $17.4 billion deal with Dow Chemical (DOW.N) or be renegotiated as states take a hard look at spending amid the global financial crisis and an oil price slump.

Gulf Arab states -- which form the Gulf Cooperation Council (GCC), a loose economic bloc -- have enjoyed a six-year boom on the back of soaring oil prices. But oil export revenues have shrunk as crude fell from a record above $147 in July to $38 at the year end.

Coupled with the financial crisis, this has led to a big push among Gulf states to revisit contracts as prices in general fall.

"Many projects in the Middle East involving foreign partners are expected to be at least delayed until the credit crisis is over," said John Sfakianakis, chief economist for HSBC's Saudi subsidiary SABB bank in Riyadh.

Kuwait canceled a petrochemical joint venture with Dow on Sunday, less than a month after it signed the deal, amid weak oil prices, a protracted political crisis and the global financial crisis.

Dow is involved in another project -- Oman's al-Duqm refining and petrochemical complex announced in 2004 -- which was slated to be built by 2009 but has been pushed back to 2012. The credit crisis may well spell trouble for a project that has seen costs spiral.

"We can expect to see the GCC countries becoming more meticulous when it comes to reviewing the value of their investments in existing and future projects, whether it is energy, power or industrial," Amol Kotwal, a deputy director at consulting Frost and Sullivan in Bangalore, said.

Total hydrocarbon export revenues are seen tumbling 38.8 percent next year to $376.3 billion, after soaring 42.2 percent this year, according to a Reuters survey.