Decision on Okhta tower project likely in two months

Redesign and pricing issues of the 400-metre high Okhta project in St Petersburg, Russia, could be resolved in the next one to two months, said a source close to the matter. In an exclusive interview with Emirates Business , the source said Gazprom Neft still needed time. In April 2008, Arabtec in Dubai was awarded the Dh10 billion contract to build the project. "Yes, the project is still on," said the source within the Gazprom Neft group who did not wish to be named. "The situation is such that there are design issues that have to be agreed by Gazprom Neft, by Okhta (a subsidiary of Gazprom Neft), by Arabtec and others; in terms of 'technical pricing'. We need time to understand all these issues. It takes time for RMJM, the architects, to make changes in the design. There are some technical issues with piling design. It is difficult to say when, but maybe, we will finish this in the next one or two months." Meanwhile, the Arabtec Holding CEO said he is optimistic about the project going ahead. "We have been responding to all their changes in terms of design, alternatives and budgets. They have everything they needed from us," said Riad Kamal, CEO of Arabtec Holding. "I am not aware of any issues that are subject to change unless they want to cancel some parts of the project. It is not just the Okhta Tower – we are also constructing adjoining buildings as well. So this involves more than just the Okhta Tower. We are waiting for them to give us the feedback and the go-ahead. We have been told that the project will not stop and that the Gazprom board is keen to get started." He said there was a time when low oil prices were a cause of concern. "We had a little bit of a fear when oil prices plummeted down to the $30s and we thought that they might not go ahead," Kamal said. "But with oil price at around $70, they might be encouraged to proceed. We are very optimistic." Within the region, Kamal said its subsidiary, Arabtec Construction, is expecting another SR1bn (Dh97.9bn) worth of work in Saudi Arabia this year, apart from the recent SR2bn for the Lamar project and SR1.5bn for the construction of Princess Noura University in Riyadh. "We are expecting another project, which will be in various parts of the Kingdom with CPC – the sub-contract will be around SR1bn. Our current order book stands at Dh29.5bn including Russia or Dh19.5bn excluding Russia." On March 7, Arabtec Construction, a subsidiary of Arabtec Holding, announced the setting up of Arabtec Saudi Arabia, a subsidiary with a paid up capital of SR150m. The partnership agreement signed with CPC Services Company, a member of the Saudi bin Laden Group, and Prime International Group Services, a subsidiary of a leading Saudi group, will tap into "the ongoing growth of the Saudi construction and infrastructure market", said Kamal. The venture is 45 per cent Arabtec UAE, 35 per cent CPC and 20 per cent Prime International, he said. "The projected turnover in the first year will be in the excess of SR1.5bn and in the next two to three years will increase to SR3bn-SR5bn," said Kamal. He had then told Emirates Business the Okhta project had been approved by Gazprom. "Last week, we concluded negotiations with them and are hoping the board will give the go-ahead," he said. In December 2008, the company said it was expecting the deal to come to fruition by end of the year. In November 2005, Gazprom announced that Sibneft was going to build the Gazprom City Business centre and the British architectural firm RMJM won the project in December 2006. The construction of the entire Gazprom City is proposed to be complete by 2016. In March 2007 the project was renamed from Gazprom City to Okhta centre (after the river of Okhta). Meanwhile, Kamal added that prospects still look bright in the UAE. "In Abu Dhabi, we are waiting for decisions on two projects valued at around Dh3bn," added Kamal. "If not both, we expect a positive from one of them." In December 2008, Ziad Makhzoumi, Chief Financial Officer at Arabtec Holding, had forecast that the company "will still do Dh9.5bn next year and Dh11bn in 2010." Keep up with the latest business news from the region with the daily Emirates Business 24|7 newsletter. To subscribe to the newsletter, please click here .