$29bn Saudi construction contracts in 2010

Power, water and residential drive construction spend in Saudi

The Saudi construction sector is booming.
The Saudi construction sector is booming.

Saudi Arabia awarded $29billion worth of construction contracts in 2010, the Jeddah-based National Commercial Bank (NCB) said in its quarterly review of the construction sector. The report was compiled by NCB group chief economist Said Al-Shaikh.

The bulk of the contracts were driven by heavy-spending sectors such as power, water and residential real estate. The power sector alone accounted for 37% of the total value of all awarded contracts.

Nearly 70% of the contracts were awarded during the second half of 2010. Therefore the Construction Contract Index (CCI), which was lagging during the first half of the year, shot up 101 points to reach 180.2 points between Q1 and Q4 2010.

The CCI reached its highest point of the year during Q4 when it peaked at 196.9 points in November. While the CCI ended lower in 2010 than it did in 2009, reaching 259.4 points, it finished 10 points higher than in 2008.

The bank said 2010 had shaped up to be a solid year for construction, as infrastructure-related sectors such as roads and water accounted for a higher value of awarded contracts compared to the previous two years.

The value of awarded contracts in October reached $4billion. The industrial and residential real estate sectors accounted for 46% and 40% of the total value of awarded contracts respectively.

The industrial sector's largest contract was awarded by Al-Rajhi Group to South Korea's STX Heavy Industries to build a polysilicon plant, and a benzene plant, valued at $1.09billion. Completion at the Yanbu industrial complex is scheduled for 2014.

The Saudi Binladin Group awarded a sizeable $1.33billion contract to Arabtec Saudi within the residential real estate sector. The contract calls for the construction of 5,000 new villas in the Eastern Province. Arabtec Saudi is expected to prepare the site and build the villas over a 48-month period.

The report said the education sector had awarded a contract by the Ministry of Higher Education to various local contracting companies valued at $210m. The contract was for the construction of housing units for the teaching staff of King Abdul Aziz University in Jeddah.
The value of awarded contracts during November dipped compared to October. However, there were many contract awards in the roads sector, signed between the Ministry of Transportation and various local contracting companies, which totalled $590million. The contracts were awarded across the Kingdom. The range of work includes the expansion of road networks, construction of road bridges and maintenance of streets and highways.

The power sector had the second largest total value of contracts at $480million, the NCB report stated. Saudi Electricity Company awarded a contract to Arabian Bemco Contracting Company for construction of the third phase of the Al-Qassim power plant, valued at $370million. Phase three of the project is expected to add an additional 560MW.

The mixed-use real estate and industrial sectors accounted for 73% of the $2.32billion in awarded contract values during December. The mixed-use real estate sector's largest contract was Jabal Omar Development Company's award to Nesma & Partners Construction to work on part of the first phase of the Jabal Omar development in Makkah.

Construction work will be on the section of the project adjacent to Ibrahim Al-Khalil street. Nesma & Partners is expected to complete this part of the first phase within 24 months from commencement. The Jabal Omar development will include 37 towers with a total built up area of two million square metres. The total land area of the development covers 230,000 square metres.

Another significant project in the transportation sector was Saudi Railways Organisation (SRO) awarding a $101.07million contract to Saudi Archirodon. The latter will be building dual high-speed railway lines between Riyadh and Dammam. The railway, which is expected to be completed by mid-2012, will be for passengers and cargo services. The awarded contract is one of many that comprise SRO's 2040 masterplan for the Kingdom.

The NCB said 2011 could expect the same amount of contract awards, with heavy-spending sectors like power, water and petrochemical accounting for the lion’s share.

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