Oil & gas deals boost Saudi contract award levels

Kingdom awards $22.6bn of deals in Q2; $33.2bn in first half of 2014

NEWS, Business, Contract awards, Contracting market, Dodsal, Oil & gas, Saudi Arabia, Shandong, Tecnicas Reunidas

Construction contract awards increased by 47% during the second quarter of 2014 to $22.6bn (SR84.9bn), compared with $10.6bn (SR39.7bn) in the first quarter of the year.

Contract awards for the first half of the year stood at $33.2bn, 21% higher than in the first quarter of 2013.

The Construction Contracts Index produced by the Kingdom's National Commercial Bank (NCB) showed that the bulk (60%) of large contracts awarded during the period were in the power and oil & gas sectors, awarded by state-owned Saudi Aramco.

These included a $2.5bn deal to Chinese contractor Shandong for a combined cycle power plant at a refinery in Jazan, a $1.7bn deal to Tecnicas Reunidas for offsite and utilities work at the same project, and a $1.6bn deal with the UAE's Dodsal to deliver a Master Gas System Expansion project in Madinah.

Contract awards fell temporarily during the first quarter as a result of labour market issues following a crackdown on illegal expat visas at the end of 2013. However, NCB said the second quarter figures showed the market had "regained the momentum that has been witnessed over the last few years".

"The construction market relies heavily on key market determinants such as demographic dynamics, labor size and the health of the Kingdom’s industries. These factors continue to propel the growth of the construction sector as demand for social and physical infrastructure have and will continue to be a focal point of the government.

"Upcoming contracts are expected to include numerous mega-projects within anchor sectors. One significant project that is expected to be awarded is the terminal upgrades at King Khalid International Airport. Additionally, Saudi Aramco is receiving bids for its SR11bn ($2.9bn) Khurais oil field expansion in the Eastern Province."

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