Saudi's 2014 contract awards tumble 25% to $59bn

Figure is lowest in four years, but Saudi's National Commercial Bank says market remains healthy

Makkah; undergoing a major construction programme at present.
Makkah; undergoing a major construction programme at present.

The value of large construction contracts issued in Saudi Arabia in 2014 reached $58.9bn (SR221m), which was a drop of 25% on the $72.2bn (SR293bn) achieved in 2013.

The figure was the lowest annual amount for new construction contracts awarded in four years, although the final quarter amount of $16.5bn (SR61.9bn) was an 81% increase on the $9.1bn awarded in Q3, according to a report by National Commercial Bank (NCB).

It argued that although contract awards fell back by a quarter during the year, the construction market was still in a healthy state with new contract awards exceeding SR200bn ($53.3bn) for each of the past four years.

Both physical and social infrastructure-related sectors continued to grow compared to 2013. However, it was the reduction in the size of mega-projects that caused the decline in 2014, NCB argued.

It added that the sector was likely to continue to benefit from government spending programmes, particularly as the Kingdom recently announced an expansionary budget despite oil price declines.

"The government’s plan as part of its announced 2015 budget reflects its desire to keep capital expenditures propped up," it said.

The main areas of spending in the final quarter were the oil & gas, power and transport markets.

The biggest contract to be awarded during the period was a $1.5bn deal for new central processing facilities at Saudi Aramco's Khurais gas field, which went to a joint venture between Consolidated Contractors and Saipem.

The two next-biggest contracts were healthcare deals, and were both awarded to a joint venture between Riyadh-based Al Bawani and Italian contracting giant Salini Impregilo.

They were a $1.5bn deal for the new King Faisal Medical City in Abha containing 1,350 beds and the 1,000-bed Prince Mohammed bin Abdulaziz City in Jouf, which is being built under a $1.25bn contract.

Looking ahead, NCB predicted that the Saudi government's announcement that it would continue its capital expenditure - even if it means dipping into its reserves - will remain healthy.

"Our projections for capital expenditures during 2015 are that it will reach SR239bn ($63.7bn), which is 29% higher than the Ministry of Finance’s projections.

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