Step aside oil, Saudi's construction industry raking in the riyals
The value of awarded contracts settled at a leisurely pace during the first quarter of 2014 after witnessing a record year in 2013. Nonetheless, contract awards in the amount of SR39.7 billion ($10.59 billion) during the first quarter (Q1) of 2014 illustrates the continued role of the construction sector’s significance to the Kingdom’s economy. Absent this quarter are the numerous amounts of mega-projects that were witnessed throughout 2013. The anchor sectors yielded to infrastructure related sectors, which the government earmarked for heavy expenditures during 2014. While the power sector captured the highest share of awarded contracts with 25 percent, it was the roads and urban development sectors that significantly contributed to the overall value by capturing 16 percent and 12 percent shares, respectively. The healthcare and mixed-use real estate sectors contributed 9 percent and 8 percent, respectively.
The SR39.7 billion ($10.59 billion) in awarded contracts during Q1 of 2014 marks a 19 percent decline compared to Q1 of 2013 that amassed SR49.1 billion. The value of awarded contracts is expected to be further bolstered as many mega-projects are currently in the tendering phase, and will account for a significant share of awarded contracts throughout the year. Furthermore, the government’s continued focus on improving the Kingdom’s infrastructure landscape through heavy capital expenditures will allow for sustainable opportunities for both local and international contractors.
The Construction Contracts Index (CCI) dropped significantly to end the quarter at 198.67 points, reflecting a 31 percent decline compared to Q1 of 2013.
The CCI’s slide was gradual as it slipped to 260.02 points in January and lowered to 216.09 in February. It also marked the end of a 34 month streak of consecutive periods above 200 points, which began in May 2011.
However, the CCI remains in a very healthy environment and will likely climb back to its familiar zone. This will occur as more mega-projects are awarded throughout the year.
A majority of the awarded contracts took place in the three main regions of Eastern Province, Riyadh and Mecca as they accounted for 29 percent, 26 percent and 21 percent of contract values, respectively.
The nature of the contracts were geared toward the rehabilitation of roads, upkeeping and enhancement of urban developments and the construction of new healthcare centers. A number of contracts in the power sector contributed to the Eastern Province’s market share.
In Riyadh, a sizeable project for the development of employee housing for Sabic employees was awarded. The real estate sector contributed to Mecca’s performance as the hospitality and mixed-use sector made sizeable contributions.
January had the highest value of awarded contracts in Q1 of 2014, reaching SR21.6 billion ($5.76 billion). The power and roads sectors accounted for the highest share of awarded contracts by value. The power sector’s SR8 billion in awarded contract accounted for 37 percent of all contracts in January.
The biggest contract by value was awarded by the Saudi Aramco to Larsen & Toubro in the amount of SR1.1 billion ($290 million). The contracts calls for the installation of a 230kV double circuit overhead transmission line and underground cabling spanning 55 kilometers.
Larsen & Toubro are expected to complete the project by the first quarter of 2016. Other contracts in the power sector, which were awarded by the Saudi Electricity Company (SEC), mainly pertained to the construction and mainte-nance of transformers and substations.
The roads sector accounted for 19 percent of the value of awarded contracts. The SR4.2 billion ($1.12 billion) in awarded contracts were primarily directed to numerous parts of the Kingdom. The majority of contracts were aimed at completing, rehabilitating and asphalting new highways and rural roads.
Within the mixed-use real estate sector, a significant contract was awarded in Mecca by Jabal Omar Development Company as part of the fourth phase. The contract was awarded to Ruwad Civil Construction in the amount of SR3 billion ($800 million). Phase four includes the construction of 11 towers and associated facilities and a built-up area of 320,000 square meters. The project is expected to be completed by the first quarter of 2017.
The oil and gas sector witnessed one contract, which was awarded by Saudi Aramco to Samsung Engineering in the amount of SR1.5 billion ($400 million). Samsung Engineering will expand the handling facilities at the Shaybah oil field to increase the fields output by 250,000 barrels a day. This includes adding additional gas oil separators, a wet crude handling train and a booster gas compressor. This engineering, procurement and construction (EPC) project is expected to be completed by 2016.
A significant project in the hospitality sector was awarded by AMIAS Holding to the Al Saad/ BESIX JV for the construction of the Kempinski Residences in Jeddah. The luxury development will include a 65-story hotel with 242 rooms and 104 serviced apartments. The total built-up area will be approximately 79,600 square meters. The project is expected to be completed by the first quarter of 2017.
The healthcare sector made a sizeable contribution of SR2 billion ($533 million) worth of contracts in January. The most notable contract was awarded by the Ministry of Health to Seder Construction Company in the amount of SR626 million ($167 million) . The contract calls for the construction of a 500-bed hospital in Mecca with a built-up area of 40,000 square meters. The project is expected to be completed by the first quarter of 2017.
The value of awarded contracts was cut nearly in half during February, reaching SR10.8 billion ($2.88 billion). The urban planning sector accounted for the highest share of awarded contracts with SR2.1 billion ($560 million). The contracts were awarded by the Ministry of Municipal and Rural Affairs and were spread across numerous area within the Kingdom. The contracts were numerous in volume but low in value. Contracts included the rehabilitation of public gardens, maintenance and improvement of grounds as well as the beautification of public areas.
A housing project in the petrochemicals sector for Sabic’s employees was awarded by Sabic to Joannou & Paraskevaides in the amount of SR2 billion ($533 million). The development, which will be called Al-Waseel Hills in Riyadh will con-tain 685 employee housing units in addition to mosques, schools, shopping centers and sports clubs. The project is expected to be completed by the first quarter of 2017.
The healthcare sector had SR1.2 billion ($320 million) worth of contracts that were awarded in February. The largest contract by value was awarded by the Ministry of Health to Rabia Trading and Agriculture Company for the construction of a 400-bed mental health hospital in Abha. The project is expected to be completed within 24 months.
A sizeable contract was awarded in the Transportation sector by the Saudi Ports Authority to China Harbour Engineering Company in the amount of SR770 million ($205 million). The contract calls for the construction of three berths, deredging and reclamation of 28 million cubic meters and demolishing the existing breakwater to construct a new one. The new terminal aims to serve the Waad Al-Shamal City in the Eastern Province. The project is expected to be completed by the third quarter of 2016.
The value of awarded contracts was further clipped in March, reaching SR7.4 billion ($1.97 billion). The urban development sector contained the highest value of awarded contracts with nearly SR1.8 billion ($480 million). The contracts were a continuance of contracts similar to February that are aimed at enhancing rural towns and public facilities.
The power sector had SR1.4 billion ($370 million) worth of contracts awarded. SEC awarded several contract of which the most notable being awarded to National Contracting Company for the installation of 380kV overhead transmission lines in the Eastern Province. The value of the contract is approximately SR623 million ($166 million). Going to outlook, the value of awarded contracts is expected to pick up during the upcoming months as numerous mega-projects in anchor sectors are expected to be awarded in the petrochemical, industrial and power sectors. The government’s plan to continually upgrade and enhance the physical and social infrastructure of the Kingdom ensures that the construction sector will likely to continue the momentum that has been in place over the past several years.
- Kuwait fights budget deficit: Reexamining government salaries, expatriate labor
- Businessmen tortured in UAE
- State of the Arab World Economy report 2016: diversify, tax, slash subsidies
- Arab investors won't dump the Trump despite anti-Muslim remarks
- UAE economy minister projects high growth despite oil prices
- Saudi construction contracts exceed whopping $13 bln in Q1 only
- Debt, downgrade and Saudi Arabia
- 450 million Saudi riyals deal to further enhance Riyadh real estate
- Interview with Mr. Stavros Loizou, CEO - Lewis Charles Securities Limited.
- Casamia Star Handles Projects worth 400 Million AED for Best Eastern