Published: Aug 31, 2014
Source: Saudi Gazette

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Value of Saudi construction contracts awarded in Q2 ’14 rebounds to SR84.9 billion

The value of awarded contracts in Saudi Arabia during Q2’14 has regained the momentum that has been witnessed over the last few years, the National Commercial Bank said in its latest quarterly review of contract awards in the Saudi construction sector.

The “NCB Construction Contracts Index” report said 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, it noted.

Upcoming contracts are expected to include numerous mega-projects within the 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 SR11 billion Khurais oil field expansion in the Eastern Province, the report added.

There was a significant upswing in the value of awarded contracts during the second quarter of 2014 as it reached SR84.9 billion. It marked a strong rebound from the previous quarter. Anchor sectors took hold of the majority of spending, as the power and oil & gas sectors accounted for approximately 60 percent of the value of awarded contracts. Those two sectors have also dominated the value of awarded contracts during the first half of 2014, accounting for 49 percent of contracts. The roads sector garnered a distant third, with 9 percent of the value of awarded contracts during H1’14. Beyond the power and oil & gas sector during Q2’14, the value of awarded contracts was nearly even across a majority of the remaining sectors.

The total value of awarded contracts through H1’14 reached SR124.6 billion. The resurgence of awarded contracts during Q2’14 has put the pipeline of upcoming construction projects back on track. The Q2’14 value of awarded contracts surpassed Q2’13 by 60 percent when it reached SR53.6 billion. Furthermore, the value of awarded contracts during H1’14 surpassed that of H1’13 by 21 percent, which stood at SR102.7 billion. As efforts to focus expenditures on construction projects continue, the value of awarded contracts in 2014 will likely parallel the magnitude of projects that were awarded over the last several years. 

The Construction Contracts Index (CCI) recovered from the first sub 200 points in 34 straight months that occurred in March. The CCI gradually rose from 218.95 in April to 297.66 and 304.04 in May and June, respectively. Although the CCI dipped below 200 points during Q1’14, it ended 21 percent higher than the same period in Q2’13. The rally occurred as a result of a very strong performance in May, which witnessed approximately SR44.1 billion worth of awarded contracts. The CCI is expected to resume this positive trend throughout 2014. 

The concentration of contracts within the oil & gas sector in the Jizan region allowed it to capture 33 percent of the overall share by region. Jizan was the recipient of numerous mega-project contracts as part of Saudi Aramco’s development of the Jizan Refinery and Terminal project. The Eastern Province, which had a 15 percent share witnessed a sizeable petro-chemical project that was awarded by SABIC. Riyadh had a significant residential real estate contract as part of the Cordoba project. The power sector accounted for numerous contracts throughout the Kingdom and in Makkah and Madinah in particular. 

The SR19.6 billion in awarded contract during April was led by the power and oil & gas sectors. Numerous contracts were awarded by the Saudi Electricity Company (SEC) across the Kingdom as part of it strategic plan to increase power generation to further its reach into more households.

Alfanar was the largest recipient of contracts that were awarded to it by SEC as it won 7 contracts worth approximately SR3.2 billion of the total SR5.7 billion. The con-tracts, which spanned across the Kingdom, were mainly for the construction of substations, transformers and switchgears. The most noteworthy contract called for Alfanar to construct the Tabarjal substation, transformers, switchgears and buildings near Al Qurayyat, Aljouf. The SR544 million contract is expected to be completed by the third quarter of 2016. 

A single contract was awarded in the oil & gas sector in April in the amount of SR6.2 billion. Saudi Aramco awarded the contract to Dodsal for the development of the first phase of the Master Gas System Expansion (MGSE) in Madinah. The scope of the first phase of the MGSE scheme calls for installation of pipelines across 585 Kms of land as well as the construction of two gas compression stations. The project is expected to be completed by the fourth quarter of 2017. 

The residential real estate sector had three contracts worth SR1.5 billion that was awarded by the Ministry of Housing in April. The largest contract was awarded to Bin Jarallah Establishment for the development of infrastructure works in Khamis Mushait as part of the Saudi Housing Project. The SR1.3 billion contract is expected to be completed by the second quarter of 2017. 

Within the education sector, approximately SR1.4 billion worth of contracts were awarded. The largest set of contracts was awarded by the Ministry of Higher Education in the amount of SR700 million for the construction of the female faculty building, study halls and laboratories at the Salman Bin Abdulaziz University in Al Kharj. 

The roads sector had approximately SR1.1 billion in awarded contracts. The majority of these contracts were awarded by the Ministry of Transport. However, the largest contract was awarded by the Arriyadh Development Authority to Al Fahd Company in the amount of SR900 million. 

The contract calls for Al Fahd Company to develop 12 km of road work as phase two of the Abu Bakr Al Siddiq motorway up-grade project. The contract is expected to be completed by the second quarter of 2017. 

For the second consecutive month, the oil & gas and power sectors led all other sectors in contract awards. The two sec-tors accounted for SR31.1 billion of the overall SR44.1 billion in value of awarded contracts. The oil & gas sector alone had six contracts worth approximately SR27.4 billion in May. Five of the six contracts were awarded as part of Saudi Aramco’s Jizan Refinery IGCC power plant. 

The largest of the five contracts was awarded to Shandong Electric Power Construction Corporation in the amount of SR9.4 billion. Shandong will be tasked with the development of a combined cycle power plant that will cover a portion of the refinery’s power needs. 

The scope of the project entails the construction of 10 gas turbines, 5 steam turbines15 generators and 10 heat recovery steam generators. The project is expected to be completed by the fourth quarter of 2016. 

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