Saudi Arabia registers 8pc drop in Q1 awarded contracts
RIYADH, June 9, 2020
The total value of awarded contracts across Saudi Arabia for the first quarter reached SR45.2 billion ($12 billion), down 8 per cent when compared to the same period last year. However, the value grew by 28 per cent quarter-on-quarter, according to a report by US Saudi Business Council (USSBC).
While the pace of awarded contracts during the first quarter exhibited the continued rebound in both the value and volume of awarded contracts that was witnessed in 2019, it was spared what is expected to be a downturn in the number of projects for the remainder of 2020 resulting from Covid-19 and the reduction in global oil prices.
The Saudi government’s 5 per cent budget cut move to combat the effects of Covid-19 in March did not materially impact project awards during the first quarter but is likely to affect the execution timeline of those contracts moving forward, said the statement from USSBC.
According to experts, the implementation of budgetary cuts in March as well as the more recent additional budget cut announced in May of SR100 billion ($26 billion) are likely to dampen the kingdom’s capital expenditures in 2020.
The awarded contracts in Saudi Arabia contained numerous mega-projects across several sectors.
According to USSBC, the lion's share of the contract value was garnered by military sector with SR15 billion ($4 billion) deals followed by oil and gas (SR11.2 billion) and petrochemicals (SR8.3 billion).
These three sectors accounted for 76 per cent of all awarded contracts alone, while the other contributing sectors included water, power, and real estate.
The military sector was led by two mega-projects associated with the construction of the King Salman airbase as well as the King Faisal air academy, each valued at SR7.5 billion. This marks the highest value of awarded contracts in a quarter and year in the military sector on record.
The oil and gas sector continued its momentum from 2019 as it accounted for SR11.2 billion or 25 percent of awarded contracts led by state oil giant Saudi Aramco.
Contracts were awarded for the development of the Marjan oil field as well as Safaniya and South Ghawar in the Eastern Province. Saudi Aramco said it would continue to award mega-projects in the oil and gas sector despite the impact of Covid-19 on the economy.
The petrochemicals sector rose this quarter after a relatively slow year in 2019. The value of awarded contracts surged to SR8.3 billion ($2.2 billion) from two contracts, accounting for 18 percent of total projects.
This reflects a significant jump as the total value of awarded contracts in 2019 was SAR2.5
billion ($662 million) for the petrochemicals sector.
Regionwise, the Eastern Province dominated the list with the highest share of awarded contracts worth SR21.8 billion ($5.8 billion) or 48 per cent of the total.
All of the oil & gas and petrochemicals sector contracts were awarded in the Eastern Province, accounting for SR19.5 billion ($5.2 billion) or 89 percent.
Saudi Aramco awarded all the oil and gas contracts while several companies awarded petrochemical projects, with Advanced Petrochemicals Company awarding a significant contract in the amount of SR6.8 billion ($1.8 billion).
The power, real estate, and transportation sectors also contributed to the Eastern Province’s
Riyadh came second in the list with 37 per cent of the awarded contracts worth SR16.6 billion ($4.4 billion). The Riyadh region was dominated by the military sector as a result of the King Salman and King Faisal airbase projects, which accounted for SR15 billion ($4 billion) or 90 percent.
Other contributing sectors in the Riyadh region included real estate, healthcare, and transportation.
The Madinah region registered a distant third with SR2.8 billion ($752 million) or 6 per cent of awarded contracts. Madinah registered two notable contracts of which the largest was a SAR2.6 billion ($700 million) water project.
The Makkah region contributed SR2 billion ($533 million) or 5 percent and was led by the education and power sectors.
The USSBC’s Contract Awards Index climbed to 216.6 points by the end of the first quarter. The index briefly dipped below the 200 point mark in January for the first time since May 2019, it added.-TradeArabia News Service