The Saudi Arabia Construction Projects Market

Analysis of market potential

May 2019 Prepared by Ed James Director of Content & Analysis, MEED Projects [email protected]

© 2013 MEED Insight Saudi Arabia is by far the largest projects market in the GCC, both in terms of historical and future project values. This reflects its position as the Arab World’s biggest economy.

The kingdom’s sheer geographical size, large population and extensive oil and gas output also gives the most diverse of all the region’s projects market, ensuring that it has opportunities across all sectors. It is for these reasons that Saudi Arabia consistently remains the most important and top priority market for most international companies.

Future developments in the market will be guided by the framework set out in the Saudi Arabia 2030 Vision which envisages hundreds of billions of dollars being invested in transforming the economy through the development of massive new tourism, mixed-use and leisure developments across the kingdom.

The largest of these is the $500bn Neom gigaproject which involves the creation of a new city in the northwest of the country. Work on this and other key developments such as Qiddiya, the Red Sea Tourism Project and Amaala are already under way and will only accelerate in the coming five years.

With the largest projects pipeline in the GCC, worth more than $1.1bn, Saudi Arabia is set to maintain its position as the leading market in region. The sheer scale and breadth of opportunities make it a market that no one can afford to miss

This report provides an example of some of the key future project opportunities in the state as well as some data on the overall size of the market. It has been prepared by MEED Projects, the region’s leading projects tracking service. To learn more, please visit www.MEEDProjects.com, email [email protected], or call +9714 8180318

Indeed, this is already being seen in the construction and transport sectors as contract awards have grown from $11.2bn in 2016 to $14.6bn in 2018. Higher oil prices have supported this increase in spending, but the government’s 2030 Vision for a wholesale reform of the kingdom’s economy by investment in mixed-use, leisure, tourism and transportation projects is the main driver for this and future project expenditure Value of construction and civil infrastructure contracts awarded in the GCC, 2016-18 ($m)* 40.000

35.000

30.000

25.000

20.000

15.000

10.000

5.000

0 Bahrain Kuwait Oman Saudi Arabia UAE 2016 2017 2018

Higher oil prices in 2018 helped spur accelerating real economic growth in Saudi Arabia to a healthy 2.2%.With higher revenues on the back of an improved oil price which hit $72 a barrel average last year, the government announced in December a record budget of SR1.12 trillion equivalent to $302bn. Much of this budgeted expenditure will be spent on the government’s infrastructure plans in line with the Saudi Arabia 2030 Vision. Key projects as part of this strategy include the $500bn Neom ‘gigaproject’ and other key mixed-use developments like Qiddiya, Amaala, and the Red Sea tourism project Saudi Arabia budget, 2010-19 (SAR bn) Saudi Arabia key economic indicators, 1.400 2019 Nominal GDP ($bn), 2018 782.5 1.200 Real GDP growth, 2018 (%) 2.2 Real GDP growth, 2019f (%) 1.8 1.000 Non-oil real GDP growth, 2019f 800 (%) 2.1 Oil real GDP growth, 2019f (%) 2.8 600 Fiscal Breakeven Oil Price ($/barrel) 73.3 400 Government debt (% of GDP) 23.7 200 Current account balance (%/GDP) 3.5 Official Reserves ($bn) 349.4 0 CPI inflation (%) -0.7 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Unemployment rate (% of total Revenues Expenditure labour force) 5.4 Sources: IMF; Gov

4 2018 selected KSA construction contract awards

Project Value ($m) Aramco Bahri Lamprell HHI - KSIMC: Package 6 1,100 Aramco Bahri Lamprell HHI - KSIMC: Package 5 1,100 Aramco Bahri Lamprell HHI - KSIMC: Package 4 1,100 PIF - Sharma Complex : Royal Residential Buildings (Package 2) 1,000 MOH - East Gate 960 Hundreds of construction PIF - Sharma Complex : Royal Residential Buildings (Package 3) 500 contracts were awarded last year PIF - Sharma Complex : Royal Residential Buildings (Infrastructure in Saudi Arabia ranging from Works) 500 hospitals and schools to palaces Saudi Aramco - Ajyal Site Development in South Dhahran (Phase 2) 300 and ports. Al Akaria - Al Widyan Development: Infrastructure 292 One of the reasons why Saudi Alandalus Property/Sulaiman Al Habib Medical :Sulaiman Al Habib Medical Center 250 Arabia is the number one target Jeddah Municipality - Jeddah Waterfront and Corniche Development: market for many companies is Phase 7 & 8 240 the sheer diversity of projects it Ministry of Housing - 997 villas in South Dammam 180 offers. Kingdom Holding - Jeddah Economic City : Infrastructure Works 165 Unlike some other markets in the Saudi Aramco - Labor Accommodation and Supporting Facilities Zone GCC, the kingdom has the F1 (Package 8) 160 broadest mix of project Abha Private Hospital - Abha Private Hospital (300 Beds) 160 opportunities thanks to its size MOH - Saudi Housing Project: Rabeyet Al Sharq Housing Complex 150 and wealth. Al Madina Al Munawarah Development Authority - Wadi Al Aqeeq Rehabilitation 133 Ministry of Finance - Expansion of Cargo Area of Salwa Port 128 MODON - Link Roads for Second & Third Industrial Cities in Jeddah 128 MOH - Al Majmaah Hospital (300 beds) 124 Source: MEED Projects 5 Top construction clients

The construction market in Saudi Arabia tends to be dominated by government or quasi-government organisations. The leading client currently in terms of work under execution is the organisation responsible for the modernisation and expansion of the Grand Mosque in Mecca. The Ministry of Interior is in second place by virtue of its nationwide house building and security complexes programme, while the third-ranked client is the ADA, responsible for the $20bn-plus Riyadh metro project KSA selected top construction and infrastructure clients by value of work under execution ($m)

0 5.000 10.000 15.000 20.000 25.000 30.000 General Presidency for Grand Mosque and Prophet Mosque… Saudi Arabia Ministry of Interior ArRiyadh Development Authority Saudi Aramco Saudi Arabia Ministry of Education Saudi Arabia Ministry of Transport Saudi Arabia Ministry of Housing Royal Commission for Jubail & Yanbu Saudi Public Investment Fund Arabian Centres Saudi Arabia Ministry of Health Umm Al Qura for Development & Construction Saudi Arabia General Authority for Civil Aviation Jabal Omar Development Company Jeddah Economic Company Private Developer Raidah Investment Company Saudi Arabia National Guard Health Affairs Saudi Arabia Ministry of Defense & Aviation Saudi Arabia Ministry of Finance

Source: MEED Projects 6 Top contractors

There are many capable and experienced local contractors in Saudi Arabia as evidenced by the top four positions below of the leading contractors in the kingdom. But opportunities abound for companies from around the world. Sepco of China, Germany’s Siemens, Bechtel from the US and FCC of Spain are all examples of leading firms from around the world who have more than $1bn of contracts in hand in the country. KSA selected top construction and infrastructure contractors by value of work under execution ($m)

0 5.000 10.000 15.000 20.000 25.000 30.000 35.000 Saudi Binladin Group ABV Rock Group El Seif Engineering Contracting Nesma & Partners SEPCO Al Arrab Contracting Co. Beijing Emirates International Construction Co Joannou & Paraskevaides Almabani / CCC / Bechtel JV Bechtel Corporation Consolidated Contractors Siemens Al Rashid Trading & Contracting Fare Construction Al Ayuni Investment & Contracting Saudi Arabian Baytur Construction Co. Al Bawani Azmeel Contracting Saudi Construction Development Company FCC Construction

Source: MEED Projects 7 Future pipeline

Saudi Arabia has more than $1.15 trillion work of future projects in the pipeline, making it by far the largest market of all the GCC states. The biggest future sector by large margin is construction, highlighting the huge amount of construction work planned in the kingdom. In total, the construction and transport sectors have more than $825bn of known planned an un-awarded projects.

Value of future KSA planned and un-awarded contracts by sector ($m)

675.741

249.736

136.883

41.982

21.789 16.562 16.376 12.014

Chemical Construction Gas Industrial Oil Power Transport Water

Source: MEED Projects * Graph is based on a logarithmic scale for ease of visualisation 8 Future selected KSA projects

There are hundreds of future construction and civil infrastructure contracts across Saudi Arabia, the largest of which are highlighted in the below table. They range from metros and high-speed railways to the world’s largest park and tourism development.

Project Value ($m) SRO - Riyadh Dammam High-Speed Rail 14,000 Jeddah Metro Company - Jeddah Public Transportation Program (JPTP) 12,400 GACA - KAIA: Phase 2 10,000 Makkah Region Development Authority - Al Faisaliah City 10,000 GACA - KAIA: Phase 3 10,000 ADA - King Salman International Park 10,000 PIF - Red Sea Tourism Project 9,605 Eastern Province Municipality - Dammam Metro 9,000 Jeddah Metro Company - Jeddah Metro: Orange & Blue Lines 8,000 SAR - Saudi Landbridge 7,000 JDURC - Murooj Jeddah (Wadi Al Asla) 5,500 Taif Municipality - Taif Public Transport Network 5,000 PIF - New Jeddah Downtown 4,800 SRO - Yanbu Jeddah Jizan and Taif Khamis Mushayt Abha Railway 4,200 MMRTC - Mecca Metro: Line D 4,000 Qiddiya - The Qiddiya Project (Entertainment City) 4,000 MOT - King Hamad Causeway 4,000 MMRTC - Mecca Metro: Line A 4,000 MMRTC - Mecca Metro: Phase 1 (Lines B, C): Part 1: Package 3 (SYS) 3,547 Jeddah Metro Company - Jeddah Metro: Red Line 3,500

Source: MEED Projects 9 Some active current projects

11 Neom

12 Qiddiya

13 KAAR Gateway

14 Red Sea Tourism Project