Bigger is better for construction
23 December 2024
Nothing encapsulates a buoyant construction market better than signing a contract to complete the world’s tallest tower. That happened on 2 October 2024, when Saudi Binladin Group (SBG) was awarded a $2bn contract to complete the 1,000-metre-plus Jeddah Tower.
The award was significant in many ways. It was a revival of the tower project, which has been on hold since 2018, and it was also a comeback for SBG after years of financial stress that had led many in the market to think it would never win another major construction deal.
On a macro level, the construction deal confirmed that the region is home to the world’s most daring and challenging construction projects.
More importantly, these projects are more than just aspirations; they are real projects that are being built.
Biggest contracts
While Jeddah Tower was the most symbolic contract award in 2024, at $2bn, it was not the largest. That accolade went to the Italian contractor WeBuild when it was awarded a $4.7bn contract for the construction of the three dams at the Trojena mountain resort at Neom in January.
Like Jeddah Tower, the project is a challenging one. Time pressure is a key issue. Trojena has been selected to host the 2029 Asian Winter Games, and the reservoir will be used to make the snow for the event. This means the dams must be completed and the reservoir filled well in advance.
The project is also technically complex. The main dam will have a height of 145 metres and will be 475 metres long at its crest. Inside the reservoir there will be a kidney-shaped dam that will house an attraction known as the Enchanted Forest, which will be connected to the rest of the Trojena development by an underwater tunnel.
WeBuild’s involvement also highlighted that international contractors, after sitting on the sidelines for a number of years, are playing an active role in the Saudi construction market.
One market segment that has attracted strong interest is building stadiums, which like Trojena have to be completed for football tournaments with fixed dates: the 2027 Asian Games and the 2034 Fifa World Cup.
In October, Spain’s FCC in joint venture with the local Nesma & Partners secured a $1bn contract to build the Prince Mohammed Bin Salman Stadium at the Qiddiya City development on the outskirts of Riyadh.
Earlier in the year, a joint venture of Belgian contractor Besix and the local Albawani was awarded the contract to build the Aramco football stadium in Al-Khobar, and Beijing-headquartered China Railway Construction Corporation and local contractor Sama Construction for Trading & Contracting won the contract to construct the Jeddah Central stadium project.
Outside of Saudi Arabia, there were only two contract awards valued at over $1bn and both were in the UAE emirate of Abu Dhabi.
In January, a $1.2bn contract to complete phases two and four at the Saadiyat Lagoons project was awarded to a joint venture of two Abu Dhabi-based contractors, Trojan Construction Group and Arabian Construction Company.
The other $1bn-plus deal was a $1.4bn contract to complete dredging and marine works for the Nisi Island development, which was awarded to the local NMDC Group.
These deals were highlights in what was a strong year for the rest of the market. In total, according to regional projects tracker MEED Projects, there were $67.9bn of construction contract awards by the end of October 2024. If the trajectory is maintained until the end of the year, it will result in about $81.4bn of awards, which is lower than the $96.9bn of awards recorded in 2023, but still higher than any of the eight years from 2015 to 2022.
Market challenges
Replicating the record-breaking performance of 2023 was never going to be easy, especially after Riyadh warned that its spending would be more targeted at the end of 2023. Those comments, made by the finance minister, set the tone for 2024, which proved to be a year with plenty of contract awards, but without the apparent carefree attitude to spending that characterised 2023.
The other challenge with following on from a bumper year is supply chain constraints. With full order books, contractors and suppliers have lost some of the appetite that they had for new work in 2023. The result of this for project clients has been difficulties in attracting enough bidders, and when bids are submitted, the offers are often not competitively priced.
These challenges have been felt most acutely by projects in the remote regions of Saudi Arabia. The issue is so prevalent at Neom that there is now a phenomenon known as ‘Neom inflation’, which implies that the $500bn gigaproject in the remote northwestern corner of the kingdom has its own unique inflation rate.
These regional issues have added to the international supply chain constraints that have been felt since the Covid-19 pandemic and, more recently, during the conflict in Gaza and threats to shipping lanes in the Red Sea.
Addressing challenges
The market has responded to these challenges. In Saudi Arabia, the Public Investment Fund (PIF) invested in four of the kingdom’s largest general contractors in 2023. Then, in February 2024, the sovereign wealth vehicle announced that it had, together with the National Infrastructure Fund, introduced a new contractor financing programme, designed to strengthen the construction sector’s finances.
The programme aims to provide contractors with finance solutions to help improve their cash flows.
Developers have also been improving their contract terms and, crucially, working to ensure payments are processed on time – a move that should also help improve contractor cash flows.
The PIF-backed development companies have also been actively working on attracting new companies to Saudi Arabia. They have been travelling the world on roadshows to attract more contractors and suppliers to projects in the kingdom.
These roadshows have been highlighting the volume and scale of the opportunities in Saudi Arabia, and have shown that the kingdom offers long-term opportunities for companies that come and invest in the market.
In the UAE, Abu Dhabi has invested heavily in its construction supply chain. With its government-controlled investment vehicles and a series of interconnected mergers and acquisitions, Abu Dhabi and its ruling family now own the emirate’s key contracting companies and the suppliers of vital raw materials such as cement and steel.
These national champions shield Abu Dhabi from many, but not all, supply chain challenges that have impacted projects in other markets.
Meanwhile, in Dubai, where the real estate market is driving construction, private sector developers are courting contractors to work on their projects.
As private entities, they are not bound by the procurement regulations that government or government-controlled developers have, so they have been offering directly negotiated deals to help guarantee that their projects are delivered on time.
2025 outlook
Unless the market dynamics shift dramatically, the market will likely face many of the same challenges in 2025.
One of the overriding fears is a sharp slowdown in project spending in Saudi Arabia. This has happened before and is a valid concern, and the market has already shown signs of plateauing in some areas.
This is most noticeable when contract awards for the five official gigaprojects – Diriyah, Neom, Qiddiya, Red Sea Global and Roshn – are examined. After a sharp ramp-up in awards from 2020 to 2023, the pace of contract awards levelled off in 2024, which reflects budgetary concerns within the development companies and the PIF, and the market’s ability to take on such large volumes of new work.
With budgets under pressure, developers in Saudi Arabia are increasingly looking for investment to help fund their projects. The success of these efforts will determine how buoyant the market in the kingdom remains over the long term.
Even if investment comes in, it will take time, which means there will likely be a degree of conservatism from development companies in 2025. This was signalled in mid-November, when Neom, while announcing the exit of CEO Nadhmi Al-Nasr and the appointment of Aiman Al-Mudaifer as acting CEO, said: “As Neom enters a new phase of delivery, this new leadership will ensure operational continuity, agility and efficiency to match the overall vision and objectives of the project.”
While there may be a pause in spending on some of the Saudi gigaprojects, other schemes continue to underpin the performance of the construction market.
Oil prices remain supportive of government spending on projects across the Gulf, and for the private sector, in markets such as the UAE, real estate projects continue to move into construction as developers rush to deliver units to investors and capitalise on the ongoing strength of the property market.
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Webuild wins $600m Diriyah Square project deal
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Italian contractor Webuild has announced that it has won a $600m contract from Diriyah Company for a package for the Diriyah Square project.
The contract relates to construction works on package three of the Diriyah Square project. It involves the finishing and mechanical, electrical and plumbing works on more than 70 buildings and public spaces within Diriyah Square.
These assets cover a total area of about 365,000 square metres.
Webuild is already working on the underground multi-storey car park at Diriyah Square.
The three-floor underground car park will serve the mixed-use Diriyah Square district, which will include leisure and entertainment, hotels, retail, grade A offices, the King Salman Grand mosque and residential units designed in the traditional Najdi architectural style.
The car park has a floor area of 1 million square metres, with underground roads and tunnels below Diriyah Square, and a capacity for 10,500 cars.
The parking facility will directly connect commuters with all of Diriyah’s destinations, including Wadi Hanifah, the Western Ring Road and a national motorway. It will be a key component of the City of Riyadh Arterial Road system.
In an official statement on its website, Webuild said that the construction works on the car park are 55% completed.
MEED reported in January 2021 that Diriyah Company had selected Webuild for the super basement car park at the Diriyah project in Riyadh.
Diriyah gigaproject
The Diriyah masterplan envisages the city as a cultural and lifestyle tourism destination. Located northwest of Riyadh’s city centre, it will cover 14 square kilometres and combine 300 years of history, culture and heritage with hospitality facilities.
The company awarded several significant contracts last year, including three contracts worth over SR21bn ($5.5bn). These included an estimated $2bn contract awarded to a joint venture of El-Seif Engineering & Contracting and China State to build the North Cultural District.
In July last year, Diriyah also awarded a $2.1bn package to a joint venture of local contractor Albawani and Qatar’s Urbacon to construct assets in the Wadi Safar district of the gigaproject.
Then in December, Diriyah Company awarded an estimated SR5.8bn ($1.5bn) contract to a joint venture of local firm Nesma & Partners and the local branch of Man Enterprise for its Jabal Al-Qurain Avenue cultural district, located in the northern district of the Diriyah Gate project.
Once complete, Diriyah will have the capacity to accommodate 100,000 residents and visitors.
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August deadline for Diriyah Pendry superblock package
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Saudi gigaproject developer Diriyah Company has asked firms to submit commercial proposals by 13 August for a contract to build the Pendry superblock package in the second phase of the Diriyah Gate development (DG2).
MEED understands that the tender was issued in June, with the technical bid submission deadline set for 6 July.
The Pendry superblock encompasses the construction of a hotel, known as the Pendry Hotel, along with residential and commercial assets.
The project will span an area of 75,365 square metres and is located in the northwestern district of the DG2 area.
Earlier this month, MEED exclusively reported that Diriyah Company is preparing to tender more superblock packages this quarter, following the receipt of prequalification statements from interested firms.
Notices were issued in mid-June for packages that include the Waldorf Astoria superblock and the Edition superblock, both located in DG2.
The Waldorf Astoria superblock is a mixed-use development featuring the Waldorf Astoria Residences & Hotel, commercial and residential facilities and office spaces.
The Waldorf Astoria Hotel is a 200-key property, while the Waldorf Astoria Residences will offer around 46 branded residences.
The project is located along the Grand Boulevard South and the Northern Arterial Road in the Boulevard Northwestern district at DG2.
The prequalification documents for this package were submitted on 29 June.
Prequalification documents for the Edition superblock were submitted on 2 July.
This package comprises a mix of residential, commercial and office spaces, including the 200-key Edition Hotel and 150-key Equinox Hotel.
The project is situated between King Khalid Road and the Grand Boulevard within the Boulevard East district in DG2.
Diriyah Company has also received prequalification statements from firms interested in constructing the upcoming Radisson Red superblock in DG2.
The Radisson Red superblock comprises a hotel, residential apartments, retail facilities, commercial office spaces and a park.
The project is situated in the Boulevard East district, between King Khalid Road and the Grand Boulevard in Diriyah.
Diriyah also tendered a contract in April to build the new iconic museum in the DG2 area.
Diriyah gigaproject
The Diriyah masterplan envisages the city as a cultural and lifestyle tourism destination. Located northwest of Riyadh’s city centre, it will cover 14 square kilometres and combine 300 years of history, culture and heritage with hospitality facilities.
The company awarded several significant contracts last year, including three contracts worth over SR21bn ($5.5bn). These included an estimated $2bn contract awarded to a joint venture of El-Seif Engineering & Contracting and China State to build the North Cultural District.
In July last year, Diriyah also awarded a $2.1bn package to a joint venture of local contractor Albawani and Qatar’s Urbacon to construct assets in the Wadi Safar district of the gigaproject.
Then in December, Diriyah Company awarded an estimated SR5.8bn ($1.5bn) contract to a joint venture of local firm Nesma & Partners and the local branch of Man Enterprise for its Jabal Al-Qurain Avenue cultural district, located in the northern district of the Diriyah Gate project.
Once complete, Diriyah will have the capacity to accommodate 100,000 residents and visitors.
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Penspen to expand workforce in Neutral Zone
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UK-based engineering and project management company Penspen is expanding its headcount in the Neutral Zone, which is shared by Saudi Arabia and Kuwait, according to a senior executive.
Penspen currently has 130 employees working in the Neutral Zone, also known as the Divided Zone. The company expects to increase the headcount to 200 by the end of the year, according to Neale Carter, the company’s executive vice-president for the Middle East, Africa and Asia-Pacific.
“It’s a challenging environment, but we’re very pleased to be there,” he said.
Penspen was invited to join the tendering programme for a range of projects for state-owned Kuwait Gulf Oil Company (KGOC), which is a partner in Al-Khafji Joint Operations (KJO) alongside Saudi Arabia’s Aramco Gulf Operations Company (AGOC).
Penspen was previously the project management consultant for KJO in the Neutral Zone from 2006 until 2017, when US-based Jacobs replaced them in the role.
Penspen then went through the tendering process in 2022 and won the contract back in 2023.
The current contract is a five-year project management consultancy services contract.
The Neutral Zone has seen an uptick in oil and gas activity in the past couple of years.
In May, MEED reported that KJO has more than 20 projects currently ongoing to develop the Khafji field, which is located in the shared territory.
Additionally, KJO is currently in the tendering phase with engineering, procurement and construction (EPC) works on the Dorra gas field development project, which is also located in the Divided Zone.
KJO has divided the scope of work on the Dorra gas field development project, which is estimated to be valued at up to $10bn, into four EPC packages – three offshore and one onshore.
In May, Saudi Arabia and Kuwait announced a new oil discovery in the shared territory.
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Saudi Arabia signs deals for $8.3bn of renewables projects
14 July 2025
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A consortium of Acwa Power, Water & Electricity Holding Company (Badeel) and Saudi Aramco Power Company (Sapco) has signed power purchase agreements (PPAs) with Saudi Power Procurement Company (SPPC) for seven renewable energy projects that will require $8.3bn of investment.
The projects, which have a total capacity of 15,000MW, include five large-scale solar photovoltaic plants with a total capacity of 12,000MW and two large-scale wind energy plants with a total capacity of 3,000MW.
Financial closes are expected by the third quarter of 2025. The projects are scheduled to start operating in the second half of 2027 and the first half of 2028.
The projects are part of Saudi Arabia’s National Renewable Energy Programme (NREP), which is led and supervised by the Energy Ministry. PIF has committed to developing 70% of Saudi Arabia’s renewable energy target capacity by 2030.
With the addition of these new projects, Acwa Power's solar and wind portfolio in Saudi Arabia now comprises 21 projects, representing more than 34GW of combined renewable capacity. Acwa Power's total renewable capacity portfolio, which includes projects in other countries, totals 51.9GW.
The Public Investment Fund (PIF) is the largest shareholder in Acwa Power; it is listed on the Saudi Stock Exchange (Tadawul) with a 44% stake. The PIF wholly owns Badeel. The PIF holds a 16% stake in Aramco, which is also listed on the Tadawul.
Acwa Power recently said it is raising SR7.1bn ($1.9bn) with a rights issue to finance its equity contributions in its growing portfolio of domestic and international energy and water projects, as part of its plan to triple managed assets by 2030.
According to the prospectus for the rights issue, between 75% and 85% of the proceeds will go towards funding its share in current and upcoming projects, while up to 20% may be used for mergers and acquisitions. The remainder will support corporate activities and early-stage project development to accelerate delivery timelines.
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Eni signs $1.35bn Algerian oil and gas deal
14 July 2025
Algeria’s state-owned oil and gas company Sonatrach and the Italian company Eni have signed a production-sharing hydrocarbons contract (PSC) estimated to be worth $1.35bn.
The contract covers the exploration and exploitation of the Zemoul El-Kebir concession area, located in the Berkine Basin, approximately 300 kilometres east of Hassi Messaoud, according to a statement by Sonatrach.
The deal with Eni is the latest in a string of high-profile agreements that Sonatrach has announced with international oil and gas companies.
The contract with Eni was signed under Hydrocarbons Law No 1913 and extends for a period of 30 years, with an extendable option for an additional 10 years.
It includes a seven-year exploration period, with $110m of the estimated $1.35bn investment budget expected to be used in the exploration phase.
In its statement, Sonatrach said: “The work programme associated with this contract includes the use of innovative technological methods, including the latest digital solutions related to exploitation, in addition to the use of modern technologies to improve production and recover reserves.
“It is worth noting that, within the framework of implementing this contract, preference is given to the use of local content and the use of subcontracting services from national operators.”
Expected production from the area covered by the deal has been estimated at 415 million barrels of oil equivalent, including 9.3 billion cubic metres of gas, over the contract period.
The signing of the final PSC with Eni follows a provisional deal that was signed between Sonatrach and Eni on 19 May 2024.
As well as signing the PSC relating to the Zemoul El-Kebir concession area, the two parties also signed a gas agreement aimed at defining the terms of the hydrocarbons contract relating to the marketing of dry gas quantities from the operating area, intended for export.
A framework agreement was also signed between Sonatrach and Eni Corporate University, aiming to develop the skills of Sonatrach employees and transfer knowledge through the Eni Corporate University training institution, for a period of three years.
In June, Algeria awarded five out of the six oil and gas exploration licences it offered during its 2024 bidding round, a move viewed as a success by stakeholders in the country’s energy sector.
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The latest licensing round was followed by meetings between Algeria’s President Abdelmadjid Tebboune and delegations from US-based oil and gas companies ExxonMobil and Chevron.
Project activity across Algeria’s energy, industrial and manufacturing sectors is steadily building as the country focuses on a vertically-integrated strategy that leverages the exploitation of its natural resources.
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