meed-logo

line1 line2 line3
SIGN IN / REGISTER

Riyadh prioritises stability over headline growth

28 September 2023

MEED's October 2023 special report on Saudi Arabia also includes: 

> POLITICS: Saudi Arabia looks both east and west
> GIGAPROJECTS: Gigaproject activity enters full swing
> TRANSPORT: Infrastructure projects support Riyadh’s logistics ambitions
> UPSTREAM: Aramco focuses on upstream capacity building
> DOWNSTREAM: Saudi chemical and downstream projects in motion
> POWER: Riyadh rides power projects surge
> WATER: Saudi water projects momentum holds steady
> BANKS: Saudi banks track more modest growth path
> SPORT: Saudi Arabia’s football vision goes global
> JEDDAH TOWER: Jeddah developer restarts world’s tallest tower

 

As 2023 heads towards its final quarter, Saudi Arabia has elected to continue to pursue further voluntary Opec+ oil production cuts, supporting oil prices at the expense of its own immediate GDP growth.

On 5 September, Riyadh confirmed its intention to roll over its additional 1 million barrels a day (b/d) of production cuts until the end of the fourth quarter. Analysts had largely expected Saudi Arabia to extend the cuts with a view to further tightening oil markets, and the price of Brent crude broke the $90-a-barrel mark and reached its highest point in 10 months shortly after the cut extension was announced.

Despite the rise in prices, Saudi Arabia’s ongoing oil production restraint will ensure no improvement is likely to be made on its modest mid-year real GDP growth forecasts.

In July, the Washington-based IMF lowered its projection for Saudi Arabia’s economic growth to 1.9 per cent, down from an earlier forecast of 3.1 per cent in April – and compared to an 8.7 per cent growth figure for 2022, which saw oil reach highs of up to $124 a barrel and the kingdom’s first fiscal surplus in nearly a decade.

The country also entered a technical recession in the second quarter after its economy contracted for its second successive quarter in a row – shrinking by 0.1 per cent after a contraction of 1.4 per cent in the first quarter, according to estimates from the General Authority for Statistics (Gastat). This resulted in a slowing of year-on-year growth to 3.8 per cent in the first quarter and 1.1 per cent in the second.

There is now a risk that the Saudi economy could see an overall contraction for 2023. The further three months of production cuts will translate into a 9 per cent overall fall in production in 2023, the largest drop in 15 years, according to Khalij Economics.

Non-oil growth

Despite the disappointing headline GDP growth figures and projections, however, Saudi Arabia is maintaining a robust non-oil growth rate.

The non-oil economy is estimated to have grown 5.5 per cent year-on-year in the second quarter of 2023, according to Gastat, while oil sector growth declined by 4.2 per cent. Private sector growth for the quarter has been estimated to be even higher, at about 6.1 per cent.

At the same time, the Riyad Bank Saudi Arabia purchasing managers’ index (PMI) settled to an 11-month low of 56.6 in August 2023, down from 57.7 in July, reflecting a moderation of non-oil activity. It was the second stepdown in two months for the index from a multi-year high for new business in June.

The headline PMI figures remain deeply positive, however, with the index well above the 50 mark that delineates growth from contraction. 

The index also saw the rate of job creation pick up further in August amid sustained new business growth. This reflects a continuation of a job creation trend in the country that has seen unemployment fall from 9 per cent during the Covid-19 pandemic to 4.8 per cent at the end of 2022. Meanwhile, youth unemployment has been halved over the past two years to 16.8 per cent in 2022.

On the flipside, input cost inflation accelerated to its fastest rate in over a year due to a sharper uptick in purchase prices, though selling prices partially compensated for this by also rising. Business confidence nevertheless slid to the lowest level since June 2020 over concerns of rising market competition.

Project performance

The kingdom’s non-oil sector should continue to be well supported by Saudi Arabia’s infrastructure and project spending plans. These schemes remain affordable thanks to the kingdom’s broad financial reserves and buffers.

As of mid-September, Saudi Arabia’s project spending for 2023 had already all but matched that of 2022, with contract awards in the kingdom approaching the $57bn mark – last year’s figure – but with three and a half months still left to run. 

This is the third straight year with project awards of around $55bn or more. This is a 75 per cent increase in spending compared to the period from 2016 to 2020, which witnessed an average of only slightly more than $30bn in awards each year.

There is a further $50bn-worth of project work in bid evaluation and expected to be awarded this year. Even accommodating the possibility of delays for much of this work, the award of even a modest portion of this would make 2023 by far the strongest year on record for project awards in Saudi Arabia.

This heightened level of projects activity is as much due to above-average spending on oil and gas infrastructure, amid a spree of investment by Saudi Aramco in the optimisation of its core assets, as it is to the kingdom’s gigaproject programme. 

Oil and gas project awards alone have exceeded $21bn in 2023 to date and could readily be on track to beat the previous award high of $24.7bn seen in 2019.

It is the construction and transport sector that has the furthest to go to outdo itself in the last quarter of 2023. 

Awards in the sector to date have hit $24.6bn, whereas awards in 2022 reached $34.7bn – so there is a $10.1bn gap to bridge to beat last year’s performance. This is not unrealistic given the $14.2bn-worth of projects in the sector under bid evaluation, and especially given the backing of the Public Investment Fund for the kingdom’s gigaprojects and other Vision 2030 schemes.

Overall, the ongoing upsurge in projects activity should continue to prove supportive of the non-oil economy, regardless of either the vicissitudes of the oil price or Saudi Arabia’s moderation of its own oil production.

https://image.digitalinsightresearch.in/uploads/NewsArticle/11153290/main.gif
John Bambridge

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Gulf LNG sector enters a new prolific phase

    24 October 2025

     

    Liquefied natural gas (LNG) has been produced in the GCC since the 1970s. However, it is only since the start of this decade that regional producers have begun committing tens of billions of dollars to significantly ramp up output, driven by soaring global demand for the super-chilled fuel.

    The GCC is projected to add at least 80 million tonnes a year (t/y) of LNG capacity by 2030, placing it firmly among the world’s top three producing regions. 

    Qatar leads the Gulf’s push for LNG dominance as the region’s largest – and one of its earliest – LNG producers.

    State enterprise QatarEnergy has been producing LNG from the giant North Field offshore gas reserve in the Gulf waters, which it shares with Iran, since the 1980s. QatarEnergy currently produces 77.5 million t/y of LNG from 15 processing trains, all located in a sprawling complex in Ras Laffan Industrial City.

    Top spot

    QatarEnergy is on course to nearly double its LNG production to 142 million t/y by the end of the decade through its $40bn North Field LNG expansion programme.

    The energy giant is understood to have spent nearly $30bn on the first two phases of its North Field expansion – North Field East and North Field South – which will raise LNG production capacity from 77.5 million t/y to 126 million t/y by 2028. Engineering, procurement and construction (EPC) works on both projects are progressing.

    QatarEnergy awarded the main EPC contracts for the North Field East project in 2021. The project aims to boost LNG output to 110 million t/y by 2025. The $13bn EPC package – covering the engineering, procurement, construction and installation of four LNG trains, each with a capacity of 8 million t/y – was awarded in February 2021 to a consortium of Japan’s Chiyoda Corporation and France’s Technip Energies.

    In May 2023, QatarEnergy awarded the $10bn main EPC contract for the North Field South project to a consortium of Technip Energies and Lebanon-based Consolidated Contractors Company. 

    The contract includes two large LNG trains, each with a capacity of 7.8 million t/y.

    Once fully operational, the first two phases of the North Field expansion will add 48 million t/y of supply to the global LNG market.

    In February 2024, QatarEnergy announced the third phase of its North Field expansion – North Field West. The project will add 16 million t/y of LNG capacity through two processing trains of 8 million t/y each, following the model of earlier phases. It will source feedstock from the western zone of the offshore North Field reserve.

    Progress on the North Field West project has, however, been slow, and it has remained in the pre-front-end engineering and design (pre-feed) phase since its announcement.

    QatarEnergy is reportedly exploring options to fast-track it to the EPC stage.

    The first two phases of the North Field expansion will add 48 million t/y to the global LNG market

    Oman progress

    Oman has recently made significant progress in the global race to expand LNG production and exports. The Omani government made headlines in July last year, when it announced that majority state-owned Oman LNG would build a fourth train at its Qalhat LNG production complex in Sur.

    The new LNG train will have an output capacity of 3.8 million t/y, increasing Oman LNG’s total production capacity to 15.2 million t/y when it is commissioned in 2029.

    Oman LNG recently made key progress on its project to add a fourth processing train at the Sur LNG complex. The majority state-owned company has shortlisted a consortium of Chiyoda and South Korea’s Samsung C&T, Japanese contractor JGC Corporation and another consortium of Italian contractor Saipem and South Korea-based Daewoo Engineering & Construction to participate in the main tender for EPC works.

    Technical and commercial bids are due in February and March 2026, respectively.

    The EPC tender process began less than a year after Oman LNG awarded the feed contract to US-based consultancy KBR.

    Separately, France’s TotalEnergies is studying a potential expansion of its Marsa LNG bunkering and export terminal in Oman. The move is significant considering that the first phase of the project is currently under construction in the sultanate’s northern industrial city of Sohar, and will have an output capacity of 1 million t/y.

    TotalEnergies purportedly began an initial study on a potential second phase of the Marsa LNG facility earlier this year. The French energy major may consider doubling the output capacity of the LNG complex, although the plan is yet to be confirmed, according to sources.

    Earlier in the year, TotalEnergies appointed Technip Energies – already the main EPC contractor on the under- construction Marsa LNG terminal – as a consultant to perform concept and feasibility studies on the proposed second expansion phase.

    With Oman LNG advancing its fourth train and TotalEnergies mulling a potential doubling of LNG production in Oman, the sultanate is positioning itself as a key global LNG player by 2030.

    UAE plans

    Abu Dhabi National Oil Company (Adnoc) has historically been one of the GCC’s smaller LNG producers. Its subsidiary, Adnoc Gas, operates three large gas processing trains on Das Island. 

    The Das Island terminal has a liquefaction and export capacity of about 6 million t/y. The first two trains, commissioned in the 1970s, provide a combined 2.9 million t/y, while the third, added in the mid-1990s, contributes 3.2 million t/y.

    Adnoc Gas will significantly expand its LNG capacity with a new greenfield terminal in Ruwais, set to come online in 2028.  The terminal will add 9.6 million t/y of LNG capacity via two 4.8 million t/y trains.

    Adnoc awarded the $5.5bn EPC contract in June 2024 to a consortium of Technip Energies, JGC Corporation, and NMDC Energy, coinciding with its final investment decision.

    Along with the main processing trains, the Ruwais LNG complex will also feature process units, storage tanks and an export jetty for loading cargoes and LNG bunkering, as well as utilities, flare handling systems and associated buildings. The facility will ship LNG mainly to key Asian markets, such as Pakistan, India, China, South Korea and Japan. 

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14933998/main.gif
    Indrajit Sen
  • NHC signs Al-Fursan project deal with South Korean firm

    24 October 2025

    Register for MEED’s 14-day trial access 

    Saudi Arabia’s National Housing Company (NHC) has signed a memorandum of understanding (MoU) with South Korea’s GS Engineering & Construction to build a residential project in NHC’s Al‑Fursan suburb of Riyadh.

    The MoU was signed in Seoul earlier this week by Saudi Arabia’s Minister of Municipal and Rural Affairs and Housing, Majed Al‑Hogail, and NHC’s CEO, Mohammed Al‑Buty.

    In an official statement published by the Saudi Press Agency, NHC said: “The MoU extends the growing Saudi-Korean partnerships, strengthened by the signing of another MoU in November 2024 to develop the Balady Platform and implement digital twins and smart city applications, contributing to urban planning development and improved quality of life.”

    This is the second major project agreement NHC has signed for residential development within the Al‑Fursan district.

    In March last year, NHC and Egyptian real estate developer Talaat Moustafa Group signed an agreement to develop more than 27,000 residential units at NHC’s Banan City project in the Al‑Fursan suburb.

    The project will cover an area of 10 million square metres and include hospitals, schools, retail, sports facilities and other public amenities.

    In 2023, NHC and Saudi Arabia’s Housing Ministry signed investment agreements totalling more than SR24bn ($6.4bn) to launch the Al-Fursan residential project.

    Al‑Fursan is described as the largest scheme in terms of area and number of housing units that NHC is implementing in partnership with other real estate developers. 

    For the district’s first phase, 18 real estate development agreements were signed with companies including Retal Urban Development Company and Sumou Real Estate Company.

    NHC also signed four consultancy contracts to manage projects and supervise implementation of phase one and the deployment of comprehensive infrastructure works.

    Other deals involved the development of facilities, including commercial and recreational areas, hospitals, health and sports centres, mosques and schools.

    MEED reported in 2020 that Riyadh planned to oversee the development of more than 1 million homes by 2025 to meet growing demand in the kingdom.

    By 2030, the Saudi capital aims to more than double its population, from 7-8 million to 15-20 million, and become one of the 10 wealthiest cities in the world.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14934006/main.jpg
    Yasir Iqbal
  • October 2025: Data drives regional projects

    24 October 2025

    Click here to download the PDF

    Includes: Commodity tracker | Construction risk | Brent Spot Price | Construction output

    MEED’s November 2025 report on the UAE includes:

    > COMMENT: Investment shapes UAE growth story
    > GOVERNMENT: Public spending ties the UAE closer together
    > ECONOMY: UAE growth expansion beats expectations
    > BANKING: Stability is the watchword for UAE lenders
    > OIL & GAS: Adnoc strives to build long-term upstream potential
    > PETROCHEMICALS: Taziz fulfils Abu Dhabi’s chemical ambitions at pace
    > POWER: UAE power sector hits record $8.9bn in contracts
    > WATER: Tunnel projects set pace for UAE water sector
    > CONSTRUCTION: UAE construction faces delivery pressures
    > TRANSPORT: $70bn infrastructure schemes underpin UAE economic expansion

    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/14933968/main.gif
    MEED Editorial
  • Oman tenders industrial city infrastructure contracts

    24 October 2025

     

    Oman’s Public Establishment for Industrial Estates (Madayn) has issued two tenders for infrastructure development works at Al‑Suwaiq Industrial City in Al‑Batinah North Governorate and Madha Industrial City in Musandam Governorate.

    Madayn issued a tender on 21 October inviting companies to bid for a contract to develop the first phase of the infrastructure and utilities network at Al‑Suwaiq Industrial City.

    The scope covers construction of a building, greenhouses, roads, water network, electricity and sewage networks, and other associated facilities.

    The bid submission deadline is 30 November.

    The tender for construction of infrastructure works at Madha Industrial City was also issued on 21 October, with a submission deadline of 30 November. 

    In December 2023, Madayn inaugurated two projects at Al-Mazunah Free Zone valued at RO9.5m ($25m), including a facility building project and phase one package two and phases two and three at Al-Mazunah Free Zone.

    Madayn, OQ Refineries & Petrochemical Industries and the Industrial Innovation Academy signed an agreement in June 2022 to set up Ladayn Polymer Park in Sohar.

    At that time, Madayn also signed seven land‑usufruct agreements with an extendable duration of 33 years at reduced prices with the investors.

    According to a report from UK-based data analytics provider GlobalData, the output of the Omani construction industry is expected to register annual growth of 4.2% from 2025 to 2027, supported by investments in economic zones, renewable energy, manufacturing and tourism projects under Vision 2040.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14933905/main.jpg
    Yasir Iqbal
  • Petrofac submits lowest bid of $1.48bn for Kuwait oil project

    24 October 2025

    Register for MEED’s 14-day trial access 

    UK‑based Petrofac has submitted the lowest bid for a contract to install Water Injection Plant 4 (WIP‑4) in south Kuwait.

    Petrofac submitted a bid of KD453,736,367 ($1.48bn), which is 7% lower than the KD488,378,247 ($1.59bn) submitted by India’s Larsen & Toubro, the only other company to bid for the project.

    The project’s bid deadline was postponed at least 14 times before prices were ultimately submitted.

    The main contract tender was originally issued by Kuwait Oil Company (KOC) on 11 August 2024, with a bid submission deadline of 10 November 2024.

    The project includes:

    • Construction of a water injection plant called WIP-4
    • Installation of safety and security systems
    • Laying of pipelines
    • Installation of oil gathering systems
    • Installation of the new well pads
    • Construction of associated facilities

    When it was first tendered in August last year, nine companies were qualified to bid. They were:

    • Samsung Engineering & Construction (South Korea)
    • Sinopec Luoyand Engineering Company (China)
    • Hyundai Engineering & Construction Company (South Korea)
    • Sinopec Engineering Incorporation (China)
    • Larsen & Toubro (India)
    • Petrofac International (UK)
    • Saipem (Italy)
    • Daewoo Engineering & Construction (South Korea)
    • Tecnicas Reunidas (Spain)

    Kuwait is currently trying to boost project activity in its upstream sector.

    The country’s national oil company, Kuwait Petroleum Corporation (KPC), is aiming to increase oil production capacity to 4 million barrels a day by 2035.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14933876/main.jpg
    Wil Crisp