meed-logo

line1 line2 line3
SIGN IN / REGISTER

Riyadh reins in spending

24 May 2024

 

Register for MEED's guest programme 

On the surface, it feels like business as usual in Saudi Arabia as new projects continue to be launched.

On 8 May, designs for another futuristic project at Neom’s Gulf of Aqaba were released with slick computer-generated imagery. Known as Jaumur (pictured), it includes the development of a mixed-use community featuring 1,200 residential units and two hotels offering 350 rooms. The most eye-catching part of the project is at the marina, which will have a 1.5-kilometre aerofoil that will rise above the yacht berths.

Beneath the surface, a consensus is emerging that the kingdom’s projects market is in the midst of a recalibration as spending is reined in.

The challenge for Riyadh over the next few years will be balancing the delivery of its ambitions with the reality of its financial capabilities.

The first public sign that things were changing came in December 2023, when Finance Minister Mohammed Al Jadaan told reporters at the launch of the 2024 budget that the delivery of some of the projects included in the Saudi Vision 2030 plan may be delayed to avoid pressure on the economy.

Tightening the purse strings

The ministry-level decision is trickling down as individual development companies are not getting their full budgets approved. “Our firm is working on almost all of the major projects in Saudi Arabia in some capacity,” says an international consultant. “The feedback we are getting is that budget spending for 2024 has been reduced by about 30% on average.”

Many of these delivery companies are subsidiaries of sovereign wealth vehicle the Public Investment Fund (PIF), which has taken a leading role in transforming the kingdom’s economy over the past eight years with development schemes including its five official gigaprojects, Neom, Roshn, Red Sea Global (RSG), Qiddiya and Diriyah.

The reports of budget cuts have coincided with a drop in contract awards. According to MEED’s Gigaprojects Tracker, there has been a sharp decline in the value of contracts awarded by the five official gigaprojects this year. 

In April, they awarded $166m of work, down from $271m in March and $509m in February. The total in January was $5.56bn, largely due to the $4.7bn contract awarded to the local Webuild for the construction of dams at the Trojena mountain resort in Neom.

The reports of budget cuts have coincided with a drop in contract awards

Funding options

The budget cuts are just part of the message, says the consultant. The delivery companies are being told to find external investment to deliver their projects, and there are already signs of this happening. The clearest came in late April, when Neom announced a $2.7bn revolving credit facility from nine local banks to cater to the project’s short-term financing requirements.

In a statement, Neom CEO Nadhmi Nasser highlighted the project’s drive to find new sources of funding. “As Neom continues to gather pace, this new credit facility, backed by Saudi Arabia’s leading financial institutions, is a natural fit within our wider strategy for funding. We continue to explore a variety of funding sources as we deliver transformational infrastructure assets while supporting the wider Vision 2030 programme,” he said. 

In a research note following the deal, London-based Capital Economics said: “While this does take some of the onus away from the government and Public Investment Fund, it is increasingly using resources that could be used more productively in the private non-oil sector.”

Capital Economics also noted that the facility adds to the growing share of commercial banks’ lending to the public sector. Since 2015, this share has increased from 7% to 22% in March 2024.

Another solution for development companies is deploying public-private partnerships (PPPs) to deliver infrastructure and utilities. This is attractive because PPPs reduce the initial capital expenditure required for a project. 

RSG has already pursued this route for The Red Sea Project and Amaala; other development companies are exploring the PPP avenue for their projects.

Real estate investment is another option. There is an expectation that Riyadh will introduce a foreign ownership law that could turbocharge the market as a similar law did for Dubai in the early 2000s. 

There are already examples of real estate investment deals being done, including the National Housing Company with Spain’s Urbas Group for housing in Riyadh, RSG with Kingdom Holding Company for hotels, and King Salman with a real estate development fund.

PPP offers budget and efficiency routes

Prioritising projects

As projects in the kingdom are developed differently, the challenge for the construction industry will be identifying which of the many schemes that aim to transform the Saudi economy are a top priority.

Much will depend on the success of the investment drive. The most likely projects to go ahead are those linked to global events with immovable deadlines. Experience across the region over the past decade has shown that even if construction elsewhere slowed down, construction for Expo 2020 in Dubai and the 2022 Fifa World Cup in Qatar continued regardless. 

“For Saudi Arabia, there are three major events: the Asian Winter Games in 2029, Expo 2030 and World Cup 2034. They will be the obvious priorities,” says the international consultant.

https://image.digitalinsightresearch.in/uploads/NewsArticle/11816519/main.gif
Colin Foreman

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

Click here to register
Exclusive from Meed
Related Articles
  • Saudi Arabia battery storage awards provide fresh lift

    24 August 2026

    Commentary
    Mark Dowdall
    Power & water editor

    The latest battery storage awards provide a welcome injection of investment into Saudi Arabia’s power market, which has seen a sharp slowdown in contract awards this year.

    Saudi Power Procurement Company’s four Group 1 storage service agreements, announced last week, are worth more than $1.16bn and cover 2,000MW of capacity.

    That is significant against the wider market. According to regional project tracker MEED Projects, Saudi Arabia recorded $19.7bn in power sector contract awards in the first seven months of 2025, compared with just $2.5bn in new awards in the same period this year.

    The battery energy storage system (bess) awards therefore account for a sizeable share of the activity recorded so far this year and provide a much-needed source of new contracting activity.

    Importantly, this is not a one-off. SPPC issued the request for proposal (RFP) for its second group of bess projects in July, covering six projects with a combined capacity of 3,000MW and 12,000MWh.

    With the Group 1 tender taking around 18 months from RFP to contract award, it is reasonable to expect Group 2 contracts to be signed in 2027.

    At the same time, the awards for six independent renewable plants under Round 7 of Saudi Arabia’s National Renewable Energy Programme (NREP), with a combined capacity of 5,300MW, are also likely to move into next year, with the latest bid deadlines now extending into September.

    Although a substantial pipeline remains in procurement, it is only once these projects move from tender to award and into construction that this pipeline translates into market activity.

    It is important that these tenders continue to progress at the pace established by the early rounds of Saudi Arabia’s renewable energy programme and now also SPPC’s independent storage provider bess scheme.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/18962923/main.jpg
    Mark Dowdall
  • Qatar receives bids for major power grid expansion

    24 August 2026

     

    Qatar General Electricity & Water Corporation (Kahramaa) has received bids for several packages under a major power transmission expansion project tendered in April.

    The project covers new substations at multiple voltage levels, as well as the supply and installation of 400kV extra-high-voltage power cables. The overall scheme is estimated to cost $650m.

    It is being tendered as part of Kahramaa’s 2026 procurement plan, which includes 198 tenders with a total estimated value of QR21.4bn ($5.9bn).

    According to sources, bids were submitted for the following packages on 20 August:

    • Substation packages S1 and S2, covering new 132/11kV substations (estimated cost: $200m)
    • Package S3, covering new 66/11kV substations ($50m)
    • Package S4, including a new 400/220/132kV substation, as well as upgrades and modifications to existing 400kV and 220kV substations ($200m)
    • Package S5, covering new 132/11kV substations and upgrades to existing 132kV and 66kV substations ($100m)
    • Cable packages C1 and C2, covering 400kV cables ($100m)

    Kahramaa previously stated that foreign companies not registered in Qatar would be allowed to participate in the bidding, subject to meeting specified conditions, including registration and certification requirements.

    In June, the electricity and water utility awarded contracts worth more than QR2.2bn ($604m) to expand the electricity transmission network in the country’s western region.

    The engineering, procurement and construction (EPC) works will support the integration of the 2GW Dukhan solar power project into Qatar’s national electricity grid. The scope includes new and upgraded substations, as well as the installation of underground cables and overhead transmission lines.

    Kahramaa said contracts were awarded to local firm Voltage Engineering, Turkiye’s Best & Betas Consortium, India’s Larsen & Toubro and South Korea’s LS Cable.

    Of Kahramaa’s 2026 procurement plan, electricity transmission projects account for QR8.9bn ($2.4bn) and include the construction of new 400/132kV substations in Al-Wukair and Al-Mashaf, as well as the expansion of 400kV substations at Ras Laffan.

    These also cover the installation of 132kV underground cables between Al-Sailiya and Al-Rayyan over a 24-kilometre route, as well as upgrades to the 400kV and 220kV networks.

    Additionally, there are 64 planned electricity distribution projects managed by the Electricity Distribution Department that cover the medium-voltage and low-voltage networks throughout Doha and the regional municipalities. 

    https://image.digitalinsightresearch.in/uploads/NewsArticle/18962223/main.jpg
    Mark Dowdall
  • Maaden closes $1bn term loan and credit facility

    24 August 2026

    Saudi Arabian Mining Company (Maaden) has announced the closing of its inaugural international syndicated term loan and revolving credit facilities, worth a total of $1bn.

    The $500m international term loan facility will support Maaden’s growth agenda and general corporate purposes, including funding growth projects across its portfolio.

    The $500m international revolving credit facility, which is expected to remain undrawn, provides additional committed funding capacity “as Maaden continues to scale its business and execute its long-term growth strategy”.

    The transaction “was met with strong support from the international banking market, attracting participation from a diverse group of leading international banks across key global financial markets”, including the US, Canada, Europe, China and Japan. The facilities were oversubscribed, Maaden said.

    ALSO READ: Maaden and Aramco sign deal to create joint venture

    “The level of demand reflects the global banking community’s confidence in Maaden’s financial strength, strategic direction and ambitious growth plans,” the Saudi state miner said in its statement.

    “The facilities mark another significant milestone in Maaden’s funding journey – further diversifying its sources of funding and broadening its access to global capital providers as the company continues to advance its long-term growth ambitions.

    “Maaden continues to make significant progress across its growth pipeline, expanding production, advancing major projects and accelerating exploration as it builds a world-class mining company at the heart of Saudi Arabia’s economic transformation.”

    https://image.digitalinsightresearch.in/uploads/NewsArticle/18962086/main4516.jpg
    Indrajit Sen
  • Dubai inflation slows to 5.3% in July

    24 August 2026

    Dubai’s annual inflation rate slowed to 5.3% in July, down from 5.7% in June, as a decline in transport costs eased pressure on consumer prices, according to Emirates NBD.

    The bank said the slowdown supported its view that price growth peaked at mid-year, and it expects inflation to continue easing through the rest of 2026. Monthly price growth slowed to 0.1% in July, from 0.4% in June, the weakest pace since February.

    Transport was the clearest sign of the moderation. Annual price growth in the category slowed to 11.9% in July, from 18.1% in June, as transport costs fell 3.7% over the month. Fuel and lubricant inflation eased to 24.1% year on year, from 48.3%, tracking a decline in local petrol prices.

    Petrol remains the main swing factor in the emirate’s inflation. Transport contributed 1.1 percentage points to headline inflation in July, down from 1.7 percentage points in June. Emirates NBD said the relief may prove temporary, with Super 98 petrol prices climbing 5.9% in August to leave them 33.8% higher than a year earlier. The bank expects headline inflation to edge higher in the August figures before easing again later in the year.

    The UAE deregulated petrol and diesel prices in 2015 and reviews them monthly against global prices, meaning changes in global fuel costs pass through to consumers quickly. Transport, which includes fuel, accounts for 9% of Dubai’s consumer price index basket.

    Housing remained the largest contributor to inflation even as its impulse faded. Housing and utilities, which account for about two-fifths of the basket, added 2.8 percentage points to headline inflation. Annual price growth in the category slowed to 7.0%, from 7.4% in January.

    Food inflation edged up to 7.8% year on year, from 7.6% in June, which the bank attributed to lingering supply-chain disruption from the regional conflict. Inflation in restaurants and hotels accelerated to 4.5% year on year, from 1.7% in June.

    Emirates NBD forecasts inflation of 2.9% by year-end but said risks to that projection were tilted to the upside, given lingering pressures in food and housing.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/18961735/main1839.jpg
    Colin Foreman
  • Libya oil project on track for 2027 completion

    24 August 2026

     

    The project to develop a workers’ camp at Libya’s Erawin oil field is on track for completion next year, according to industry sources.

    The project, estimated to be worth about $50m, is being executed by the Libyan oil services company Al-Saraya Al-Hamara, headquartered in the city of Sebha.

    The Libyan company was awarded the contract in February 2025.

    The scope of the project includes:

    • Construction of an accommodation camp
    • Construction of the camp maintenance warehouse
    • Construction of the camp office
    • Construction of a fire brigade shelter
    • Construction of a kitchen and mess hall
    • Construction of a mosque
    • Construction of a laundry room
    • Construction of a clinic
    • Construction of parking facilities
    • Installation of a fire and gas system
    • Installation of a power generator
    • Construction of associated facilities

    The client on the project is Zallaf Libya Oil & Gas Exploration & Production Company.

    Zallaf Libya Oil & Gas Exploration & Production Company was established in Libya in 2013 and is wholly owned by Libya’s state-owned National Oil Corporation.

    The Erawin field development project is located about 800 kilometres south of Tripoli and 100km southwest of the El-Sharara field.

    Libya shipped its first cargo of crude from the Erawin oil field in November 2023.

    The shipment departed from Libya’s Zawiyah port and consisted of 600,000 barrels of crude.

    Australia-based Worley Parsons was appointed as the front-end engineering and design (feed) contractor for the early production facility project in 2019.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/18953632/main.jpg
    Wil Crisp