Saudi Arabia looks both east and west
15 September 2023
MEED's October 2023 special report on Saudi Arabia also includes:
> Gigaproject activity enters full swing
> Infrastructure projects support Riyadh’s logistics ambitions
> Aramco focuses on upstream capacity building
> Saudi chemical and downstream projects in motion
> Riyadh rides power projects surge
> Saudi banks track more modest growth path
> Jeddah developer restarts world’s tallest tower
Saudi Crown Prince Mohammed bin Salman al-Saud has been enjoying the international limelight of late, with a trip to India to take part in the G20 summit on 9 and 10 September. There, he met a succession of international leaders, including India’s Prime Minister Narendra Modi, Brazilian President Luiz Inacio Lula da Silva and Turkey’s President Recep Tayyip Erdogan.
A few days earlier, he had announced the launch of a new international body, the Global Water Organisation. Details of its purpose and funding remain limited for now, but it will have its headquarters in Riyadh and is expected to lead international efforts to better manage the world’s water resources.
All this activity is a sign that MBS remains intent on changing Saudi Arabia’s position in the world order – also evident in its decision in March to join the China-dominated Shanghai Cooperation Organisation (SCO) as a dialogue partner.
That was followed on 24 August by an invitation to join the Brics group, along with the UAE, Iran and three other countries.
Saudi is engaged in extreme hedging … I think Riyadh has suggested reluctance to join Brics just to buy time and signal to Western partners that it is not too eager to join. But I believe Riyadh has long made that call
Cinzia Bianco, European Council on Foreign Relations
Weighing the options
Yet Riyadh also appears keenly aware of the potential pitfalls as it tries to carve out a different role for itself. That was clearly seen in its ambiguous reaction to the Brics invitation, with Foreign Affairs Minister Prince Faisal bin Farhan saying it wanted to find out “further details on membership requirements” before committing to join.
Analysts saw those comments as an attempt to placate those in Western capitals concerned about China's growing influence in the Gulf region, and in the UAE and Saudi Arabia in particular.
“I think Faisal bin Farhan’s statement was one of trying to balance expectations and signal to the Biden administration that the Saudis are not definitively taking sides, but rather are seeking to maximise their own leverage in multiple relationships that they see as not mutually exclusive,” says Kristian Coates Ulrichsen, fellow for the Middle East at Rice University’s Baker Institute for Public Policy.
“There is a feeling in the Biden administration that, under Mohammed bin Zayed, the UAE has made a choice to go its own way and do its own thing, but that with Saudi Arabia, there is still a chance to offer Mohammed bin Salman a package that can outdo anything China can come up with.”
Such considerations are nevertheless likely to delay rather than prevent Riyadh from taking up the offer to join Brics or deepen its involvement with the SCO.
There are good reasons for moving with some caution, though. Recent UK media reports have suggested that Saudi Arabia is lobbying to join a project by the UK, Italy and Japan to develop a next-generation fighter jet – something that would give it access to technology that would be hard or impossible to replicate from other, non-Western sources.
The issue will likely be on the agenda if and when Mohammed bin Salman travels to London in the coming months – a visit that has been suggested but is unconfirmed at the time of writing. Such visits remain controversial in Western capitals, where the diplomatic concerns that emerged over relations with Saudi Arabia in 2018 are far from resolved.
“Saudi is engaged in extreme hedging,” says Cinzia Bianco, visiting fellow at the European Council on Foreign Relations.
“Indeed, I think Riyadh has suggested reluctance to join Brics just to buy time and signal to Western partners that it is not too eager to join. But I believe Riyadh has long made that call and will join Brics, as well as the SCO.
“I am not entirely sure what MBS can achieve in London. I know that they want in on the Tempest fighter jet and to sign a bilateral free trade agreement with the UK, but on both questions, there are substantial political obstacles.”
The challenge is that, as 2030 nears, so much of Mohammed bin Salman’s credibility has been vested in that year that officials will feel under intense pressure to deliver results, however they achieve them
Kristian Coates Ulrichsen, Rice University’s Baker Institute for Public Policy
Domestic performance
On the domestic front, there are other, broader considerations for Mohammed bin Salman.
As was the case with the launch of the new Global Water Organisation, he often attaches himself closely to new initiatives – something also seen in Riyadh’s bid to host the Expo 2030 trade fair and the broader Vision 2030 strategy to remodel the economy. However, this creates risks if the new projects fail to create the stir that officials hope.
“There’s no doubt that the Saudi crown prince has wagered a substantial degree of financial and political capital as part of his transformation agenda for the country,” says Robert Mogielnicki, senior resident scholar at the Arab Gulf States Institute in Washington.
On the other hand, it might be that there is so much change under way that all the other activity overshadows any failures.
“Somewhat counterintuitively, the massive scale and scope of new investments and initiatives make it harder to point at any one specific area of underperformance as a reflection of the broader transformation process,” adds Mogielnicki.
At the same time, the whole apparatus of the Saudi state will be working hard to ensure that the crown prince’s ambitions are as close to being realised as possible.
“I agree that MBS risks running up reputational problems in the next few years, especially if 2030 nears and some of the gigaprojects show signs of lagging behind with little discernible development,” says Ulrichsen.
“The challenge is that, as 2030 nears, so much of Mohammed bin Salman’s credibility has been vested in that year that officials will feel under intense pressure to deliver results, however they achieve them.”
Image: New Delhi, 11 September 2023 – Saudi Crown Prince Mohammed bin Salman meets India's President Droupadi Murmu at the Presidential Palace (Rashtrapati Bhavan). Credit: Saudi Press Agency
Exclusive from Meed
-
Neom requests revised Gayal wind proposals
6 September 2024
-
Wabag confirms $317m Saudi water deal
6 September 2024
-
Chinese companies win 95% of all Iraqi energy projects
6 September 2024
-
Region plugs in to electric future
5 September 2024
-
PIF and Hyundai award car plant construction deal
5 September 2024
All of this is only 1% of what MEED.com has to offer
Subscribe now and unlock all the 153,671 articles on MEED.com
- All the latest news, data, and market intelligence across MENA at your fingerprints
- First-hand updates and inside information on projects, clients and competitors that matter to you
- 20 years' archive of information, data, and news for you to access at your convenience
- Strategize to succeed and minimise risks with timely analysis of current and future market trends
![](https://guest.meed.com/wp-content/themes/meed/assets/images/sub-image.png)
Related Articles
-
Neom requests revised Gayal wind proposals
6 September 2024
Neom’s energy, water and hydrogen subsidiary Enowa has requested that the final bidders submit updated proposals for a contract to build a 1,200MW wind farm catering to the gigaproject in Saudi Arabia.
This development follows the introduction of an addendum to the tender after companies submitted their best and final offers (bafos) for the contract to build the 1,200MW Gayal wind farm project in June, a source close to the project tells MEED.
MEED reported on 9 July that Neom is progressing towards awarding the engineering, procurement and construction (EPC) contract to the selected bidder following receipt of the bafos.
Enowa received the initial bids for the contract on 4 March.
It is understood that PowerChina and Egyptian contractor Orascom are among the firms invited to bid for the Gayal wind farm EPC contract.
The wind farm project site is approximately 35 kilometres northwest of the former town of Gayal.
The project will have an estimated plot area of 164 square kilometres. The project duration is 31 months from the start of construction.
The scope of work for the EPC contractors bidding for the scheme includes the design, supply and installation of wind turbine generators and foundations, three 380kV substations and control systems, meteorological towers, site roads, hard stands, crane pads and associated infrastructure.
Enowa received bids for another renewable energy project, the 800MW Shiqri solar farm, in March. The client is conducting commercial clarifications for the solar project, MEED reported in May.
Neom aims to be powered 100% by renewable energy by 2030.
https://image.digitalinsightresearch.in/uploads/NewsArticle/12465111/main0411.jpg -
Wabag confirms $317m Saudi water deal
6 September 2024
India-headquartered VA Tech Wabag has confirmed winning a contract to build a 300 cubic-metres-a-day (cm/d) seawater reverse osmosis (SWRO) plant project in Yanbu, Saudi Arabia.
The value of the contract for the Yanbu 5 SWRO plant is $317m, the Bombay Stock Exchange-listed company said in a statement on 6 September.
The engineering, procurement, construction and commissioning contract covers the design, engineering, supply, construction and commissioning of the desalination plant.
According to Wabag, the plant will operate using dual media filters followed by a two-pass reverse osmosis process and re-mineralisation to produce clean potable water, which will be further distributed by Saudi Water Authority (SWA).
The plant is located on the west coast of Saudi Arabia, south of the Red Sea-facing Yanbu Al-Bahr, and is scheduled to be completed within 30 months of the contract award.
MEED reported in July that Wabag submitted a lower bid for the contract.
Saudi Arabia's main producer of desalinated water, SWA – formerly Saline Water Conversion Company (SWCC) – received two bids in May for the contract to build the Yanbu 5 SWRO project.
The other bidder is understood to comprise a local contractor team and an overseas-based partner.
The bid evaluation process is ongoing for a second project, the Shuaiba 6 SWRO plant, which has a capacity of 545,000 cm/d.
Two other projects, the Jubail and Ras Al-Khair SWRO projects, are in the bidding stage. They will each have the capacity to treat 600,000 cm/d of seawater.
The four contracts are being procured using an EPC model, in contrast to the SWRO facilities being procured on a public-private partnership basis by state offtaker Saudi Water Partnership Company.
SWA is the world's largest producer of desalinated water, with a capacity of at least 6.6 million cm/d. Plants utilising older and more energy-intensive techniques such as multi-stage flash technology account for the majority of the current capacity.
https://image.digitalinsightresearch.in/uploads/NewsArticle/12464222/main3634.gif -
Chinese companies win 95% of all Iraqi energy projects
6 September 2024
Commentary
Wil Crisp
Oil & gas reporterCompanies headquartered in China have won 95% of all major project contracts awarded in Iraq’s oil, gas, chemicals and power sectors so far this year, as they increase their dominance in the market.
A total of $12.1bn in energy project contracts were won by Chinese companies during the first eight months of 2024, according to data gathered by regional project tracker MEED Projects.
The only major award so far this year that was not won by a company or partnership that was 100% Chinese, was the contract to rehabilitate the Baiji 2 gas-fired power station, which is estimated to be worth $1.3bn by MEED Projects.
This contract was awarded to a consortium of Beijing-headquartered China State Construction Engineering Corporation (CSCEC) and German technology conglomerate Siemens.
Commenting on the figures, one industry source said: “China has been a dominant force in Iraq’s energy sector for a long time and this is only increasing as time passes.
“The huge presence that China has in the country’s energy sector is a source of concern for Iraq’s leadership, which doesn’t want to cede control of so many important infrastructure projects to companies from any single country.”
“The problem is, other countries are reluctant to take on the risks of doing business in Iraq and at the same offer the competitive prices that Chinese contractors can offer.”
The biggest energy project contract won by a Chinese contractor so far this year is the agreement for the development of the Al-Faw Investment Refinery project.
The client on the project, state-owned Southern Refineries Company, signed a contract with CSCEC in May this year.
The refinery will have a capacity of 300,000 barrels a day and will produce oil derivatives for both domestic and international markets.
The project will be carried out in two stages. The first phase will involve refining operations, while the second will involve constructing a petrochemicals complex with a capacity of 3 million tonnes a year.
The wider project also includes the construction of a 2,000MW power plant and the establishment of the Al-Faw Academy for Refinery Technology, to train 5,000 Iraqi workers that will eventually work at the facility.
Hualu, a subsidiary of China National Chemical Engineering Company (CNCEC), signed a preliminary principles agreement for the project in December 2021.
At the time, Iraq’s Oil Ministry said that the project would have an investment value of $7bn-$8bn.
MEED Projects has estimated that the contract value of the deal signed with CSCEC in May for the refinery project is about $4bn.
Other energy project contracts won by Chinese companies during the first eight months of this year included the contract for the Artawi 1,000MW photovoltaic solar power plant in Basra.
This contract, estimated to be worth $1bn, was awarded to China Energy Engineering International Group.
Chengdu-based DongFang Electric Corporation was awarded the main contract for a project to convert the Baghdad South power plant into a combined-cycle gas turbine power plant.
The project is estimated to be worth $85m and will increase the capacity of the power plant by 125MW-625MW.
Also this year, a subsidiary of PetroChina, the listed arm of state-owned China National Petroleum Corporation, signed an agreement to develop Iraq’s Nahr Bin Umar onshore gas field.
The subsidiary, PetroChina Halfaya, was awarded the build-own-operate-transfer contract, which is estimated to be worth about $400m.
Iraq’s Oil Ministry said that the field will have an initial output capacity of 150 million cubic feet a day.
The project is expected to be completed within 36 months and will include the construction of gas-gathering facilities, storage tanks and pipeline networks to supply gas to power stations.
Strong performance
Chinese contractors also performed well in Iraq’s energy sector in terms of the value of contract awards in 2023.
Last year, Chinese contractors won $2.3bn in Iraqi energy sector contracts, almost half of the $4.8bn that was awarded.
Looking at the data for 2023 and the first eight months of 2024 together, Chinese companies won $14.5bn in contracts, 82% of the $17.6bn in energy project contracts awarded over the period.
The second closest competitors were companies from Germany, which won just over $1bn in contracts, 6% of all awards.
Iraqi companies were third, winning $816m in contracts, according to the data compiled by MEED Projects.
Contracts were also won by companies from Italy, the Netherlands and Turkiye.
Iraq is currently in the midst of a push to try and increase the volume of work being carried out by US companies in the country’s energy sector.
Earlier this month, Iraq announced that it was planning to offer about 10 gas exploration blocks to international companies in a new licensing round that will be launched during a visit to the US by Iraqi Oil Minister Hayan Abdel-Ghani.
Abdel-Ghani said that he will be specifically targeting US companies in the upcoming round.
Earlier this year, the US international oil and gas company ExxonMobil completed its exit from Iraq’s West Qurna-1 oil field, handing over operatorship to PetroChina.
Exxon’s plan to exit the West Qurna-1 oil field was first announced in April 2021, when Iraq’s Oil Ministry said the US-based oil company was considering selling its 32.7% stake.
https://image.digitalinsightresearch.in/uploads/NewsArticle/12460160/main3355.jpg -
Region plugs in to electric future
5 September 2024
Commentary
Colin Foreman
EditorRead the September 2024 issue of MEED Business Review
Saudi Arabia is well known as one of the world’s largest oil exporters. What is less known is that the kingdom is also one of the world’s most significant consumers of oil.
According to the US-based Energy Information Agency (EIA), Saudi Arabia consumed 3.65 million barrels a day (b/d) in 2022, making it the fifth-largest consumer globally, with a 4% share of the global total.
Much of Saudi Arabia’s oil consumption comes from the power sector, although this is changing as Riyadh embarks on an ambitious renewable energy programme. Another major contributor is combustion engines in automobiles.
Anyone who has experienced Riyadh’s traffic congestion in recent years will attest to the fact that Saudi Arabia has a lot of cars.
In the coming years, the plan is for the cars on Saudi Arabia’s streets to be electric rather than gasoline-powered.
This aim is supported by key initiatives involving establishing electric vehicle (EV) assembly plants in the kingdom and plants that will produce key components, most notably batteries.
For Saudi Arabia’s efforts and similar endeavours across the region to be successful, other factors will also need to be considered. Shifting from gasoline to electric will require upgrading infrastructure with charging points installed at service stations and in residential areas.
Overhauling infrastructure in existing urban areas is complicated and costly, but the region’s governments have demonstrated a clear commitment to making EVs work. Initial success is within reach as the region plays catch up with other geographies that have shown higher EV ownership rates are achievable.
Looking further ahead, if the region can successfully shift to EVs, it will prove that even the most oil-dependent economies can embrace change and lead the charge towards a cleaner and greener future.
Must-read sections in the September 2024 issue of MEED Business Review include:
> AGENDA:
> GCC ponders electric future
> Region on the cusp of EV production boom> CURRENT AFFAIRS:
> Outlook uncertain for Iraq gas expansion project
> Security concerns threaten outlook for Libyan oil sectorINDUSTRY REPORT:
Analysis of the outlook for the downstream sector
> Global LNG demand set for steady growth
> Region advances LNG projects with pace> SAUDI GIGAPROJECTS: Communication gaps hinder Saudi gigaprojects
> INTERVIEW: Legacy building at Diriyah
> SAUDI STADIUMS: Top 15 Saudi stadium projects
> LEADERSHIP: Navigating the impact of digital currencies on forex markets
> KUWAIT MARKET REPORT:
> COMMENT: Kuwait’s prospects take positive turn
> GOVERNMENT: Kuwait navigates unchartered political territory
> ECONOMY: Fiscal deficit pushes Kuwait towards reforms
> BANKING: Kuwaiti banks hunt for growth
> OIL & GAS: Kuwait oil project activity doubles
> POWER & WATER: Kuwait utilities battle uncertainty
> CONSTRUCTION: Kuwait construction sector turns corner> MEED COMMENTS:
> Saudi World Cup bid bucks global trend for sporting events
> Finance deals reflect China’s role in delivering Vision 2030
> Harris-Walz portents shift in US policy on Gaza
> Aramco increases spending despite drop in profits> GULF PROJECTS INDEX: UAE leads slight dip in market
> JULY 2024 CONTRACTS: Saudi Arabia boosts regional total again
> ECONOMIC DATA: Data drives regional projects
> OPINION: The beginning of the end
> BUSINESS OUTLOOK: Finance, oil and gas, construction, power and water contracts
To see previous issues of MEED Business Review, please click herehttps://image.digitalinsightresearch.in/uploads/NewsArticle/12460011/main.gif -
PIF and Hyundai award car plant construction deal
5 September 2024
Register for MEED's 14-day trial access
Saudi Arabia's sovereign wealth vehicle, the Public Investment Fund (PIF), and South Korea's Hyundai Motor Company have awarded the contract to build a vehicle manufacturing plant in Saudi Arabia.
According to media reports, the firms awarded an estimated $248m contract to Seoul-headquartered Hyundai Engineering & Contracting.
Construction of the plant is expected to start in 2024, and vehicle production in 2026.
The facility will have a production capacity of 50,000 vehicles a year, including both conventional vehicles and electric vehicles (EVs).
MEED reported in November last year that Hyundai Motor Company had appointed Seoul-headquartered Heerim Architects as the design consultant for its vehicle manufacturing plant in Saudi Arabia.
PIF and Hyundai Motor Company signed a joint venture agreement to set up a vehicle manufacturing plant in the country in October last year.
The PIF will hold a 70% share in the joint venture, with Hyundai holding the remaining 30% stake. The total investment for the project is estimated to be about $500m.
In December 2022, Saudi Arabia's Industry & Mineral Resources Ministry signed a memorandum of understanding with Hyundai Motor Company to establish a car production plant in the kingdom.
The PIF is keen to invest in the kingdom's automotive sector. Last year, it launched the National Automotive & Mobility Investment Company (Tasaru Mobility Investments) to develop the local supply chain capabilities for the automotive and mobility industry in Saudi Arabia.
https://image.digitalinsightresearch.in/uploads/NewsArticle/12457629/main.gif