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Saudi Arabia picks up the projects pace

23 March 2023

Commentary

John Bambridge

Analysis editor

While all eyes have been on Saudi Arabia’s Vision 2030 for some time, in the past 12 months the country’s gigaprojects have truly begun to gain momentum, with a surge in spending on infrastructure and associated projects.

In just the past five months, the kingdom has awarded contracts worth $7bn on projects linked to Neom and the other Public Investment Fund schemes. This has catapulted the value of Saudi construction contract awards to $32.4bn in 2022, more than double the $15bn-worth of awards in 2020. It also caused the construction and transport sector to rise to account for 58 per cent of all contracts awarded last year in the kingdom. 

In addition to its greenfield developments, Saudi Arabia is looking to revitalise and redevelop the downtown areas of all of its major cities, as well as enhance public transportation and logistics networks across the country as part of the National Transport & Logistics Strategy.

The non-oil private sector is experiencing robust growth, and business confidence is riding high despite a planned reduction in oil production as part of Opec+ commitments. Growth in the non-oil sector is leading the country’s overall growth, which has been forecast at 2.6-3 per cent this year.

After a record-breaking year for activity in Saudi Arabia’s capital markets, a further 23 companies are in the wing with their listing on the country’s stock exchange pending. Saudi Arabia’s banks are meanwhile poised to continue their outperformance of the GCC region, with credit growth expected to reach 12 per cent in 2023 compared to the GCC average of 5 per cent. This trend is primarily driven by a thriving mortgage sector, which is boosting lending activity.

In the oil sector, Saudi Aramco plans to ramp up its maximum oil output spare capacity to 13 million barrels a day (b/d) by 2027, up from about 12 million b/d currently. The company also intends to increase gas production by 50 per cent by the end of the decade. Almost $20bn-worth of upstream oil and gas projects are on the cusp of entering execution.

Saudi Arabia’s energy diversification strategy is also progressing steadily in the utilities sector, which in 2022 saw the highest number of contracts awarded since 2013. 

In addition to studying the feasibility of three solar photovoltaic parks with a combined capacity of 30GW, Saudi Power Procurement Company is inviting bids for the fourth round of the National Renewable Energy Programme. 

The National Water Strategy 2030 is meanwhile furthering projects in water desalination, treatment, storage and distribution. The objective is to bridge the gap between water demand and supply, in part by raising desalination capacity to account for 90 per cent of the national urban supply. 

Overall, Saudi Arabia’s economic ambitions are taking off on multiple fronts, presenting a business landscape of not just promise, but increasingly tangible developments.

MEED's April 2023 special report on Saudi Arabia includes:

> ECONOMY: Riyadh steps up the Vision 2030 tempo

> CONSTRUCTION: Saudi construction project ramp-up accelerates

> UPSTREAM: Aramco slated to escalate upstream spending

> DOWNSTREAM: Petchems ambitions define Saudi downstream

> POWER: Saudi Arabia reinvigorates power sector

> WATER: Saudi water begins next growth phase

> BANKING: Saudi banks bid to keep ahead of the pack

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John Bambridge

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