meed-logo

line1 line2 line3
SIGN IN / REGISTER

Saudi Arabia under project pressure

28 March 2023

 

Saudi Arabia’s projects market is overheating. The volume of projects announced in the past six years vastly exceeds the resources that are available to work in the kingdom. 

Combined with tight deadlines to complete projects as part of Vision 2030, the pressure on the construction industry to deliver is ratcheting up and turning the tables on the supply chain as the shift from a buyer’s to a seller’s market accelerates.

For the five years from 2016 to 2020, there was an average of about $14bn-worth of contract awards a year in Saudi Arabia for the construction and transport sectors. After rising to $21bn in 2021, the total rose to $32bn in 2022 – the second-best year on record. 

The near doubling of the total annual value of contract awards by the end of 2022 has required a significant scale-up of resources in the kingdom, and the ramp-up is set to continue. 

Much of this pressure is due to the five official gigaprojects, which are major programmes of work that will involve a sustained flow of contract awards for years to come.

Gigaproject focus

The project most recently classified as a gigaproject by the Saudi authorities is the Diriyah Gate development on the western outskirts of Riyadh. It joins the $500bn Neom development in the northwest of the kingdom, Qiddiya entertainment city outside Riyadh, Red Sea Global’s projects on the Red Sea coast and Roshn’s housing developments across the kingdom.

These projects are relatively new. They began to be launched in 2017 and spent much of the following three years in the design phase. 

After a start that was hampered by the work and travel restrictions required to manage the Covid-19 pandemic, construction activity on these projects has accelerated sharply since the start of 2022. 

According to regional project tracker MEED Projects, there have been $36bn-worth of contract awards across these official gigaprojects since 2017. Compared to the entire Saudi projects market over the same period that represents 14.5 per cent of contract awards. 

The percentage rises to 20 per cent if a more recent time frame is used and only contract awards since the start of 2022 are included. As work gathers pace on the gigaprojects, their significance is expected to grow even further.

More major projects

Saudi Arabia’s ambitions are not limited to the five gigaprojects. In January, Crown Prince Mohammed bin Salman al-Saud launched the world’s largest modern downtown in Riyadh. 

Known as the New Murabba project, it involves the development of 19 square kilometres of land to the northwest of the capital. The centrepiece of the project is the Mukaab, which is a 400-metre-cubed structure with a tower standing inside it. 

New Murabba is part of a plan announced in January 2021 to double the size of Riyadh from 7.5 million residents to 15-20 million residents in 2030. Other major projects in the capital include King Salman International airport, King Salman Park, Sports Boulevard and Mohammed bin Salman Non-Profit City. 

Beyond the capital there are development projects planned in all major urban centres by Saudi Downtown Company, as well as entertainment centres being developed by Saudi Entertainment Ventures (Seven).

Connecting these cities and projects will be railways, roads, ports and airports that form part of the National Transport & Logistics strategy, which aims to turn the kingdom into a global hub for travel and trade by 2030.

World’s largest piling project shifts to The Line’s marina

Resourcing challenges  

One of the key challenges for the development firms and government agencies responsible for delivering these projects is securing the resources they need. 

As client bodies attempt to make their projects more attractive for companies to work on, the industry is changing. The first signs of this change can be seen in the consultancy market. 

After years of searching for project opportunities, the big consultancy businesses are now only selectively bidding for projects in the kingdom. This is because their orderbooks are already full, and for many international firms there is a concern that they could become over-exposed to the Saudi market. 

On contracts that have already been won there are also challenges. Staffing projects is proving difficult as the kingdom remains a hard sell for many project professionals, despite significant social reforms that have taken place in recent years. 

Then, once staff have been recruited and deployed on projects, there is the prospect of losing them to competitors or clients that require the same human resources.

Securing contractors

As activity on site accelerates, the bigger concern is contracting resources. As things stand, there are not enough contractors working in Saudi Arabia to deliver all of the planned projects. 

The first way to deal with this problem is to increase the capacity of contractors in the kingdom. In February this year, the Public Investment Fund (PIF) invested $1.3bn in four local construction firms: Al-Bawani Holding Company, Almabani General Contractors Company, El-Seif Engineering Contracting Company and Nesma & Partners Contracting Company. 

This investment will allow the companies to scale up their capacity, adopt advanced technologies and improve local supply chains. 

As these firms grow, the hope is that it will encourage other local companies to also expand.

International or regional companies can also help, and over the past two years foreign players have become active in the kingdom again. Firms such as Bouygues, Samsung C&T, Hyundai Engineering Construction, China State, Webuild, FCC, Alec, Consolidated Contractors Company and Urbacon Trading Contracting Company have all secured major orders. 

In some cases, these contract awards have been supported with foreign finance, which gives the contractor an additional level of comfort when it comes to potential payment for projects. For others, the contract awards reflect growing assurance in the Saudi market. 

Boosting appeal

Confidence has been lifted by measures to make the Saudi market more attractive. Payment terms are improving and many of the frustrations typically faced by contractors are being addressed. 

One example is the use of performance guarantees. Red Sea Global, which is developing the Red Sea Project and Amaala gigaprojects on the Red Sea coast, no longer requires contractors to submit bid bonds and returns performance bonds on completion of the project, along with half of the retention. 

Alternative procurement methods and contract types are also being used, notably early contractor involvement and design and build. 

These different approaches reduce risk for the contractor and allow the client to lock in resources at a much earlier stage of the procurement process. 

Red Sea Global has adopted a different approach and is self-delivering the bulk of its projects. By acting as its own management contractor, it engages with subcontractors itself. While this means it does not need to secure the services of a main contractor, it still requires engaging with the supply chain, which – like the main contractor market – has finite resources in Saudi Arabia.

Payment terms are improving and many of the frustrations typically faced by contractors are being addressed 

Driving efficiency

On the other side of the equation, making construction more efficient could also help to limit the resources required. 

Client bodies are exploring modern methods of construction to increase the speed of delivery, reduce costs and cut the amount of resources needed on site.

The market could also be self-limiting. Decision-making in the kingdom remains centralised, which means key project decisions can be slow. While this is changing as development companies are left to run their own projects, bureaucracy can impact the speed of delivery, which ultimately reduces the immediate demand for resources on a project. 

While slow decision-making could impact progress on some projects, the overriding story for 2023 will be one of sustained pressure on the kingdom’s construction sector as it becomes a seller’s market. 

With that, there is the likelihood that contractor margins will start to creep up, just as they did in the UAE when its construction market overheated in 2003 and 2008. 

So far, that does not appear to have happened, as clients in Saudi Arabia have managed to find sufficient resources. For that to remain the case will be a major challenge, however, as on-site activity for most projects in the kingdom is still several years away from peaking. 

Daniel King, director, Currie & Brown

International contractors continue to see a level of risk in the Saudi market

“There is a lot of opportunity. A large volume of work is being planned, designed and rolled out. With that, there is significant pressure right now on the market in terms of resources and supply chain. 

“On the consultancy side, the market is tremendously difficult. 

“Even with the best incentives and best set of practices, retaining staff is a challenge. People are being attracted elsewhere and the competition is fierce. 

“For the contractors, there are a lot of tenders being let. The perception that the market has risk remains, however. That is certainly the perception for international contractors, and they are still looking at the Saudi market with some level of risk appreciation in terms of how quickly they are going to be paid and what the margins really are. 

“That approach will likely prevail for the short to medium term, until clients’ practices change in terms of contractual frameworks and payment practices. 

“Varied procurement practices are coming into play to guarantee supply chain. It might be early contractor involvement or partnering, but the main purpose is to guarantee the right level of contractors.”

Adel Karem Jemah, senior vice-president, Hill International

To prevent resource shortages, supply chain and procurement must be carefully considered

“It is imperative to consider alternative methods of procurement during boom times, and the current boom in Saudi Arabia is unprecedented considering the types, size, nature and complexity of projects that have been announced in line with Vision 2030. 

“This necessitates giving due consideration to the supply chain and type of procurement.

“It is not enough to look for resources locally or even regionally to cope with such projects. One needs to reach out to where such resources are available globally, either due to slowdowns in certain regions or the completion of other major projects. 

“Cost-plus contracts were used previously in many projects in Saudi Arabia. However, the risk for such contracts rests with the client and sometimes the cost ends up much more than expected. That is why financiers prefer the lump-sum type of contracts. 

“Nonetheless, I can see this type of contract being used for fast-track projects with very tight schedules, for instance to meet deadlines for facilities required for international or regional sporting events. 

“In any case, the evaluation and selection of contractors needs to be done with extreme diligence.”

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

https://image.digitalinsightresearch.in/uploads/NewsArticle/10705629/main.gif
Colin Foreman

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

Click here to register
Exclusive from Meed
Related Articles
  • Contractor appointed for Oman power plants

    13 May 2026

     

    A consortium of China-headquartered Shandong Electric Power Construction No. 3 Company (Sepco 3) and South Korea’s Doosan Enerbility has been appointed as the main contractor on the Misfah and Duqm combined-cycle gas turbine power plants in Oman.

    The contracts cover the construction of two independent power producer (IPP) projects, with work scheduled to begin in the third quarter of 2026.

    State offtaker Nama Power & Water Procurement (Nama PWP) had previously signed power-purchase agreements (PPAs) for the development and operation of the plants.

    The developer’s contract was awarded to a consortium comprising Korea Western Power (Kowepo), Qatar’s Nebras Power, the UAE’s Etihad Water & Electricity (EtihadWE) and Oman’s Bhawan Infrastructure Services.

    The Misfah IPP will be led by Nebras Power and located in Wilayat Bousher in Muscat Governorate, with a planned capacity of 1,600MW.

    The Duqm IPP will be led by Kowepo and located in Wilayat Duqm in Al-Wusta Governorate, with a capacity of 800MW.

    According to Nama PWP, the total investment for the two projects is estimated at approximately RO1bn ($2.6bn).

    MEED reported last October that Nama PWP had received three bids for the development and operation of the gas-fired IPPs.

    The other bids included a consortium comprising China’s Shenzhen Energy Group and Oman National Engineering & Investment Company, and a lone bid from Saudi Arabia’s Acwa Power.

    Synergy Consulting is the financial adviser and lead adviser to Nama PWP for these projects.

    In November, Oman’s OQ Gas Networks received final investment approval to proceed with gas supply connections for the facilities.

    The Misfah IPP will receive 8.5 million cubic metres a day (cm/d) of natural gas. The Duqm IPP will be supplied with 4.5 million cm/d of natural gas.

    In March 2025, the same Sepco 3 and Doosan Enerbility consortium signed an engineering, procurement and construction contract with Saudi Electricity Company for the expansion of the Riyadh Power Plant 12 (PP12).

    Located about 150 kilometres northwest of Riyadh, the 1,863MW power plant is expected to be completed in 2028.

    > Be recognised among the best in the industry at the MEED Projects Awards 2026 …

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16816237/main.jpg
    Mark Dowdall
  • Financial challenge tests Iraq’s resolve

    13 May 2026

     

    On 21 April, as a fragile ceasefire held between the US and Iran, the Trump administration halted a $500m shipment in cash headed for Iraq, as it sought to clamp down on Iranian-backed Shia militias in the country. 

    That cash, derived from Iraqi oil exports and routed via the US Federal Reserve to the Central Bank of Iraq (CBI), is a vital cog in Iraq’s financial arteries, enabling it to cover foreign exchange demand.

    This was not the first time that Iraq’s financial system has felt the US’s warm breath on its neck.

    Back in February 2025, the US Treasury Department blacklisted five Iraqi banks from participating in dollar transactions, citing concerns about their role in illicit financial flows that benefited Iran’s Islamic Revolutionary Guards Corps.

    Iraq has also itself often circumscribed dollar use within its own financial system.

    In July 2023, the CBI banned 14 banks from conducting dollar transactions in a crackdown on dollar smuggling. In February 2024, it banned a further eight banks from dollar transactions as part of a crackdown on fraud and money laundering.

    Dollar pressure

    The recent halt in US dollar cash shipments has nevertheless added pressure to Iraq’s parallel currency market gap, says Lucila Bonilla, lead emerging market economist at Oxford Economics.  

    “The gap between the parallel exchange rate has widened noticeably against the official peg, to around 20%,” she says.

    “Dollar demand has risen as citizens and traders seek to hedge uncertainty – dollar deposits are up, and there are reports of a notable shift in the composition of cash holdings toward dollars.”

    Ratings agencies see the US move on Iraqi dollar use as a challenge, but one that might not prove too onerous.

    “Iraq can overcome a short-term war as it has $100bn of reserves and its debt profile is bearable,” says Gilbert Hobeika, a director at Fitch Ratings.

    “But a longer-term conflict will hurt Iraq as the economy is reliant on oil revenues and government involvement, while facing at the same time risk from the US stopping delivery of US dollars.”

    How persistent the pressure proves will depend largely on the duration of the Hormuz shock and how the relationship with the US evolves.

    “Forming a new government that is palatable to the US could ease the pressure, though Iraq’s protracted government formation process adds uncertainty to that timeline,” says Bonilla.

    The US-Iran war is putting even more pressure on banks.

    “There are uncertainties with regard to depositors,” says Hobeika. “The public sector banks have weak management and governance structures. Financial reporting is weak, and that puts pressure on asset quality and capitalisation.”

    If the conflict lasts a long time, the government will start withdrawing funds to pay salaries and contractors.

    “That will affect deposits at the public sector banks in the near term,” says Hobeika.

    State-heavy system

    Iraq’s banking system is dominated by a handful of state-owned banks with a market share of 75%-80%, and then 60-plus private banks competing for the remaining 20%-25% of the pie. 

    “Private banks have struggled to compete in a market with limited opportunities, small deposit bases and a narrow range of products, often focusing on very basic activities,” says Lea Hanna, an analyst at Moody’s.

    “In 2019, we had a wave of Islamic banks getting bans on dealing with US dollars – reducing what had been a primary source of business.”

    A few private banks have benefitted since then, namely those with majority ownership by foreign banks such as National Bank of Iraq, a subsidiary of Capital Bank of Jordan, and Bank of Baghdad, a subsidiary of Jordan Kuwait Bank.

    “Supported by their affiliates, these banks are relatively well run compared to domestic peers and have ample capital buffers,” says Hanna.

    “They have captured a large market share of US dollar transfers thanks to their strong US correspondent banking relationships that allow them easier access to US dollars. They have seen a surge in their profitability and an increase in their deposit base.”

    Financial reform

    The CBI has attempted to introduce reforms to the banking system, as part of a wider effort to enable it to channel funding to the private sector.

    In early 2025, it increased the minimum issued and paid-up capital requirement to ID400bn ($305m), along with a requirement to establish correspondent banking relationships for foreign-currency trading. The plan was to increase these in ID50bn increments every six months, to hasten sector consolidation.

    However, of Fitch’s rated banks, just two – state-owned Trade Bank of Iraq and Mansour Bank, a subsidiary of Qatar National Bank – met the full capital requirement.

    “While a lot of banks managed to increase their capital, a number of them didn’t and have been struggling to improve their systems and compliance with anti-terrorism and anti-money laundering regulations,” says Hobeika.

    “These systems take a long time to improve, and it costs the banks too. For that reason, they have agreed with the central bank to postpone implementation to 2027/28.”

    The expectation is that the number of private Iraqi banks will shrink from 60 to about half that number by 2028.

    “Iraq’s banking sector is undergoing a significant overhaul, with the Central Bank pushing through higher capital requirements, improved anti-money-laundering compliance, and a shift towards commercial banks managing their own international correspondent relationships. These moves are welcomed,” says Bonilla.

    But the harder work remains, argues Bonilla: state-owned banks still carry high levels of non-performing loans, weak governance and a history of politically directed lending, while private sector credit remains among the lowest in the region.

    “The stakes are high as the IMF estimates that a comprehensive reform of the financial sector, alongside broader governance and regulatory changes, could double Iraq’s non-oil growth potential over the medium term, adding around 4 percentage points to GDP,” says Bonilla.

    “For now, the reforms address the plumbing. The structural transformation of a banking system to serve the private sector is still largely ahead.”

    Clouded outlook

    So far, Iraq’s financial system seems to have averted a worst-case scenario of large-scale deposit withdrawals related to the Iran conflict.

    Any deposit withdrawals seem to be more related to the introduction of a digital custom system ASYCUDA (Automated System for Customs Data) aimed at helping the government collect revenues, which saw a lot of traders trying to bypass the custom charges.

    “This drove some exporters or traders to source US dollars outside the banking system, in the parallel market, to avoid stricter requirements and up-front payment of customs duties. That has now eased,” says Hanna.

    Looking ahead, Fitch anticipates that most government financing is likely to come from the CBI through indirect purchases of government securities.

    The central bank’s total claims on the central government represented about 52% of the domestic debt stock and 25% of the total debt stock at end-2024, notes the agency.

    It envisages that a smaller portion will come from the government’s cash deposits, anticipated to fall to an average 12% by 2027.

    Fitch says the CBI’s balance sheet limits refinancing risks, while the FX reserves are large enough to absorb the expansion of that balance sheet without putting pressure on the exchange-rate peg with the US dollar.

    Surging foreign direct investment comes as a source of comfort, with annual inflows rising from around $2bn in 2022 to $5bn-$7bn from 2023 onwards. 

    Reform of the financial system will remain at the top of the new government’s in-tray.

    The regional environment is unconducive to this mammoth task, and it can only hope that an end to the conflict would support ongoing Iraqi efforts to build a financial system comparable to that of some of its Gulf neighbours.

    MEED’s June 2026 report on Iraq also includes:

    > OVERVIEW: Iraq enters era of resilience, reform and rising risks
    > OIL & GAS: Iraqi oil and gas sector in crisis
    > POWER & WATER: Focus shifts to delivery of Iraq utilities expansion
    > CONSTRUCTION: Momentum builds in Iraq’s post-war construction sector

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16799540/main.gif
    James Gavin
  • JinkoSolar signs 2GW deal for Abu Dhabi solar project

    13 May 2026

    China’s JinkoSolar has signed an agreement with Abu Dhabi Future Energy Company (Masdar) to supply 2GW of photovoltaic (PV) modules for the round-the-clock renewable energy project in Abu Dhabi.

    The agreement covers the supply of JinkoSolar’s Tiger Neo series modules for the project, which is being developed by Masdar in collaboration with Emirates Water & Electricity Company (Ewec).

    The landmark $6bn project combines a 5.2GW solar PV plant with a 19 gigawatt-hour battery energy storage system (bess).

    It entered construction in October 2025 with India’s Larsen & Toubro and Power China working as contractors. It is known as the world’s first gigascale round-the-clock renewable energy project.

    Masdar had earlier selected JinkoSolar and JA Solar as preferred suppliers for solar PV modules, and CATL (Contemporary Amperex Technology) as preferred supplier for the bess segment.

    The project is designed to provide baseload renewable power and address intermittency challenges associated with solar generation. The developers said the scheme will serve as a model for similar projects internationally.

    JinkoSolar said the Tiger Neo modules supplied for the project are based on N-type TOPCon technology and have been adapted to meet the technical requirements of the development.

    Senior executives from both companies attended the signing ceremony in Abu Dhabi, including Mohamed Jameel Al-Ramahi, CEO of Masdar, and Charlie Cao, CEO of JinkoSolar.

    Jinko has won several major contracts in recent years, including a contract to supply solar PV modules with a capacity of 3GW for Saudi Arabia’s Haden and Al-Khushaybi solar projects.

    It also recently announced the signing of a 2GW solar PV module supply agreement with China Energy Engineering Corporation (CEEC) for Saudi Arabia’s Phase Six Khurais PV project.

    > Be recognised among the best in the industry at the MEED Projects Awards 2026 …

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16813268/main1816.jpg
    Mark Dowdall
  • Dubai opens prequalification for Jebel Ali STP expansion

    13 May 2026

     

    Dubai Municipality has issued a request for qualifications for the Jebel Ali sewerage treatment plant (STP) expansion – phase 3 project.

    The DS150/3 project will be delivered under a public-private partnership (PPP) model on a design, build, finance, own, operate and transfer basis.

    The project involves the development of a new water resource recovery facility with an ultimate treatment capacity of up to 1 million cubic metres a day (cm/d).

    It is being procured through Dubai Municipality’s Sewerage and Recycled Water Projects Department and will be delivered through a two-stage operational approach over a 30-year concession period.

    The bid submission deadline is 18 June.

    UK-headquartered Deloitte is acting as financial adviser, Aecom as technical adviser and CMS as legal adviser.

    Dubai Municipality said the project will also include additional land uses and community-focused amenities as part of broader sustainability and urban integration objectives.

    Phase one and two expansion

    In April, the deadline was extended for contractors to submit bids for an engineering, procurement and construction (EPC) contract covering the expansion of the Jebel Ali STP phases one and two.

    Located on a 670-hectare site in Jebel Ali, the original wastewater facility has a treatment capacity of about 675,000 cm/d following the completion of phase two in 2019, combining approximately 300,000 cm/d from phase one and 375,000 cm/d from phase two.

    The upgraded facility will be capable of treating an additional sewage flow of 100,000 cm/d, with the expansion estimated to cost $300m.

    The new bid submission deadline is 11 June.

    UK-headquartered KPMG and UAE-based Tribe Infrastructure are serving as financial advisers on the project.

    > Be recognised among the best in the industry at the MEED Projects Awards 2026 …

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16812872/main.jpg
    Mark Dowdall
  • Iraq LNG project delayed until next year

    13 May 2026

    Register for MEED’s 14-day trial access 

    Iraq’s first liquefied natural gas (LNG) import terminal, which has an estimated project value of $450m, is now expected to become operational in 2027 due to delays caused by the regional war and disruption to shipping through the Strait of Hormuz.

    Work on jetty reinforcement and fixed terminal infrastructure at the Port of Khor Al-Zubair has been delayed, according to a statement from US-based Excelerate Energy, which is contracted to develop the facility.

    In its statement, the company said: “We are revising our full-year guidance to reflect the delayed startup of our Iraq terminal due to the ongoing conflict in the Middle East.”

    It added: “The Iraq project fundamentals remain unchanged. Looking ahead, we continue to have confidence in our sequenced earnings growth through 2028.”

    In October 2025, Excelerate signed a definitive commercial agreement with a subsidiary of Iraq’s Ministry of Electricity for the development of the country’s first LNG import terminal.

    The integrated project includes a five-year agreement for regasification services and LNG supply, with extension options, and a minimum contracted offtake of 250 million standard cubic feet a day (cf/d).

    Excelerate said: “Jetty reinforcement and construction of the fixed terminal infrastructure have been delayed temporarily due to the conflict in the Middle East and the terminal is no longer expected to commence operations in the third quarter of 2026 as previously disclosed.

    “Project startup is now expected in 2027. The long-term fundamentals supporting the project remain unchanged, driven by chronic power shortages and limited domestic gas processing capacity in Iraq.

    “Current conditions further reinforce the country’s need for reliable and scalable LNG import infrastructure and construction will resume as conditions allow.”

    Earlier this year, Iraq’s Ministry of Electricity said that the terminal was on track to come online on 1 June, ahead of expected gas shortages during the summer months.

    Then, in late April, the ministry said the project had been delayed by several months and was expected to come online in August at the earliest.

    Although Iraq is Opec’s second-largest oil producer after Saudi Arabia, it is a net natural gas importer because its lack of infrastructure investment has meant that, until 2023, it flared roughly half of the estimated 3.12 billion cf/d of gas produced in association with crude oil.

    Iraq’s reliance on flaring associated gas instead of gathering and processing it has prevented the country from fully realising its potential as a gas producer and forced the Iraqi government to rely on costly gas and electricity imports from Iran.

    READ THE MAY 2026 MEED BUSINESS REVIEW – click here to view PDF

    Global energy sector forced to recalibrate; Conflict hits debt issuance and listings activity; UAE’s non-oil sector faces unclear recovery period amid disruption.

    Distributed to senior decision-makers in the region and around the world, the May 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/16803348/main.jpg
    Wil Crisp