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
  • Bahrain’s economy walks precarious path

    26 November 2025

    Download the PDF

    MEED’s December 2025 report on Bahrain includes:

    > COMMENT: Manama pursues reform amid strain
    > GVT & ECONOMY: Bahrain’s cautious economic evolution
    > BANKING: Mergers loom over Bahrain’s banking system
    > OIL & GAS: Bahrain remains in pursuit of hydrocarbon resources
    > POWER & WATER: Bahrain advances utility reform
    > CONSTRUCTION: Bahrain construction faces major slowdown
    > TRANSPORT: Air Asia aviation deal boosts connectivity

    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/15159666/main.gif
    MEED Editorial
  • Rua Al-Madinah signs hotel operations agreement

    26 November 2025

    Saudi Arabia’s Rua Al-Madinah, the Public Investment Fund (PIF) subsidiary tasked with Medina’s tourism and cultural development, has signed a hotel operations and management agreement with Adeera Hospitality for its Rua Al-Madinah project.

    Adeera Hospitality, which PIF also backs, will operate two buildings comprising 250 hotel rooms and 120 residential units under its Alia brand within the Rua Al-Madinah project, which is being developed near the Prophet’s Mosque.

    Adeera joins Rua Al-Madinah’s roster of hotel operators, which includes leading global hospitality brands such as Marriott, Hyatt, Accor and Hilton.

    The Rua Al-Madinah development includes the construction of 18 hotels under three categories – three-star, four-star and five-star – as well as secondary infrastructure.

    The towers will range in height from 11 to 21 storeys.

    Rua Al-Madinah estimates that superblock five will require 430,000 cubic metres of concrete, 875,000 square metres of block wall, 423,000 sq m of drywall, 74,000 tonnes of steel rebar, 215,000 sq m of tiles, and 228,000 sq m of facades, curtain walls and windows.

    The hotels, which will mainly provide accommodation for pilgrims visiting the holy city, will have a built-up area of about 65,000 sq m.

    In February last year, the client awarded two contracts worth SR300m ($80m) to international consulting firms for work on the superblocks four and five components of the Rua Al-Madinah project.

    Rua Al-Madinah signed a contract with US-based engineering firm Jacobs for design consultancy services for 12 hotels and other infrastructure for superblock four of the project.

    Another contract was signed with US-based KEO International Consultants to oversee the implementation of the superblock five project.

    Other consultants working on superblock five include US-based Perkins Eastman and Singapore-based Meinhardt. 

    UAE-based Ema Design is the interior designer.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15158923/main.jpg
    Yasir Iqbal
  • Meraas confirms $517m The Acres villas contract award

    26 November 2025

    Dubai-based real estate developer Meraas, now part of Dubai Holding Group, has confirmed that it has awarded a AED1.9bn ($517m) contract to build 642 three-, four- and five-bedroom villas as part of the first phase of its residential community, The Acres, in Dubailand.

    The contract was awarded to the local firm United Engineering Construction Company.

    MEED exclusively reported in August that Meraas had awarded the contract for the project.

    The Acres project is designed by local architectural practice U+A Architects.

    The masterplan includes 1,200 villas ranging from three to seven bedrooms.

    It also features a nursery, school, clinic, mosques, clubhouses, a retail zone, a 2,000-square-metre garden, walking and biking trails, an outdoor gym, children’s playgrounds, swimming pools and sports facilities.

    The latest announcement follows Meraas awarding a AED440m ($120m) contract for the construction of the Northline residential project in the Al-Wasl area of Dubai.

    The contract was awarded to the local GCC Contracting Company.

    The project includes the construction of three residential buildings. Construction work is expected to begin shortly, and the project is slated for completion by 2027.

    Meraas’ latest project contract awards in Dubai are backed by heightened real estate activity in the UAE’s construction market. Schemes worth over $323bn are in the execution or planning stages, according to UK analytics firm GlobalData.

    The company forecasts that the output of the UAE’s construction sector will grow by 4.2% in real terms in 2025, supported by developments in infrastructure, energy and utilities, as well as residential construction projects.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15158561/main.jpg
    Yasir Iqbal
  • December deadline for Riyadh airport fourth runway

    26 November 2025

     

    King Salman International Airport Development Company (KSIADC) has allowed firms until 3 December to bid for the design-and-build contract for the fourth runway at King Salman International airport (KSIA) in Riyadh.

    The tender was first floated on 17 April. The previous bid submission deadline was 28 October.

    It is understood that the third and fourth runways will add to the two existing runways at Riyadh’s King Khalid International airport, which will eventually become part of KSIA.

    KSIADC, which is backed by Saudi Arabia’s Public Investment Fund, prequalified firms in September last year for the main engineering, procurement and construction packages; early and enabling works; specialist systems and integration; specialist systems, materials and equipment; engineering and design; professional services; health, safety, security, environment and wellbeing services; modular installation and prefabrication; local content; and environmental, social, governance and other services.

    The entire scheme is divided into eight assets. These are:

    • Iconic Terminal
    • Terminal 6
    • Private aviation terminal 
    • Central runway and temporary apron
    • Hangars
    • Landside transport
    • Cargo buildings
    • Real estate

    In August last year, KSIADC confirmed it had signed up several architectural and design firms for the various elements of the project.

    US-based firm Bechtel Corporation will manage the delivery of three new terminals, including the terminal for commercial carriers, Terminal 6 for low-cost carriers and a new private aviation terminal with hangars.

    Parsons, also of the US, was chosen as the delivery partner for two packages. One covers the airside infrastructure, including the runways, taxiways, air traffic control towers, fuel farms and fire stations. The other involves the infrastructure connecting the airport to the rest of the city, including utilities and roads.

    UK-based Foster+Partners will design the airport’s masterplan, including the terminals, six runways and a multi-asset real estate area.

    US-based engineering firm Jacobs will provide specialist consultancy services for the masterplan and the design of the new runways.

    UK-based engineering firm Mace was appointed as the project’s delivery partner and local firm Nera was awarded the airspace design consultancy contract.

    Project scale

    The project covers an area of about 57 square kilometres (sq km), allowing for six parallel runways, and will include the existing terminals at King Khalid International airport. It will also include 12 sq km of airport support facilities, residential and recreational facilities, retail outlets and other logistics real estate.

    If the project is completed on time in 2030, it will become the world’s largest operating airport in terms of passenger capacity, according to UK analytics firm GlobalData.

    The airport aims to accommodate up to 120 million passengers by 2030 and 185 million by 2050. The goal for cargo is to process 3.5 million tonnes a year by 2050.

    Saudi Arabia plans to invest $100bn in its aviation sector. Riyadh’s Saudi Aviation Strategy, announced by the General Authority of Civil Aviation (Gaca), aims to triple Saudi Arabia’s annual passenger traffic to 330 million travellers by 2030.

    It also aims to increase air cargo traffic to 4.5 million tonnes and raise the country’s total air connections to more than 250 destinations.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15158546/main.jpg
    Yasir Iqbal
  • Chinese contractor appointed for Algerian refinery project

    26 November 2025

    China’s Sinopec Guangzhou Engineering Company has signed a contract for the construction of a heavy naphtha catalytic processing unit at the Arzew refinery in Algeria.

    The contract was signed with the Algerian national oil and gas company Sonatrach.

    The contract uses the engineering, procurement, construction and operation model.

    Under the terms of the contract, Sinopec Guangzhou Engineering Company will handle the entire project lifecycle, from initial design to long-term management and operation.

    The project will be completed over 30 months, according to a statement from the Algerian Ministry of Hydrocarbons & Mines.

    The unit will have an annual capacity of 738,000 tonnes of heavy naphtha and will enable the refinery to increase gasoline production from 550,000 tonnes to 1.2 million tonnes a year.

    Algeria’s Ministry of Hydrocarbons & Mines said this represented “a significant step” that will strengthen the national capacity for gasoline production and help meet demand across various regions, particularly in the west and southwest of the country.

    Sinopec Guangzhou Engineering Company is a subsidiary of China Petroleum & Chemical Corporation (Sinopec), which is listed on stock exchanges in Hong Kong, Shanghai and New York.

    The project is part of Sonatrach’s wider programme to modernise and expand national refining capacities.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/15157814/main.jpg
    Wil Crisp