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
  • Egyptian contractor wins Abu Dhabi Ramhan Island deal

    4 September 2026

    Egypt-headquartered contractor Rowad Modern Engineering has been awarded the main works contract for the Marina Apartments project on Ramhan Island, Abu Dhabi.

    The contract was awarded by the local firm Eagle Hills, which is led by Mohamed Alabbar, the founder and chairman of Emaar Properties.

    Rowad’s scope includes structural and architectural works, finishing, and mechanical, electrical and plumbing systems.

    The company will also deliver infrastructure works, including utility connections to external networks, testing and commissioning.

    The development comprises two residential towers offering 187 residential units.

    The works will be carried out under the consultancy supervision of local engineering firm Mirage Leisure & Development.

    The latest contract award follows Eagle Hills awarding the local firm Arabian Construction Company (ACC) an estimated AED2.5bn ($680m) construction contract to build about 500 villas at the Ramhan Island development, as reported by MEED previously.

    Located off the coast of Abu Dhabi, the Ramhan Island development spans an area of over 4 million square metres.

    The overall development includes the construction of 1,800 villas, 900 residences, a hotel and retail facilities.

    Mohamed Alabbar launched the Ramhan Island development in May 2024.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19355437/main.jpg
    Yasir Iqbal
  • Dubai sets deadline for Jebel Ali waste-to-energy PPP

    4 September 2026

     

    Register for MEED’s 14-day trial access 

    Dubai Municipality has set a 27 September deadline for developers to submit expressions of interest (EOIs) for its planned Jebel Ali waste-to-energy (WTE) public-private partnership (PPP), according to a source.

    The greenfield facility is planned to treat up to 6,000 tonnes of municipal solid waste a day.

    The municipality is seeking international and local developers to develop, finance and operate the facility. It is planning to prequalify developers later this year before issuing a request for proposals (RFP) in the first quarter of next year, a source said.

    The Jebel Ali facility is intended to support Dubai’s waste-management strategy and its target of reducing reliance on landfill.

    Dubai Municipality is being advised by a team led by Abu Dhabi’s Tribe Infrastructure Group, with UK-headquartered Ashurst and Germany’s Fichtner also involved.

    It was confirmed to MEED that the project is separate from the planned second phase of the Warsan WTE facility, for which Dubai Municipality issued a consultancy tender in February.

    That facility will be located in Warsan 2, next to the Al-Aweer sewage treatment plant. The expansion is expected to increase waste-conversion capacity at the existing Warsan site with an estimated budget of $500m. The consultancy contract has a duration of six years.

    The original Warsan WTE plant, Dubai’s first major WTE public-private partnership (PPP) project, reached full commercial operations in 2024.

    Located in the Warsan area, the AED4bn ($1.1bn) facility treats 1.9 million tonnes of municipal solid waste annually, generating up to 220MW of thermal energy that is fed into the local grid.

    In February 2023, state utility Dubai Electricity & Water Authority (Dewa) and Dubai Waste Management Company signed the power-purchase agreement (PPA) for the project.

    Dubai Waste Management Company, the special-purpose vehicle implementing the scheme, reached financial close in June 2021 for the project.

    The Warsan project was developed under a 35-year PPP concession by a consortium comprising Dubai Holding, Dubai Aluminium, Tech Group and Itochu Corporation. 

    The main contractor was a joint venture of Belgium’s Besix Group and Hitachi Zosen Inova of Switzerland.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19354502/main.jpg
    Mark Dowdall
  • Egypt to invest $4.5bn in refinery upgrades

    4 September 2026

    Egypt is planning to invest $4.5bn in refinery upgrades, according to the country’s Minister of Petroleum and Mineral Resources, Karim Badawi.

    Egyptian refineries are operating at 80% of capacity compared with 66% two years ago, according to Badawi, who wants further increases in utilisation of existing facilities.

    “We aim to invest around $4.5bn to develop existing refineries and build new units to reduce imports and achieve self-sufficiency in refined products,” he said in a statement.

    In May, Egypt said that it had increased its fuel import budget by almost 40% for the 2026-27 fiscal year amid higher global prices driven by the Iran war, which started when the US and Israel launched an attack on Iran on 28 February.

    Brent crude prices are up about a third since the conflict started, trading at more than $90 a barrel for most of this month so far.

    Badawi said a decline in Egypt’s oil and gas production between 2021 and 2024 occurred because foreign companies were reluctant to invest in the country’s energy sector due to unpaid government debts.

    He said: “We have settled all the debt, which reached $6.1bn in June 2024. As a result, hydrocarbon exploration and production activity grew by nearly 20% this year.

    “We are now moving in the right direction to increase oil and gas output gradually.”

    Despite the ongoing push to develop projects in the country’s oil and gas sector, several key projects have seen significant delays in recent years.

    These include a $2bn hydrocracking complex package that forms part of the wider Assiut oil refinery upgrade project.

    Earlier this month, MEED revealed that mechanical completion of the hydrocracking package is now unlikely to be reached until early next year due to complications in the final stages of construction.

    The hydrocracking complex package has experienced extensive delays over several years.

    In April this year, Badawi called for work to accelerate on the Assiut oil refinery upgrade project, saying it is important for reducing the country’s spending on imported refined products.

    At the time, the oil ministry said the project was 88% complete, with trial operations planned by the end of the year.

    Assiut Oil Refining Company (ASORC), a subsidiary of state-owned Egyptian General Petroleum Corporation, is the project operator.

    France’s Technip Energies is the main contractor, performing engineering, procurement and construction work on the Assiut hydrocracking complex under a $2bn contract awarded by ASORC in February 2020.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19353521/main.jpg
    Wil Crisp
  • North Field West platform bidders get extra time

    4 September 2026

     

    QatarEnergy has granted contractors additional time to prepare bids for a key tender for the engineering, procurement, construction and installation (EPCI) of large platforms for the giant North Field gas field in Qatari waters.

    The tender, issued earlier this year, forms part of the wider North Field West (NFW) project, the third and last phase of the state enterprise’s North Field liquefied natural gas (LNG) expansion programme.

    The core scope comprises the EPCI of four production deck modules (PDMs) and associated structures. The new PDMs will increase gas production from North Field reservoirs and provide additional gas feedstock for the NFW LNG development.

    QatarEnergy has set 15 September as the deadline for technical bid submissions, while commercial bids are due on 10 November, according to sources.

    The previous deadlines for submission of technical and commercial bids were 30 August and 25 October, respectively, MEED previously reported.

    The following contractors, among others, are understood to be bidding:

    • China Offshore Oil Engineering Company (China)
    • Larsen & Toubro Energy Hydrocarbon (India)
    • McDermott (US)
    • Saipem (Italy)

    Before issuing the PDM tender, QatarEnergy awarded McDermott a contract for the EPCI of four offshore jackets that will also support gas feedstock supply for the NFW LNG project. The contract is estimated to be worth about $200m, MEED reported in January.

    North Field LNG expansion

    QatarEnergy is advancing the three phases of its estimated $40bn North Field LNG expansion project. EPC works on all three giant projects are progressing.

    QatarEnergy is understood to have committed nearly $30bn to the first two phases – North Field East (NFE) and North Field South (NFS) – which will lift Qatar’s LNG production capacity from 77.5 million tonnes a year (t/y) to 126 million t/y by 2028.

    QatarEnergy awarded the main EPC contracts for NFE in 2021. The project was intended to raise LNG output to 110 million t/y by 2025. The $13bn EPC package – covering the EPCI of four LNG trains, each with a capacity of 8 million t/y – was awarded in February 2021 to a consortium of Japan’s Chiyoda and France’s Technip Energies.

    In May 2023, QatarEnergy awarded the $10bn main EPC contract for NFS to a consortium of Technip Energies and Consolidated Contractors Company (CCC). The contract includes two LNG trains, each with a capacity of 7.8 million t/y.

    Once fully operational, the first two phases are expected to add 48 million t/y of LNG supply to the global market.

    QatarEnergy took the final investment decision on NFW this year, awarding an EPC contract estimated at $8bn to a joint venture comprising Technip Energies, CCC and Gulf Asia Contracting (GAC) in February.

    Chiyoda carried out the front-end engineering and design (feed) work for the NFW LNG project.

    The NFW scope covers the EPC of two LNG trains with a combined capacity of 16 million t/y, as well as associated facilities for gas treatment, natural gas liquids recovery and helium extraction.

    In addition to LNG, NFW is expected to produce about 175,000 barrels of oil equivalent a day of condensate, ethane and LPG.

    With all three phases now under EPC execution – and NFE scheduled for commissioning later this year – QatarEnergy is positioning itself to remain one of the world’s largest LNG suppliers over the long term.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19352006/main.jpg
    Indrajit Sen
  • Contractors prepare Dubai Metro Gold Line prequalifications

    4 September 2026

     

    Register for MEED’s 14-day trial access 

    Contractors are preparing to submit their prequalification statements on 7 September for a contract to build the new Gold Line as part of the Dubai Metro network’s expansion.

    Dubai’s Roads & Transport Authority (RTA) issued the request for qualification notice for the project in June, with an initial submission deadline of 17 August, as MEED exclusively reported.

    This followed the RTA’s invitation to contractors to express interest in building the new Gold Line in May.

    Dubai officially announced the launch of the new Gold Line in April.

    In a post on social media site X, Sheikh Mohammed Bin Rashid Al-Maktoum, UAE Vice President and Prime Minister and Ruler of Dubai, said the project will cost about AED34bn ($9.2bn).

    The Gold Line will increase the Dubai Metro network’s total length by 35%.

    The project is scheduled for completion in September 2032.

    The Gold Line will be a fully underground network covering more than 42 kilometres, with 18 stations.

    It will pass through 15 areas in Dubai, benefiting 1.5 million residents.

    The project is expected to provide connectivity to over 55 under-construction real estate development projects.

    The Gold Line will start at Al-Ghubaiba in Bur Dubai and end at Jumeirah Golf Estates.

    It will connect to Dubai Metro’s existing Red and Green lines and integrate with the Etihad Rail passenger line.

    The contractor will be responsible for the design and build of all civil works, electromechanical equipment, rolling stock and rail systems.

    The selected contractor will also be required to assist in the systems maintenance and operations during an initial three-year period.

    In October last year, MEED exclusively reported that the RTA had selected US-based engineering firm Aecom to provide consultancy services for the Dubai Metro Gold Line project.

    Stage one covers concept design, stage two covers preliminary design, stage three covers the preparation of tender documents, stage four encompasses construction supervision, and stage five covers the defects and liability period.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/19350865/main.png
    Yasir Iqbal