Saudi construction project ramp-up accelerates

8 March 2023

 

Saudi Arabia’s construction projects market is charting an ever-more dynamic growth trajectory, underpinned by progress on the kingdom’s mega and gigaprojects.

The country was the GCC’s most active projects market for construction contractors for the third year running in 2022, with $32.4bn-worth of construction and transport contracts awards, according to MEED Projects.

It was also the third consecutive year of growth for Saudi construction contract awards, which rose by 58 per cent last year, up from $20.6bn in 2021. This, in turn, was up 38 per cent from the $14.8bn-worth of awards in 2020.

Construction sector awards accounted for 58 per cent of the total $55bn-worth of Saudi contract awards in 2022 across all sectors.

Gigaprojects drive

After the 2022 reveal of The Line, the 170-kilometre-long structure planned for the $500bn Neom project, February 2023 saw the kingdom launch New Murabba, a masterplan to create the world’s largest modern downtown in Riyadh.

As its centrepiece, the masterplan will feature a cubic skyscraper titled the Mukaab, a Najdi-inspired landmark that will be one of the biggest buildings in the world upon completion, at 400 metres high, 400 metres wide and 400 metres long.

The overall development will cover an area of 19 square kilometres, nearly five times the size of Dubai’s downtown, which spans two square kilometres and was built at an estimated cost of AED73bn ($20bn). While the total budget for the Riyadh scheme is not yet announced, its estimated cost could exceed $100bn.

Saudi Arabia's sovereign wealth vehicle, the Public Investment Fund (PIF), is also considering plans for a 2km megatower in Riyadh. The proposed tower would be more than double the height of the world’s tallest building – Dubai’s Burj Khalifa, which is 828 metres tall. Depending on the final design, contractors that have priced megatall towers in the region say a 2km-tall structure could cost about $5bn to construct.

New Murabba will be developed by the New Murabba Development Company, which is backed by the PIF. It could also be added to the official list of PIF gigaproject developments, alongside Neom, the Red Sea Project, Qiddiya, Roshn and Diriyah Gate.

According to MEED’s Saudi Gigaprojects report, the kingdom's gigaprojects could award up to $569bn-worth of contracts from 2021 through 2025, financing and contracting capacity permitting.

However, even a fraction of such a total would be a step change for the regional projects market, which saw $172bn-worth of work awarded from 2016 to 2021.

Saudi Arabia’s contract awards in the last quarter of 2022 were dominated by Neom’s infrastructure and earthworks packages. Five of the top 10 largest construction awards in 2022 and 2023 so far have been for Neom projects.

Other dynamic projects include the $30bn King Salman International airport; the $15bn Al-Ula development; the Royal Commission for Riyadh City's $23bn King Salman International Park, Green Riyadh and Sports Boulevard projects; Saudi Entertainment Ventures' (Seven) $5bn entertainment complexes; the $3bn Asir project; and Neom's $2bn Trojena lake project known as ‘The Vault’.

Urban regeneration

Alongside the redevelopment of Riyadh, the kingdom is also pursuing a much broader series of regeneration schemes across its major cities as part of Saudi Vision 2030.

In February, the country kicked off a major Jeddah waterfront project, part of a 15-year Historic Jeddah Revitalisation programme. The same month, US-headquartered Parsons was awarded a $15m contract to provide construction project management consultancy and contract administration services (PMCM) for the Rua al-Madinah project in Medina city.

The Rua al-Madinah project represents the first phase of the Madinah Central Area development and is projected to add $37bn to Saudi’s GDP and create 93,000 jobs. Rua al-Madinah Holding Company, another PIF subsidiary, is developing the scheme.

Last October, PIF invited firms, through its Saudi Downtown Company (SDC), to submit bids for contracts to provide project management services for 12 $500m urban downtown redevelopment schemes in cities across the kingdom.

Prospects for 2023

With more than $120bn-worth of projects in the pipeline for 2023, the outlook remains strong for the construction and transport sectors. Alongside Saudi Arabia’s masterplans, there are also a variety of public transport projects, logistics platforms and railways in the procurement process as part of the kingdom’s National Transport and Logistics Strategy.

The planned rise in government capital expenditure to SR1,114bn in 2023, up from SR955bn in 2022, supports the ramp-up in project activity.

The Ministry of Finance’s key 2023 budget spending objectives in construction include building affordable housing for 120,000 families, developing nearly 1 million sq m of parks, and building 176 ready-made industrial units together with the infrastructure for a further 56 million sq m of industrial plots. The affordable housing plans are part of a Ministry of Housing Sakani programme to raise the home-ownership ratio to 70 per cent by 2030.

The Saudi budget also affirmed that by 2025, PIF plans to invest SR1tn in new projects.

Amid subdued activity in neighbouring countries, Saudi Arabia has become the prevailing focus for GCC contractors, with local and international contractors pivoting towards the kingdom and away from Qatar and the UAE. 

“We are focusing on projects in Saudi Arabia. The job is there, not elsewhere anymore,” says a contracting source from a UAE national company.

Locally, the build-up of construction activity will be spearheaded by the creation of national champions in the contracting sector, with PIF investing $1.3bn in four local construction companies: Al-Bawani Holding Company, Almabani General Contractors Company, El-Seif Engineering Contracting Company and Nesma & Partners Contracting Company.

Image: Red Sea Global signs hotel management agreement with Fairmont to operate resort in first phase of development at the Red Sea Project 

https://image.digitalinsightresearch.in/uploads/NewsArticle/10655807/main.gif
Eva Levesque
Related Articles
  • Saudi Arabia evaluates 2GW energy storage bids

    23 October 2024

    National Grid Saudi Arabia, a wholly-owned subsidiary of Saudi Electricity Company (SEC), is evaluating bids for the contract or contracts to supply battery energy storage systems (bess) with a total combined capacity of up to 2,500MW.

    According to a source familiar with the project, the SEC entity solicited bids directly from equipment manufacturers, which include China's Sungrow, Hithium and Huawei Technologies, among others, to supply batteries, which will be installed by an engineering, procurement and construction (EPC) contractor.

    It is understood that SEC has tendered the  EPC package or packages separately.

    MEED previously reported that the planned facilities, each with a capacity of 500MW or roughly 2,000 megawatt-hours, are located in or within the proximity of the following key cities and load centres:

    • Riyadh
    • Qaisumah
    • Dawadmi
    • Al-Jouf
    • Rabigh

    The main applications for the planned bess facilities include load shifting, black start, frequency regulation and voltage support.

    They are envisaged to replace part load operation of existing power plants by charging and discharging electricity according to the system load variations and primary and secondary reserves, among other potential applications.

    In August, National Grid SA awarded the EPC contracts for three energy storage systems to Riyadh-based investment group Algihaz Holding.

    The projects are located in Najran, Madaya and Khamis Mushait.

    According to an industry source, the contracts are valued at more than $800m.

    Surging growth

    The overall capacity of deployed battery energy storage systems globally is expected to reach 127GW by 2027, up from an estimated cumulative deployment of 36.7GW at the end of 2023, according to GlobalData.

    The global information services provider cited Chinese companies BYD and CATL and South Korean companies LG Energy Solutions and Samsung SDI among the top battery technology providers globally.

    Carmakers Tesla, Volkswagen, Stellantis, General Motors, Mitsubishi Motors and Hyundai were identified as the key end markets for battery products so far.

    GlobalData expects battery energy storage deployment to increase "due to a large number of countries opting for battery storage systems to enhance their power sector transformation".

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12779739/main.gif
    Jennifer Aguinaldo
  • Saudi Arabia receives 4.5GW solar and wind prequalifications

    22 October 2024

     

    On 22 October, utility and renewable energy developers submitted their statements of qualifications (SOQs) for the contracts to develop five renewable energy independent power projects (IPPs) in Saudi Arabia.

    Saudi Arabia's principal buyer, Saudi Power Procurement Company (SPPC), issued the prequalification request for the IPPs making up the sixth round of the kingdom's National Renewable Energy Programme (NREP) on 29 September.

    Firms that are understood to have submitted SOQs include international developers such as Japan's Marubeni and Jera; France's EDF Renewables, Engie and TotalEnergies Renewables; as well as Chinese and local utility developers.

    The projects, comprising four solar photovoltaic (PV) IPPs and one wind IPP, will have a total combined capacity of 4,500MW.

    The following schemes comprise the NREP's sixth round:

    • 1,500MW Dawadmi wind IPP (Riyadh)
    • 1,400MW Najran solar PV IPP (Najran)
    • 600MW Samtah solar PV IPP (Jizan)
    • 600MW Al-Darb solar PV IPP (Jizan)
    • 400MW Al-Sufun solar PV IPP (Hail)

    SPPC is responsible for the pre-development, tendering and subsequent offtaking of the energy from the projects.

    US/India-based Synergy Consulting is providing financial advisory services to SPPC for the NREP sixth-round tender. Germany's Fichtner Consulting and US-headquartered CMS are providing technical and legal consultancy services, respectively.

    SPPC revealed the following lowest and second-lowest bidders for the contracts to develop four solar PV projects under the fourth round of the NREP on 21 October.

    2,000MW Al-Sadawi solar IPP (Eastern Province)

    • L1: Abu Dhabi Future Energy (UAE)/Korea Electric Power Corporation (Kepco, South Korea)/GD Power Development (China): $c1.29 a kilowatt-hour (kWh)
    • L2: SPIC Huanghe Hydropower Development (China)/EDF Renewables (France): $c1.31/kWh

    Al-Masaa solar IPP (Hail): 1,000MW

    • L1: SPIC/EDF Renewables (France): $c1.36/kWh
    • L2: AlJomaih Energy & Water (local) / TotalEnergies Renewables (France): $c1.40/kWh

    Al-Hinakiyah 2 solar IPP (Medina): 400MW

    • L1: SPIC/EDF: $c1.51/kWh
    • L2: Masdar/Kepco/Nesma: $c1.57/kWh

    Rabigh 2 solar IPP (Mecca): 300MW

    • L1: AlJomaih Energy & Water / TotalEnergies Renewables: $c1.78/kWh
    • L2: Masdar/Kepco/Nesma: $c1.89/kWh

    MEED previously reported that SPPC plans to award the NREP round-five contract before the end of the year.

    Photo: Pixabay

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12774001/main0411.jpg
    Jennifer Aguinaldo
  • Oman awards $186.5m sewer network packages

    22 October 2024

    Oman's Nama Water Services has awarded several contracts with a total combined value of $186.5m for the construction and development of packages of a sewer network catering to Muscat.

    The B7A contract to build a sewer network comprising a main trunk sewer and pumping station in South Azaibah in the Muscat Governate has been awarded to the local United Gulf Construction Company, which offered to build the project for $54.5m.

    Nama Water Services tendered the contract in September last year. In addition to the supply and installation of pumping stations, the scope includes the construction of a 3.5-kilometre (km) gravity sewer network and property and house connection chambers.

    Nama Water Services awarded a second contract – C13 Package C4 – worth $30m to the local firm Target. The main scope includes the construction of a 16km gravity sewer network with diameters ranging from 200 millimetres (mm) to 600mm in Oman's Seeb catchment. It also includes the construction of about 265 gravity sewer manholes.

    Cairo-headquartered Arab Contractors won a $35m contract to construct a sewer network at the C5A and C5B areas in the Aseeb catchment in Muscat.

    C5A involves the construction of a 35km gravity sewer network with diametres of 200mm-900mm and 420 gravity sewer manholes. 

    C5B entails the construction of a 32km gravity sewer network with similar diametres to C5A, and a further 375 sewer manholes.

    Nama Water Services awarded a fourth contract to Target. Valued at $67m, it involves the construction of sewer network B7D, as part of the Bausher sewer infrastructure at Al-Ansab in Oman.

    The main project scope involves the construction of a 75km gravity sewer network, 103km of property and house connection chambers and a pump station.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12772678/main.jpg
    Jennifer Aguinaldo
  • Team offers $c1.29/kWh for 2GW Sadawi solar IPP project

    21 October 2024

    A developer team that includes UAE-based Abu Dhabi Future Energy Company (Masdar) has submitted the lowest bid for a contract to develop the 2,000MW Al-Sadawi solar independent power project (IPP) in Saudi Arabia.

    The consortium, which includes South Korea's Korea Electric Power Corporation (Kepco) and China's GD Power Development, submitted a levelised cost of electricity of hals 4.847 ($c1.29) a kilowatt-hour (kWh) for the contract to develop the scheme, which is located in the Eastern Province.

    The second-lowest bidder is a team that includes China's SPIC Huanghe Hydropower Development and France's EDF Renewables, which offered to develop the project for $c1.31/kWh.

    Saudi Power Procurement Company (SPPC) received six proposals from companies for the contracts to develop and operate four solar photovoltaic (PV) IPP projects in Saudi Arabia in August.

    The projects, which have a total combined capacity of 3,700MW, are being tendered under the fifth procurement round of the kingdom's National Renewable Energy Programme (NREP).

    According to SPPC, the lowest and second-lowest bidders in the remaining schemes under round five of the NREP are:

    Al-Masaa solar IPP (Hail): 1,000MW

    • L1: SPIC/EDF Renewables (France): $c1.36/kWh
    • L2: AlJomaih Energy & Water (local) / TotalEnergies Renewables (France): $c1.40/kWh

    Al-Hinakiyah 2 solar IPP (Medina): 400MW

    • L1: SPIC/EDF: $c1.51/kWh
    • L2: Masdar/Kepco/Nesma:  $c1.57/kWh

    Rabigh 2 solar IPP (Mecca): 300MW

    • L1: AlJomaih Energy & Water / TotalEnergies Renewables: $c1.78/kWh
    • L2: Masdar/Kepco/Nesma: $c1.89/kWh

    Saudi utility developer Acwa Power is not among the 23 companies that were prequalified to bid for the fifth round of NREP projects.

    US/India-based Synergy Consulting is providing financial advisory services to SPPC for the NREP fifth-round tender. Germany's Fichtner Consulting is providing technical consultancy services.

    The round five solar PV IPPs take the total capacity of publicly tendered renewable energy projects in Saudi Arabia to over 10,300MW. Solar PV IPPs account for 79%, or about 8,100MW, of the total capacity.

    Four wind IPPs, one of which has yet to be awarded, account for the remaining capacity.

    SPPC is procuring 30% of the kingdom's target renewable energy by 2030. Saudi sovereign wealth vehicle the Public Investment Fund (PIF) is procuring the rest through the Price Discovery Scheme. The PIF has appointed Acwa Power, which it partly owns, as principal partner for these projects.

    The Saudi Energy Ministry recently said that the kingdom plans to procure 20,000MW of renewable energy capacity annually, starting this year and until 2030.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12768211/main.jpg
    Jennifer Aguinaldo
  • Ashghal tenders sewerage works

    21 October 2024

    Qatar’s Public Works Authority (Ashghal) has issued a tender for the construction of the remaining works for two packages of the Al-Kheesa foul sewer network.

    According to Ashghal's website, the project packages are called C2018/7 and C2017/118.

    It issued the tender on 9 October and expects to receive bids by 10 November. Asghal set the bid bond for the contract at QR1.7m ($467,000).

    MEED understands the project is located in the Al-Wajba area and is expected to be awarded in March 2025.

    It is one of the most recent infrastructure packages tendered by the authority, which oversaw the multibillion-dollar Local Roads and Drainage Programme (LRDP) in the run-up to the state's hosting of the Fifa World Cup in 2022.

    LRDP includes more than 200 road and drainage schemes worth an estimated QR53.2bn ($14.6bn).

    In September, Ashghal issued a tender for the construction of a road network in the Izghawa and Al-Themaid areas in the northwest of Doha.

    The project involves the construction of a single- and dual-carriageway road network in the area. The overall project is being procured in two work packages.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/12767589/main1835.jpg
    Jennifer Aguinaldo