Kingdom’s industry awarded $13.3 billion worth of contracts; value highest in 4 years
Saudi Arabia’s construction industry has seen a strong increase in the first quarter of the year off the back of $13.3 billion worth of awarded contracts, mainly in the energy and utility sectors, it has been announced.
According to a report by the US-Saudi Arabian Business Council (USSABC), the performance highlights the focus by both the government and the private sector in reclaiming the positive trend, prior to the precipitous decline in oil revenues.
Dwindling oil reserves served as a major inflection point and proved a contributing factor in the reduction of mega-project awards in the Kingdom. However, improved oil prices and a focus by the government to spend heavily on capital expenditure has aided in the turnaround, the report added.
In the report, the Council said that the $13 billion in awarded contracts contained significant mega-projects across numerous sectors. Most notably was the oil and gas, water, and transportation sectors, which accounted for 67% of all awarded contracts during Q1 2019.
The USSABC Contract Awards Index (CAI) reached 168.69 points at the end of the first quarter. This highlights a rebound in the index after an extended lull during 2017 and 2018.
The CAI’s 168.69 points marks a 29% increase versus Q1 2018, which ended at 130.63 points. Furthermore, the impressive turnaround during Q1 2019 has not been witnessed since July 2016 when the CAI reached 176.53 points, said the USSABC report.
As for the CAI’s performance during the first quarter there was a gradual increase with each passing month, it stated.
January’s CAI reached 143.29 points, February increased to 155.34 points, and March ended higher at 168.69 points.
The $13 billion in awarded contracts during the first quarter marks an overwhelming 113% increase compared to Q1 2018, when the value was $6.13 billion.
According to the report, the first quarter had the highest value of awarded contracts dating back to Q1 2015 when the value reached $23.6 billion.
Furthermore, the value of awarded contracts in Q1 2019 alone accounts for 48% of the total value witnessed in 2018, it stated.
“Consequently, the pace of awarded contracts thus far indicates that construction activities across all sectors will re-emerge as a strategic focal point in the Kingdom,” the Council said in its report.
The power sector, which usually garners a significant share of awarded contracts, contributed only 5% of awarded contracts. However, is it expected to be a larger contributor as the year progresses, it stated.
From a geographical context, the location of contract awards was heavily concentrated in the Eastern Province, which accounted for a 40% stated the Council in its report.
This comes as no surprise given the heavy industries in that region. A significant portion of the awarded contracts in the Eastern Province were in the oil & gas and water sectors bringing the total value of contracts to $5.14 billion, it stated.
Several mega projects in the Eastern Province pertained to Saudi Aramco’s investments in its offshore Marjan and Berri oil fields, it added.
The Makkah region too captured a major share, around 17% of the value of contracts worth $2.18 billion led by the water and hospitality sectors.
Water projects included desalination plants in Rabigh as well as the construction of a Four Seasons hotel in Jeddah, stated the report.
The Riyadh region came in third with $1.70 billion or 13% of the value of awarded contracts. Two significant projects were awarded in the transportation and real estate sectors.
The transportation contract pertained to the construction of the Riyadh second ring road, while the real estate sector witnessed a large residential project awarded by the Ministry of Housing, it added.