Saudi Construction Sector To Gather Steam In H2 2012

The Saudi construction sector will further gather steam in the second half of 2012, the National Commercial Bank “Construction Contracts Index” for the second quarter of this year released Saturday indicated.

NCB Construction Contracts Index reached 309.12 points by the end of the second quarter of 2012, with the total value of awarded contracts reaching SR74.5 billion. The value of awarded contracts through the first half of 2012 reached SR126.7 billion, eclipsing 2011’s “remarkable performance.”

Sixteen projects each worth SR1 billion were awarded in the period, the bulk of which came from the petrochemical sector alone.

“We expect this trend to continue into H2 ’12 as the value of awarded contracts is anticipated to further increase during this period. Additionally, non-anchor sectors are expected to take on a larger share of the overall value of awarded contracts as the government’s 2012 budget called for heavy investment in the social infrastructure sectors, the NCB report said.

On a monthly basis, June’s value of contract awards further increased to approximately SR32.3 billion, led by the petrochemical and power sectors. May’s value of contract awards jumped to approximately SR27.8 billion, led by the petrochemical and power sectors. April’s contract awards were valued at approximately SR14.4 billion, led by the transportation and education sectors.

The value of awarded contracts during the Q2’12 continued at an impressive pace as approximately SR74.5 billion worth of contracts were awarded. Anchor sectors were the main drivers during the quarter as approximately SR51.7 billion worth of contracts were awarded within the petrochemical and power sectors alone.

Furthermore, the SR126.7 billion in awarded contacts during H1 ’12 was largely as a result of mega-projects being awarded within the petrochemical and power sectors, which accounted for SR67 billion of the first half’s total value. However, infrastructure related sectors, such as the healthcare, education, urban development and roads, which have been the focus of public spending, contributed approximately SR26.5 billion of H1 ’12 value of awarded contracts.

Building on the fast growth that was exhibited during the first quarter, the SR74.5 billion in awarded contracts during Q2 ’12 resulted in a substantial tally for the first half of the year.

Compared to Q2’11, the value of awarded contracts grew by 46 percent during Q2’12. The SR126.7 billion in awarded contracts during H1’12 significantly grew by 50 percent compared to H1’11, which had reached SR84.3 billion. Although 2011 was considered to be a remarkable year in the construction sector, it appears that 2012 will continue this positive trend.

The Construction Contracts Index (CCI) reached 309.12 points to end the quarter after seeing the index steadily in-crease from 254.18 and 285.53 in April and May, respectively. This growth is largely due to the abundance of mega projects over the past six months, especially during May and June.

The growth in the value of awarded contracts has also been bolstered by non-anchor sectors, whereby the government has placed a significant emphasis on the continual development of the Kingdom.

Given the sheer amount of mega-projects that were awarded in the petrochemical and power sectors, the Eastern Province was the largest recipient as 37 percent of all awarded contracts by value occurred in that region. The Makkah region also had several mega-projects that were awarded in the petrochemical sector, mainly due to the development of Petro-Rabigh’s refinery and petrochemicals complex in the city of Rabigh.

The Madinah region captured 14 percent of the value of awarded contracts largely due to the development of the third phase of Yanbu’s Power Plant. The Riyadh region benefited from numerous contract awards across numerous sectors, which contributed to its 14 percent share.

The value of awarded contracts further increased to SR32.3 billion during May as the petrochemical and power sectors accounted for 89 percent of the value of contracts. Approximately SR20 billion worth of contracts were awarded in the petrochemical sector. Al Jubail Petrochemical Company (Kemya-JV between SABIC and ExxonMobil Chemical) awarded six contracts worth SR12.8 billion to several international contractors.

Daelim received the bulk of the contracts as it was awarded three contracts worth approximately SR7.1 billion. The first contract worth SR3 billion called for the development of the offsite and utilities for Kemya’s elastomer plant in Jubail. The work is expected to be completed by the third quarter of 2015.

May’s value of awarded contract jumped to SR27.8 billion. The petrochemical and power sectors accounted for nearly 69 percent of the total value of awarded contracts. Approximately SR12.8 billion worth of contract were awarded in the petrochemicals sector as Petro-Rabigh (JV between Saudi Aramco and Sumitomo Chemical) awarded five mega-projects as part of the phase two expansion. The largest of these contracts was awarded to Saipem SpA in the amount of SR5.6 billion. The contract calls for all associated works for the expansion of the Rabigh Aromatics Complex. The contract is expected to be completed by the first quarter of 2015.

The SR14.4 billion in awarded contracts during April was led by the transportation and education sectors. A single contract within the transportation sector accounted for 21 percent of the value of awarded contracts during April. The contract was awarded by Saudi Aerospace Engineering Industries (SAEI) to a consortium led by Turkey’s TAV Construction in the amount of SR3 billion. The phase one contract calls for the construction of Jeddah’s King Abdulaziz International airport’s aircraft maintenance, repair and operation (MRO) facility. Phase one includes the design and building of 11 aircraft hangars, ancillary building, an administration building, a closed park and aircraft parking aprons.

Within the education sector, approximately SR2.4 billion worth of contracts were awarded by the Ministry of Higher Education for the construction and development of numerous universities and associated facilities across the Kingdom. This brings the total value of awarded contracts in the education sector to approximately SR8.5 billion during H1 ’12. This reflects the government’s commitment to de-velop the education sector, which it had targeted as a critical sector as per its 2012 budget.

The healthcare sector, which has also been targeted by the government, witnessed approximately SR2.3 billion worth of awarded contracts. The Ministry of Health awarded numerous contracts across the Kingdom to local contractors. The contracts primarily consisted of constructing new hospitals and clinics. The aggregate value of awarded contracts during H1 ’12 in the healthcare sector reached approximately SR6.4 billion.

Saudi Gazette