JEDDAH: The Saudi construction sector continues to display its resiliency as it started the year on a strong note, the National Commercial Bank said in its Quarterly Review of Contract Awards in The Construction Sector. The value of awarded contracts typically increases during the second half of the year, it noted. "However, we witnessed an accelerated level of awarded contracts during the first quarter as the magnitude of expenditures by the government led to an increase in mega-project signings. The two announcement made by King Abdullah, Custodian of the Two Holy Mosques, during the quarter, which called for nearly SR500 billion worth of financial support, will have deep ramifications on the construction industry. Most notably will be the construction of 500,000 housing units in the amount of SR250 billion as well as the provisioning of SR16 billion to the Ministry of Health to implement and expand several medical projects. While these projects are geared toward the long-term, the construction sector's outlook appears to be very favorable." The momentum that was witnessed during the end of 2010 has continued into the first quarter of 2011 as the total value of awarded contracts reached SR49.7 billion. The ongoing priorities to grow the Kingdom's economic and social infrastructure as was set-forth in the 2011 budget has allowed the construction sector to continue its impressive growth. The value of awarded contracts was the result of several mega-projects being awarded in sectors such as the transportation, oil & gas and power sectors. The oil & gas sector alone accounted for 38 percent of the total value of awarded contracts followed by the transportation and industrial sectors, each garnering 18 percent and 10 percent, respectively. The SR49.7 billion in awarded contracts during Q1'11 represents a significant jump compared to the same period last year when SR8.8 billion worth of contracts were awarded. Additionally, the Construction Contracts Index (CCI) reached 187.6 points to end the quarter compared to Q1'10, which witnessed the CCI at 79.02 points. The CCI climbed to its highest point in February, reaching 225.5 points. Given the high value of awarded contracts during Q1'11, the CCI is off to a fast start similar to 2009. This suggests that the value of awarded contracts is expected to progressively increase as we reach the second half of the year. Furthermore, the 2011 budget has put a significance on the construction of many healthcare centers and educational facilities, of which the awarded contracts are likely to occur during H2'11. The value of awarded contracts by region is distributed among the provinces. As expected, the Eastern Province held the majority share of awarded contracts due to the value of awarded contracts that are associated with the oil & gas, power and water sectors. Makkah had 16 percent of the awarded contracts mainly due to a significant railways contract being awarded as part of the Haramain high-speed railway project. We expect the Eastern Province to maintain the highest portion of awarded contracts throughout the year due to the presence of oil and gas fields. The total value of awarded contracts in January reached SR7 billion. The power sector accounted for 62 percent of the awarded contracts while the water sector accounted for 20 percent. There was a single awarded contract in the power sector by the Saudi Electricity Company (SEC) to Arabian Bemco to extend the PP10 and Qurayyah power plants. Under the expansion, Arabian Bemco will add 700MW to PP10 and 800MW to Qurayyah. The value of the contract is approximately SR3.75 billion and is estimated to be completed by 2012 and 2013 for the PP10 and Qurrayah plants, respectively. The implementation of improved water networks as well as the development of desalinization plants is a major initiative that was set forth in the 2011 budget. The Ministry of Water and Electricity awarded numerous contracts across the kingdom that totaled SR1.1 billion. The contracts were awarded to local contracting companies. The contracts called for the implementation of water and sewage networks, construction of water towers and installation of various pipelines and reservoirs. The transportation and oil & gas sectors elevated the value of awarded contracts during February, accounting for 64 percent of the SR26.2 billion in awards. The transportation sector accounted for SR9 billion after the Saudi Railways Organization (SRO) awarded the second package of phase one of the Haramain high-speed railway to a consortium of companies led by Saudi Binladen Group and Saudi Oger. The package involves the design and construction of four stations in Makkah, Medina, Jeddah and Rabigh. The Haramain project is being financed entirely through the government's Public Investment Fund (PIF). Bids for phase two are expected to be selected by July 2011. The oil & gas sector had a significant contract that was awarded by Saudi Aramco to Italy's Saipem in the amount of SAR7.9 billion. The contract calls for the overall engineering, procurement and construction (EPC) for the offshore packages of the SAR17 billion Wasit gas development. Aramco's plan for Wasit is to produce 2.5 billion cubic feet a day of sulfur-rich gas from Arabiyah and Hasbah. The industrial sector witnessed a sizable contract award in the amount of SAR2.2 billion. The contract was awarded by The Saudi Arabian Mining Company (Ma'aden) and the US' Alcoa to South Korea's Samsung Engineering for an EPC for the aluminum rolling mill project at Ras Al-Zour. The rolling mill will have a capacity of 380,000 tons a year when completed. The mixed-use real estate sector had two awarded contracts that amounted to SR 2.3 billion. A contract for SR2 billion was awarded by Saudi Aramco to UAE-based Drake & Scull International for the right to build commercial buildings for the King Abdullah Petroleum Studies Research Center (KAPSARC). The types of buildings to be constructed include, basic retail facilities, a research center, a library and a conference hall designed by London-based Zaha Hadid Architects. The project is expected to be completed by August 2012. The second awarded contract in the amount of SR289 million called for the construction of new buildings at the Jubail Technical Institute as well as 166 residential units in Yanbu. The contract was awarded by the Royal Commission for Jubail and Yanbu Industrial Cities to local contractors. The total value of awarded contracts in the water sector reached SR2.7 billion. The Ministry of Water and Electricity signed numerous contracts across the Kingdom, which included building networks to transport water from dams in Khulais and Rabigh to Jeddah in the amount of SR417 million. A contract for the construction of a water desalinization plant in Yanbu in the amount of SR465 million was awarded by the Saline Water Conversion Corporation (SWCC) to South Korea's Doosan Heavy Industries and Construction. The facility will have a capacity of 15 million gallons a day, making it the largest multi-effect desalinization plant in the Kingdom. The total value of awarded contracts dipped in March, reaching approximately SR16.4 billion. The oil & gas and industrial sectors led all other sectors as they accounted for 68 percent and 13 percent of awarded contracts, respectively. The oil & gas sector witnessed a mega-project contract award in the amount of SR11.3 billion by Saudi Aramco to Samsung Engineering. The contract calls for Samsung Engineering to handle all four EPC packages for the Shaybah natural gas liquids (NGL) project in the Empty Quarter. The contract award is unique as Samsung Engineering will be the lone company working on all four packages. The project will allow Aramco to separate about 280,000 barrels a day of NGL from crude oil produced at the Shaybah field. The project is expected to be completed in 2014. Approximately SR2.1 billion worth of contracts were awarded in the industrial sector. One contract was awarded by Polysilicon Technology Company (PTC) to both, South Korea's Hyundai Engineering Company and KCC Engineering and Construction Corporation in the amount of SAR1.4 billion. The contract calls for the lump sum turnkey engineering, procurement and construction (LSTK EPC) for PTCs polysilicon plant. The plant is expected to have an initial capacity of 3,350 tons a year of solar-grade polysilicon. The next step would be for it to produce numerous products for the solar power industry. The second awarded contract in the industrial sector was worth SR675 million by Ma'aden and Alcoa to Samsun Engineering. This marks Samsung Engineering's third significant contract award during the first quarter. It has been awarded a total of SAR14.1 billion worth of contracts. Samsun Engineering will construct the aluminum cast house at Ma'aden and Alcoa's aluminum smelter at Ras Al-Zour. Completion of the smelter is expected by early 2013. The Ministry of Water and Electricity awarded two contracts worth SR1 billion to Turkish and Indian companies. The contract calls for the manufacturing and supply of steel pipes and the implementation of bringing water through those pipelines from Ras Al-Zour to Hafr Al Batin.
