Contracts awarded in the Saudi construction sector “have dramatically increased” in the second quarter of this year, according to the latest NCB Quarterly Review of Contract Awards in the Construction Sector. The NCB Construction Contracts Index, as a result, reached 80.36 points by the end of the period and with contract awards expected to continue to rise through the third quarter of 2010, the report added. The second quarter of 2010 witnessed a consistent increase in the value of awarded contracts. The total awarded contracts during Q2 grew to more than SR24.2 billion compared to SR8.8 billion during Q1, increasing by 175 percent. Given the growth trend exhibited during Q2 of 2010, the value of awarded contracts are expected to further expand during the rest of the year. With high oil prices forecast to continue to fuel growth across the entire spectrum of the Saudi economy, the number of awarded contracts are expected to continue to increase in the near to medium-term, the bank said. Recently announced projects that are currently in the bidding process and are expected to be awarded during 2010 include projects such as Saudi Aramco's major onshore construction package for its Wasit gas development program amounting to SR22.5 billion. Other projects that are expected to be awarded in 2010 include Saudi Aramco's design and construction of the first phase of the Jizan Refinery, which will be built near Jizan City at a cost of SR26 billion. The Index rose slightly to 80.36 points or by 2 percent compared to Q1. The value of awarded contracts during Q2'10 matched that of Q2'09. The total value of awarded contracts during H1'10 totaled SR33 billion, decreasing by 67 percent from H1'09 total of SR100 billion in awarded contracts. “The number of construction contract awards and activities in recent years have dramatically increased on the back of priorities set forth by the government as well as private institutions. These priorities have spurred numerous mega-projects across the Kingdom as the focus on construction activities signaled the intention to successfully expand the infrastructure capabilities as well as increasing the production capacity of all of the sectors effecting the construction industry,” the report said. The sectors that contributed to the majority of the growth in awarded contracts during H1 were power (SR11.7 billion), residential real estate (SR5.9 billion), roads (SR3.9 billion), mixed-use real estate (SR2 billion), and urban development (SR2 billion). The value of awarded contracts during April reached SR3.4 billion, which was more than double the value of awarded contracts during March. The surge in awarded contracts was fueled by the residential real estate and power sectors. A single residential real estate contract award accounted for 67 percent of all contracts awarded in April. The awarded contract amounting to SR2.3 billion, signed between the Ministry of Social Affairs and Al Rashed for Trade and Contracting, was for the implementation of the first project aimed at building residential units for the homeless in the Jizan Region. There was one awarded contract in the power sector that was valued at SR405 million. This contract was signed between the Saudi Electricity Company and Switzerland's ABB for the construction of six new substations in multiple regions within the Kingdom. The contract will cover four 115/13.8kV substations to be located in the Eastern Province and two 110/13.8kV substations in the Western Region. Two sectors, mixed-use real estate and residential real estate, drove the value of contract awards higher during May, reaching SR6.8 billion. The two sectors accounted for 62 percent of the total contract awards as the mixed-use real estate sector garnered SR2 billion for a single contract award. In June, contract awards continued the upward trend with total contract awards valued at approximately SR14 billion led by the power and urban development sectors. Creating January '08 as the base year (100 points), the construction contract index steadily rose to 170.2 points by December ‘08, owed to many large contracts led by the real estate and power sectors. The index continued its accelerating pace to reach its peak of 307.9 points in July '09 but ended the year at 259.4 points. Mainly attributed to the methodology of using a six-month moving average in which the effects of the large contracts in mid-2009 steadily dissipated along with fewer and lower valued contracts in Q1 '10, the index dropped to 79.02 points.
