KSA Construction Industry Report Jan 20111

The Saudi Construction Industry January 2011

The Saudi Construction January 2011

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The Saudi Construction Industry

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Table of contents The Saudi Construction Industry January 2011

Chapter1. Executive Summary ................................

Chapter2. The KSA Construction Industry Overview

Kingdom of Saudi Arabia at a Glance ................................

The KSA Construction Industry Overview

KSA Construction Market Size and Shares

KSA Construction Industry Focus Sectors Contract Awards

Chapter3. KSA Oil & Gas Construction Sector Overview

KSA Oil and Gas Market Overview ................................

Forces Impacting the Oil & Gas Construction Industry

Supplier Power ................................

Entry Barriers ................................................................

Substitutes................................................................

Buyer power ................................................................

Industry Rivalry ................................

The KSA Oil & Gas Upstream Project De

Focus on Gas amidst of Soaring Gas Demand

KSA announces 12 mmcfd gas find in the northern Jalamid area

Spotlight on Emerging Economies ................................

Major Field Developments in Progress

KSA Oil & Gas Downstream Projects Developments

Saudi Targeting Export Markets ................................

Refining Sector ................................

Major Refinery Projects in KSA ................................


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January 2011 ................................................................

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Chapter2. The KSA Construction Industry Overview ................................................................

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The KSA Construction Industry Overview ................................................................................................

KSA Construction Market Size and Shares ................................................................................................

ion Industry Focus Sectors Contract Awards Market Size ................................

Chapter3. KSA Oil & Gas Construction Sector Overview ................................................................

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Forces Impacting the Oil & Gas Construction Industry ................................................................

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The KSA Oil & Gas Upstream Project Developments ................................................................

Focus on Gas amidst of Soaring Gas Demand ................................................................

KSA announces 12 mmcfd gas find in the northern Jalamid area ................................

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nts in Progress ................................................................................................

KSA Oil & Gas Downstream Projects Developments ................................................................

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Major Petrochemical Projects in KSA

KSA Oil and Gas Construction Market Size and Forecasts

Future Outlook for the KSA Oil and Gas Sector

Chapter4. KSA Power and Water Desalination Industry Construction Sector Overview

Widening Gap between Power Demand and Supply in KSA

Water Conservation Measures ................................

Privatization as a Key Measure to improve infrastructure

Market Size of KSA Power and Water Desalination Industry

Market Size and Forecasts for the KSA Power and Water desalination Construction Sector

Major Power and Water Projects in KSA

Chapter5. The Saudi Building Construction Sector Overview

Contract Awards ................................................................

Future Outlook for the Saudi Building Construction Industry

Chapter6. KSA Infrastructure Sector Overview

Infrastructure Market Overview ................................

Market Drivers and Restraints- Probability Impact Matrix

Market Growth Restraints ................................

Market Size and ForecastsContractor awards 2008

Future Outlook for Infrastructure Construction sector

Chapter7. KSA Industrial Construction Sector Overview

Industrial Construction Market Overview

Market Drivers and Restraints and Probability Impact Matrix

Market Growth Drivers ................................

Market Growth Restraints ................................

Market Size and ForecastsContractor awards 2009

Future Outlook for Industrial Construction Sector


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Major Petrochemical Projects in KSA ................................................................................................

KSA Oil and Gas Construction Market Size and Forecasts ................................................................

Future Outlook for the KSA Oil and Gas Sector ................................................................

Chapter4. KSA Power and Water Desalination Industry Construction Sector Overview

Widening Gap between Power Demand and Supply in KSA ................................................................

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asure to improve infrastructure ................................

Market Size of KSA Power and Water Desalination Industry ................................................................

Market Size and Forecasts for the KSA Power and Water desalination Construction Sector

Major Power and Water Projects in KSA ................................................................

g Construction Sector Overview ................................................................

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Future Outlook for the Saudi Building Construction Industry ................................................................

Chapter6. KSA Infrastructure Sector Overview................................................................

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Probability Impact Matrix ................................................................

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Contractor awards 2008-2013 ................................................................

Future Outlook for Infrastructure Construction sector ................................................................

Chapter7. KSA Industrial Construction Sector Overview ................................................................

Industrial Construction Market Overview ................................................................................................

Market Drivers and Restraints and Probability Impact Matrix ................................................................

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Contractor awards 2009-2012 ................................................................

Future Outlook for Industrial Construction Sector ................................................................

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Chapter4. KSA Power and Water Desalination Industry Construction Sector Overview ................................ 34

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Market Size and Forecasts for the KSA Power and Water desalination Construction Sector ......................... 50

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Chapter8. Future Outlook for the KSA Construction Industry

Methodology ................................................................

Code of Ethics ................................................................

Ventures Onsite MENA Projects Database

List of Figures Figure 1: Kingdom of Saudi Arabia (KSA)

Figure 2: Saudi Construction Industry Budget Totals by Sector (US$ Million), January 2011

Figure 3: Total Contract Awards across Focus Se

2013 ................................................................

Figure 4: 5 Major Forces Impacting GCC Oil & Gas Sector

Figure 5: Geographical spread of KSA Oil and Gas Fields

Figure 6: Saudi Oil Production vs. Consumption

Figure 7: KSA Oil & Gas Construction Contract Awards (US$ Million), 2008

Figure 8: Generation Capacity and Peak Demand, Saudi Arabia, 1971

Figure 9: Power Sold (Million KWh) and Number of Subscribers (thousands) Saudi Arabia, 1971

Figure 10: Shares of Electricity Consumption by Segment (Megawatts/Hour), Saudi Arabia, 2009

Figure 11: Proposed ECRA structure on Completion of Restructuring and Privatization

Figure 12: Annual Production of Water in Cubic Millions, Saudi Arabia, 1980 to 2010

Figure 13: Contract Awards for Power & Water Construction Sector in the KSA (US$ Million), 2008

Figure 14: Saudi Total Building Construction Sector Contract Awards across Sectors (US$ million), 2008

2013 ................................................................

Figure 15: Saudi Building Construction Spend by Major Sectors, 2009

Figure 16: Saudi Building Construction Spend by Sector, 2012

Figure 17: KSA Budgetary Balance as percentage of GDP, 2000

Figure 18: KSA Infrastructure Construction Contract Awards (US$ Million), 2008

Figure 19: KSA Industrial Construction Contract Awards (US$ Million), 2008

List of Tables Table 1: Upstream Projects in Saudi Arabia, 2010

Table 2: Existing Aramco Domestic Refining Capacity ('000 bpd)


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Chapter8. Future Outlook for the KSA Construction Industry ................................................................

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Ventures Onsite MENA Projects Database ................................................................

Figure 1: Kingdom of Saudi Arabia (KSA) ................................................................................................

Saudi Construction Industry Budget Totals by Sector (US$ Million), January 2011

Figure 3: Total Contract Awards across Focus Sectors of the KSA Construction Industry (US$ Million), 2008

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Figure 4: 5 Major Forces Impacting GCC Oil & Gas Sector................................................................

Figure 5: Geographical spread of KSA Oil and Gas Fields ................................................................

Figure 6: Saudi Oil Production vs. Consumption ................................................................

onstruction Contract Awards (US$ Million), 2008-2013 ................................

Figure 8: Generation Capacity and Peak Demand, Saudi Arabia, 1971-2010 ................................

Figure 9: Power Sold (Million KWh) and Number of Subscribers (thousands) Saudi Arabia, 1971

Figure 10: Shares of Electricity Consumption by Segment (Megawatts/Hour), Saudi Arabia, 2009

Figure 11: Proposed ECRA structure on Completion of Restructuring and Privatization

Figure 12: Annual Production of Water in Cubic Millions, Saudi Arabia, 1980 to 2010

Figure 13: Contract Awards for Power & Water Construction Sector in the KSA (US$ Million), 2008

Figure 14: Saudi Total Building Construction Sector Contract Awards across Sectors (US$ million), 2008

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Figure 15: Saudi Building Construction Spend by Major Sectors, 2009................................

ure 16: Saudi Building Construction Spend by Sector, 2012 ................................

Figure 17: KSA Budgetary Balance as percentage of GDP, 2000-2011 ................................

Figure 18: KSA Infrastructure Construction Contract Awards (US$ Million), 2008-2013

Figure 19: KSA Industrial Construction Contract Awards (US$ Million), 2008-2013 ................................

Table 1: Upstream Projects in Saudi Arabia, 2010 ................................................................

: Existing Aramco Domestic Refining Capacity ('000 bpd) ................................

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Saudi Construction Industry Budget Totals by Sector (US$ Million), January 2011 ......................... 12

ctors of the KSA Construction Industry (US$ Million), 2008-

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Figure 9: Power Sold (Million KWh) and Number of Subscribers (thousands) Saudi Arabia, 1971-2010 ....... 39

Figure 10: Shares of Electricity Consumption by Segment (Megawatts/Hour), Saudi Arabia, 2009............... 40

Figure 11: Proposed ECRA structure on Completion of Restructuring and Privatization ................................ 41

Figure 12: Annual Production of Water in Cubic Millions, Saudi Arabia, 1980 to 2010 .................................. 46

Figure 13: Contract Awards for Power & Water Construction Sector in the KSA (US$ Million), 2008 -2013 . 50

Figure 14: Saudi Total Building Construction Sector Contract Awards across Sectors (US$ million), 2008-

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2013 ................................ 64

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Table 3: New Domestic Refinery Capacity Plans ('000 bpd)

Table 4: Major Refinery Projects in KSA by Project Value (US$ Million), 2010

Table 5: Major Petrochemical Projects in KSA

Table 6: Power Generation Projects and Capacity (MW) in Saudi Arabia, 2008

Table 7: Electricity Generated and Lost, Saudi Arabia, 2007

Table 8: Major Power & Water Projects in the KSA by Project Value (US$ million), October 2010

Table 9: Major Building Construction Projects by Project Value (US$ Million), Saudi Arabia, January 2011

Table 10: Major Infrastructure Construction Projects by Project Value (US$ Million) Saudi Arabia, January

2011 ................................................................

Table 11: Major Industrial Construction Projects by Value (US$ Million), Saudi Arabia, January 2011


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Table 3: New Domestic Refinery Capacity Plans ('000 bpd) ................................................................

Table 4: Major Refinery Projects in KSA by Project Value (US$ Million), 2010 ................................

Table 5: Major Petrochemical Projects in KSA ................................................................

neration Projects and Capacity (MW) in Saudi Arabia, 2008 ................................

Table 7: Electricity Generated and Lost, Saudi Arabia, 2007-2008................................

Table 8: Major Power & Water Projects in the KSA by Project Value (US$ million), October 2010

Table 9: Major Building Construction Projects by Project Value (US$ Million), Saudi Arabia, January 2011


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Table 11: Major Industrial Construction Projects by Value (US$ Million), Saudi Arabia, January 2011

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Table 8: Major Power & Water Projects in the KSA by Project Value (US$ million), October 2010 ............... 51

Table 9: Major Building Construction Projects by Project Value (US$ Million), Saudi Arabia, January 2011 . 58


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Table 11: Major Industrial Construction Projects by Value (US$ Million), Saudi Arabia, January 2011 ......... 72


Chapter1. Executive SummaryCushioned and insulated by its strong oil reserves and ambitious government plans for economic

development through diversification and investment programs

renowned six economic cities across the kingdom,

Arabia, is one of the fastest growing emerging markets of the Middle East. Its rapidly growing and fast

urbanizing young population constantly fuel demand across the commercial, residential and retail

segments of the market while housing the worlds two popular religious shrines Mecca and Medina, the

country also attracts large tourism revenues further

as well. Spurred by these factors, the construction industry in

growth in recent years with the construction contracts awarded likely to grow from

2008 to US$ 110,784 million in 2011,

has hit growth across the industry in the Middle East.

While the Saudi market continues to face its share of project

in execution of laws and lack of transparency and

continues to be a comparatively rising star, which is likely to witness a steady and healthy growth in its

construction industry in the medium and long

efforts of the government through its planned diversification based investment schemes and its healthy

demand growth across sectors.

The Saudi Construction Industry Report

experience of the GCC construction market and its extensive projects database across the countries of the

Middle East and North Africa (MENA) region. It

economic, social, technical, legislative and environmental factors impacting this promising market. Besides

an analysis into the market drivers and restraints

occurrence of these drivers and restraints on the

statistics of the construction contract awards an

the construction market namely buildings, industria

Forces impacting the sectors are also analytically examined through various matrices which take into

account the driving and restraining forces shaping the key sectors and their future growth path.


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Chapter1. Executive Summary Cushioned and insulated by its strong oil reserves and ambitious government plans for economic

development through diversification and investment programs, which include the development of the

six economic cities across the kingdom, towards achieving this goal, the Kingdom of Saudi


population constantly fuel demand across the commercial, residential and retail


country also attracts large tourism revenues further fuelling demand in the tourism and leisure segments

as well. Spurred by these factors, the construction industry in Saudi Arabia has witnessed unprecedented

growth in recent years with the construction contracts awarded likely to grow from

, in spite of the adverse effects of the global economic slowdown that

has hit growth across the industry in the Middle East.

While the Saudi market continues to face its share of project delays, conservative banking policies, delays

transparency and the adverse effects of the global economic slowdown


construction industry in the medium and long term as compared to its counterparts due to the earnest


Report (January 2011) is a study by Ventures Middle East based on its vast


Middle East and North Africa (MENA) region. It provides a strategic insight into the various political,

mic, social, technical, legislative and environmental factors impacting this promising market. Besides

an analysis into the market drivers and restraints culminating in a probability impact matrix of the

occurrence of these drivers and restraints on the KSA construction market, the study also provides key

statistics of the construction contract awards and the actual construction spend

namely buildings, industrial, power and water, oil and gas



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Cushioned and insulated by its strong oil reserves and ambitious government plans for economic

which include the development of the

towards achieving this goal, the Kingdom of Saudi


population constantly fuel demand across the commercial, residential and retail


e tourism and leisure segments

Saudi Arabia has witnessed unprecedented

growth in recent years with the construction contracts awarded likely to grow from US$ 79,927 million in

of the adverse effects of the global economic slowdown that

delays, conservative banking policies, delays

global economic slowdown, it


term as compared to its counterparts due to the earnest


y Ventures Middle East based on its vast


provides a strategic insight into the various political,

mic, social, technical, legislative and environmental factors impacting this promising market. Besides

culminating in a probability impact matrix of the

, the study also provides key

actual construction spend across the key sectors of

l, power and water, oil and gas and Infrastructure.




Key statistics also include Market Size and forecasts

of Saudi Arabia. The study also provides detailed description of the ongoing construction projects in

addition to the proposed new projects thereby serving as a wealth of information for all key stakeholders

of various sectors of the construction market


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Size and forecasts of Contract Awards in the construction market

The study also provides detailed description of the ongoing construction projects in


various sectors of the construction market vying to enter this lucrative and growing

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in the construction market sectors

The study also provides detailed description of the ongoing construction projects in


lucrative and growing market.


Chapter2. The Overview

Kingdom of Saudi Arabia at a Glance

Figure 1: Kingdom of Saudi Arabia (KSA)

The Kingdom of Saudi Arabia (KSA) is the larg

Saudi Riyals (1USD=3.75 Saudi Riyals) and a population of 25.6 million as of 2009, the Kingdom has 13

provinces with its own capitals and is one of the worlds largest producers and exporters

petroleum products, holding 21 percent of the worlds oil reserves. Its capital Riyadh is termed as the birth

place of Islam and the Kingdom houses two of Islams holiest shrines, Mecca and Medina.

Privatization and diversification has contribu

greater contribution by the private sector to the GDP

economic slowdown had its adverse impact on the economic growth of the kingdom slowing to 0.

in 2009 as against 4.4 percent in the previous year. While

which sported a positive growth, it was by no means completely insulated from the global economy.

However, economic stimulus and with heavy

power and water, the largest by any government in the world (incurring a budget deficit of US$ 4.8 billion),

the economy was able to withstand the downturn and gradually pick up the pace of growth in

part of 2009 and early 2010.


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. The KSA Construction Industry

Saudi Arabia at a Glance

The Kingdom of Saudi Arabia (KSA) is the largest country in the Arabian Peninsula. With a GDP of 1.7 trillion


provinces with its own capitals and is one of the worlds largest producers and exporters

percent of the worlds oil reserves. Its capital Riyadh is termed as the birth


Privatization and diversification has contributed to larger shares of the non-oil sector in the GDP and

greater contribution by the private sector to the GDP. With greater exposure to the world economy, global

economic slowdown had its adverse impact on the economic growth of the kingdom slowing to 0.

in 2009 as against 4.4 percent in the previous year. While Saudi was one of the few countries in the GCC


However, economic stimulus and with heavy government spending on infrastructure projects including


the economy was able to withstand the downturn and gradually pick up the pace of growth in

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Construction Industry

est country in the Arabian Peninsula. With a GDP of 1.7 trillion


provinces with its own capitals and is one of the worlds largest producers and exporters of oil and

percent of the worlds oil reserves. Its capital Riyadh is termed as the birth


oil sector in the GDP and

. With greater exposure to the world economy, global

economic slowdown had its adverse impact on the economic growth of the kingdom slowing to 0.6 percent

was one of the few countries in the GCC


government spending on infrastructure projects including


the economy was able to withstand the downturn and gradually pick up the pace of growth in the latter


The KSA Construction Industry OverviewIn spite of the slowdown, the second largest construction industry in the region has managed to withstand

the downturn, mainly on the back of sustained investment in infrastructure and a clearly planned

diversification program such as the building of six e

counterparts in the GCC region, which rely primarily on tourism and the expatriate population to sustain

demand, Saudi has a population that is growing at a healthy pace and sustaining the demand for

infrastructure, housing and utilities construction across the sectors of the economy. Moreover, the

healthy oil based reserves and the governments commitment to infrastructure investment and funding

when private investment is not forthcoming, have helped insulate

global economic slowdown in 2009. After Qatar, it is ranked the second fastest growing economy in the

GCC region.

The various socio-economic factors likely to shape the future growth path of the Kingdom of Saudi Arabia

and its construction industry that in itself is a growth engine for the economy can be analysed in terms of a

PESTLE analysis as below:


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Construction Industry Overview In spite of the slowdown, the second largest construction industry in the region has managed to withstand


diversification program such as the building of six economic cities across the kingdom. Unlike its


has a population that is growing at a healthy pace and sustaining the demand for

ture, housing and utilities construction across the sectors of the economy. Moreover, the


when private investment is not forthcoming, have helped insulate the kingdom from the brunt of the


economic factors likely to shape the future growth path of the Kingdom of Saudi Arabia

d its construction industry that in itself is a growth engine for the economy can be analysed in terms of a

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In spite of the slowdown, the second largest construction industry in the region has managed to withstand


conomic cities across the kingdom. Unlike its


has a population that is growing at a healthy pace and sustaining the demand for

ture, housing and utilities construction across the sectors of the economy. Moreover, the


the kingdom from the brunt of the


economic factors likely to shape the future growth path of the Kingdom of Saudi Arabia

d its construction industry that in itself is a growth engine for the economy can be analysed in terms of a


Saudi is one market where lack of private investment during the global economic slowdown has not

deterred the governments plans to expand and diversify the economy. It has invested up to US$ 80 billion

on infrastructure, housing and utilities, including a plan

250,000 houses per year totalling to 1.5 million homes by 2015. With mega projects including the six

economic cities either under construction or on the drawing boards, KSA has found a place on the

international map attracting investors and the latest technology, material and equipment to boost the

sustained growth in its construction industry. Inflation too has remained low in the economy encouraging

construction growth through lower input prices.

counterparts attracts latest

Legal and RegulatorySimplification of Business Startup Procedures to reduce Delaysfor Construction ProjectsRelaxation of Foreigninvestment Laws to permit100% foreign equity in businessMortgage Law awaited since 10years, expected to boost realestate financing and demand by20 to 30 percent

EnvironmentalGovernment encouraging sustainability and green

construction and "Smart Buildings", though still at nascent stage and lacking

legal enforcement


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is one market where lack of private investment during the global economic slowdown has not


on infrastructure, housing and utilities, including a plan to provide affordable housing to the tune of



l map attracting investors and the latest technology, material and equipment to boost the


construction growth through lower input prices.

PoliticalGovernment committed to Infrastructure Development and Diversification program fuelling growth

EconomicLower Inflation andhelp constructionGovernment backedprojects and US$spending programincluding low cost housingto fuel growth

SocialHigh Proportion of Young, Native population growing at a healthy rate to sustain demand for construction industry in the long run

TechnologicalHigh Sustained Growth of

Construction Industry compared to GCC

counterparts attracts latest technologies, material and

equipment

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is one market where lack of private investment during the global economic slowdown has not


to provide affordable housing to the tune of



l map attracting investors and the latest technology, material and equipment to boost the


Economicand Input Costs to

backed infrastructure$ 400 billlionover five years

housing schemes

High Proportion of Young, Native population growing at a healthy rate to sustain demand for construction industry in the long run


The government has also stepped up efforts to encourage sustainable construction programs such as the

LEED training programme for new graduate Saudi Engineers, a general environmental awareness program

tailored for the general public, specialized programmes for the hos

with international experts etc. These projects, while not enforced compulsorily, have sufficiently been

encouraged by the government with funding and tax sops to put Saudi construction on the global

sustainability map. .

Over 40 percent of the Saudi population is under 14 and therefore forms a potential demand source to

sustain demand for construction over the long run for the economy. The economy also boasts high

disposable incomes and an increasing population that

infrastructure growth all of which have a cascading impact on sustaining demand for the building

construction industry in the country.

On the legal and regulatory front the prime concern of the real estate mar

of the long awaited mortgage law to regulate the market. The proposed mortgage law which has been 10

years in the making, has been due since 2009 and according to the Shura Council

by the end of 2010 and a vote on the disputed sections of the law

King Abdullah bin Abdulaziz Al Saud

would end the long wait for the promulgation of the law.

force as assured, as of January 2011.

The comprehensive mortgage law is expected to bring in a planned overhaul of the financing market in the

residential segment of the real estate market, laying down clear rules for registering of mortgages, eviction,

foreclosures and prosecution rules an

deterred by the poor regulation and lengthy court dispute resolution procedures in the market. The law is

expected to provide the required fillip to the demand for real estate in the resid

encourage allied activities such as home financing which is currently engaged in cautiously by banks and

financial institutions in the region.

By easing procedures for starting of a business and reducing the time required to obta

permits, the Kingdom has also attracted investment across its construction sectors and helped its healthy

growth.


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t has also stepped up efforts to encourage sustainable construction programs such as the


tailored for the general public, specialized programmes for the hospitality sector conducted in partnership





disposable incomes and an increasing population that are key to the growth of retail, commerce and


On the legal and regulatory front the prime concern of the real estate markets has been the slow progress


years in the making, has been due since 2009 and according to the Shura Council

a vote on the disputed sections of the law was likely to be taken, failing a consensus

bin Abdulaziz Al Saud, the ruler of Saudi Arabia is likely to take the final decision, which

end the long wait for the promulgation of the law. However, the law was still to be brought into

law is expected to bring in a planned overhaul of the financing market in the


foreclosures and prosecution rules and legal procedures required to ease the concerns of lenders who are


expected to provide the required fillip to the demand for real estate in the resid


By easing procedures for starting of a business and reducing the time required to obta


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t has also stepped up efforts to encourage sustainable construction programs such as the


pitality sector conducted in partnership





are key to the growth of retail, commerce and


kets has been the slow progress


years in the making, has been due since 2009 and according to the Shura Council was likely to be finalized

s likely to be taken, failing a consensus

is likely to take the final decision, which

However, the law was still to be brought into

law is expected to bring in a planned overhaul of the financing market in the


d legal procedures required to ease the concerns of lenders who are


expected to provide the required fillip to the demand for real estate in the residential segment as well as


By easing procedures for starting of a business and reducing the time required to obtain construction



On the environmental front, the Kingdom has announced its intention to spend SR 150 billion (US$ 39.9

billion) over a period of eight years beginning 2010 for the construction of smart buildings across the

Kingdom. The smart buildings are aimed to promote long

reduction in dioxide emissions, lower water consumption and better wa

These factors are likely to continue to provide the

the GCC market and retain its current position as one of the fastest growing markets in the region.

KSA Construction Market Size aThe following figure depicts the size and share of the

as January 2011

Figure 2: Saudi Construction Industry Budget Totals by Sector (US$ Million),

Source: Ventures Onsite MENA Projects Database

Buildings50%

Power and Water8%

Marine1% Infrastructure

9%



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f eight years beginning 2010 for the construction of smart buildings across the

Kingdom. The smart buildings are aimed to promote long-term sustainability and energy efficiency through

reduction in dioxide emissions, lower water consumption and better waste management.

These factors are likely to continue to provide the Saudi building construction industry the required edge in


KSA Construction Market Size and Shares The following figure depicts the size and share of the Saudi construction market in terms of budget totals

Construction Industry Budget Totals by Sector (US$ Million), January 2011

Source: Ventures Onsite MENA Projects Database www.venturesonsite.com

Oil and Gas17%

Pipeline2%

Industrial13%


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f eight years beginning 2010 for the construction of smart buildings across the

term sustainability and energy efficiency through

ste management.

building construction industry the required edge in


construction market in terms of budget totals


KSA Construction Industry Focus Sectors Contract Awards

The following figure lists the trend in contract awards acr

Construction Industry for 2008-2013.

Figure 3: Total Contract Awards across Focus Sectors of the KSA Construction Industry (US$ Million), 2008

Source: Ventures Onsite MENA Projects Database (

7992784601

0

20000

40000

60000

80000

100000

120000

2008 2009

Cont

ract

Aw

ards

(US$

Mill

ion)

Total Contract Awards Across Major Focus Sectors (US$ Million)


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KSA Construction Industry Focus Sectors Contract Awards Market Size

following figure lists the trend in contract awards across the major focus sectors of the KSA

2013.

: Total Contract Awards across Focus Sectors of the KSA Construction Industry (US$ Million), 2008

MENA Projects Database (www.venturesonsite.com)

97780

110784

99546

2010 2011 2012

Total Contract Awards Across Major Focus Sectors (US$ Million)

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Market Size

oss the major focus sectors of the KSA

: Total Contract Awards across Focus Sectors of the KSA Construction Industry (US$ Million), 2008-2013

102069

2013


Chapter3. KSA Oil & Gas Construction Sector Overview

KSA Oil and Gas Market Overview

Forces Impacting the Oil & Gas Construction IndustryStringent Government regulations, gradually maturin

to alternative fuels, extreme volatility in the prices and supply of Oil due to global economic slump and

several other related factors dominate the landscape of Gulf Oil and Gas sector.


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Chapter3. KSA Oil & Gas Construction Sector

arket Overview

Forces Impacting the Oil & Gas Construction Industry Stringent Government regulations, gradually maturing Oil and Gas fields, the recent emphasis on migration


several other related factors dominate the landscape of Gulf Oil and Gas sector.

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Chapter3. KSA Oil & Gas Construction Sector

g Oil and Gas fields, the recent emphasis on migration



An analysis into the five major forces impacting this dominant sector is presented in figure

Figure 4: 5 Major Forces Impacting GCC Oil & Gas Sector

Source: Ventures Onsite MENA Projects Database (

Entry Barriers o Government

restrictions for foreign participation


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into the five major forces impacting this dominant sector is presented in figure

: 5 Major Forces Impacting GCC Oil & Gas Sector

MENA Projects Database (www.venturesonsite.com)

Rivalry o Intermittent Over

capacity o Shutting of Oil fields

outside o Industry Growth

Supplier Power

o OPEC Regulated supply and prices

Buyer Power o Availability of

alternative fuels o Price Sensitivities due

to economic slowdown o Volume

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into the five major forces impacting this dominant sector is presented in figure 4.

Substitutes

o Alternative fuels


Supplier Power

The Kingdom of Saudi Arabia wields great

and gas, holding the largest share of the worlds oil reserves. Since this sector is predominantly state

controlled in KSA, the supply is regulated strictly by restrictive government polici

and is also funded heavily in terms of technology and requirements by the government of Saudi Arabia.

Moreover, as oil is the key source of the Kingdoms revenues, it plays a pivotal role in the growth plans of

the Kingdom.

However, even suppliers wielding indefinite power have to operate in the global marketplace which wields

its own dampening influences on supplier power. The global economic slowdown forced the Organization

of Petroleum Exporting countries to cut production wi

demand and stabilize oil prices, which further resulted in cuts in Saudi Arabia

according to the Internal Energy A

complexities of oil demand, price and global economic fluctuations are likely to continue to influence the

industry and prevent indefinite wielding of supplier power by

concern that oil reserves would not be indefinit

costly for the economy in the long run

second-largest Burgan field in Kuwait restricts the free availability of oil in GCC thus

of several enhanced oil recovery projects (EOR) projects across all regions of Oman, Kuwait, Bahrain, Saudi

and other GCC countries. Without substantial new discoveries, dwindling oil reserves may weigh heavily on

the perceptions of market participants in

programmes leveraging the oil based wealth to secure the economys future.

Entry Barriers

The KSA Oil and Gas market is almost oligopolistic with

role in the market. There are significant barriers for any new market participants to enter this highly

competitive field due to restrictions in financial, technical and policy restrictions and legislations held down

by countries. Policy restrictions through barriers on foreign participation and capital are

similar to all other OPEC members.

Substitutes

The quest for cleaner and greener fuels across the globe has escalated the demand for alternative fuels

such as bio fuels, solar energy and even preferring natural gas over oil in the Western countries particularly


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The Kingdom of Saudi Arabia wields great supplier power as the worlds largest producer and supplier of oil


controlled in KSA, the supply is regulated strictly by restrictive government polici



ever, even suppliers wielding indefinite power have to operate in the global marketplace which wields


of Petroleum Exporting countries to cut production with effect from January 1, 2009, due to lower oil

which further resulted in cuts in Saudi Arabias output. While oil demand

according to the Internal Energy Agency (IEA) are projected to increase by 50 percent by 2030, the

omplexities of oil demand, price and global economic fluctuations are likely to continue to influence the

e wielding of supplier power by the Kingdom. There is also now an added

concern that oil reserves would not be indefinite and therefore heavy reliance on this resource could prove

costly for the economy in the long run. The exhaustion of the world's largest Ghawar field in Saudi and the

largest Burgan field in Kuwait restricts the free availability of oil in GCC thus



market participants in four or five decades time. This has necessitated diversification

programmes leveraging the oil based wealth to secure the economys future.

Oil and Gas market is almost oligopolistic with only state owned market participants playing a vital



Policy restrictions through barriers on foreign participation and capital are


s bio fuels, solar energy and even preferring natural gas over oil in the Western countries particularly

P a g e : 16

supplier power as the worlds largest producer and supplier of oil


controlled in KSA, the supply is regulated strictly by restrictive government policies on foreign participation



ever, even suppliers wielding indefinite power have to operate in the global marketplace which wields


th effect from January 1, 2009, due to lower oil

s output. While oil demand

(IEA) are projected to increase by 50 percent by 2030, the

omplexities of oil demand, price and global economic fluctuations are likely to continue to influence the

. There is also now an added

e and therefore heavy reliance on this resource could prove

The exhaustion of the world's largest Ghawar field in Saudi and the

largest Burgan field in Kuwait restricts the free availability of oil in GCC thus forcing the emergence



four or five decades time. This has necessitated diversification

t participants playing a vital



Policy restrictions through barriers on foreign participation and capital are also in place,


s bio fuels, solar energy and even preferring natural gas over oil in the Western countries particularly


the largest Oil consumers of North America and Europe. Currently the cost involved in producing the

alternative fuels is a major factor that is support

alternative energy sources coupled with technology insurgence would however ensure lower production

costs for alternative fuels thus increasing the availability of cheaper alternatives to oil. The

not very severely pronounced in the short term is still a denting factor in

particularly in the medium to long term during which the current promising Asian market would also

gradually be lured towards increasing usage of alternative fuels.

Buyer power

Until very recently the GCC oil and gas sector was more influenced by sellers where the buyers position

was merely a taker of Oil at a governed price and quantity with prices sky rock

US$ 140 per barrel. However, the global economic slowdown has resulted in a demand slump in the oil and

gas industry for the first time in over a decade st

intervene in order to regulate the supply and pr

switching over to alternative fuels coupled with the sluggish economic prospects had actually resorted to

buyers being more in control of the Oil and Gas situation in their respective regions. In over a

decade, KSA was forced to delay or shelve

over-supply chasing receding demand.

Industry Rivalry

Despite the intermittent shortcomings on over supply or price reductions, the lo

Oil sector remains robust with the International Energy A

agency and energy policy advisor to 28 member countries,

to exceed by over 50% by 2030. The ongoing projects linking new deposits of Oil resources being explored

in various regions of Emirates of Dubai and Sultanate of Oman stands testimony to the fact that the

Industry is growing at a steady pace and will still be the backbone fo

of the GCC countries. With the global economy set to witness gradual signs of recovery, the Industry is

expected to witness strong and robust growth in the upcoming years.


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alternative fuels is a major factor that is supporting the usage of oil. However with the easy availability of


costs for alternative fuels thus increasing the availability of cheaper alternatives to oil. The

not very severely pronounced in the short term is still a denting factor in KSA exports to these countries


sing usage of alternative fuels.


was merely a taker of Oil at a governed price and quantity with prices sky rocketing touching peaks of ev

However, the global economic slowdown has resulted in a demand slump in the oil and

time in over a decade strengthening the buyers position, forcing

the supply and prices at a controlled level. The increasing options of


buyers being more in control of the Oil and Gas situation in their respective regions. In over a

was forced to delay or shelve a few of its upstream or even EOR projects for running the risk of

supply chasing receding demand.

Despite the intermittent shortcomings on over supply or price reductions, the lo

the International Energy Agency (IEA), an international inter

agency and energy policy advisor to 28 member countries, almost foreseeing an increase in demand for oil

0% by 2030. The ongoing projects linking new deposits of Oil resources being explored


Industry is growing at a steady pace and will still be the backbone for economic recovery and development


expected to witness strong and robust growth in the upcoming years.

P a g e : 17


ing the usage of oil. However with the easy availability of


costs for alternative fuels thus increasing the availability of cheaper alternatives to oil. The threat although

exports to these countries



eting touching peaks of even

However, the global economic slowdown has resulted in a demand slump in the oil and

position, forcing OPEC to

ed level. The increasing options of


buyers being more in control of the Oil and Gas situation in their respective regions. In over a span of a

a few of its upstream or even EOR projects for running the risk of

Despite the intermittent shortcomings on over supply or price reductions, the long term prospects for the

), an international inter-governmental

almost foreseeing an increase in demand for oil

0% by 2030. The ongoing projects linking new deposits of Oil resources being explored


r economic recovery and development



The KSA Oil & Gas Upstream The Kingdom of Saudi Arabia is the largest oil producer and exporter globally with over 264 billion barrels

of proven oil reserves or 21 percent

brought online quickly. Its oil reserves are located in eight main fields including the Ghawar,

largest oilfield, and Safanyia, the worlds largest offshore oilfield.

Saudi produces a range of crude oils, from heavy to extra light. Of Saudi Arabias total oil production

capacity, about 65-70 percent is considered

According to OPEC Saudi Arabia crude oil production averaged 8.05mb/d

Saudi Arabias natural gas reserves are estimated at 7.57 TcM,

producers. Bulk of the countrys gas reserves lies in Ghawar oil field,

percent, in the form of associated gas, while other noticeable fields are Safiniya and Zuluf. In addition, 60

percent of the kingdoms gas reserves are composed of associated gas.

gas production in the country has

economic conditions and the resultant sluggish demand forcing the industry to r

In spite of being a top global producer of oil and natural gas, the country was not immune to the global

economic cycles, resulting in a plunge in the oil sector GDP of the kingdom in 2009.

sector GDP plunged 40 percent from 1.081 trillion Saudi riyals in 2008 to 647 billion riyals in 2009. The

kingdom's share of gross domestic income from oil production

during the same period. In 2010 too, analysts estimate the growth of

percent as against 0.6 percent in 2009 of which the Kingdoms non

percent in 2010 as against 3.7 percent in 2009.

percent in 2010 supported by investments by the government and private market participants in the oil

and gas infrastructure and non-crude oil hydrocarbon products, recovering from the drastic contraction of

6.9 percent in 2009.


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Upstream Project Developments The Kingdom of Saudi Arabia is the largest oil producer and exporter globally with over 264 billion barrels

percent of the world reserves and has sizeable spare capacity that can be

reserves are located in eight main fields including the Ghawar,

worlds largest offshore oilfield.


is considered of light gravity, with the rest either medium or heavy.

According to OPEC Saudi Arabia crude oil production averaged 8.05mb/d in 2009.

Saudi Arabias natural gas reserves are estimated at 7.57 TcM, ranking fifth among

. Bulk of the countrys gas reserves lies in Ghawar oil field, to the tune of

, in the form of associated gas, while other noticeable fields are Safiniya and Zuluf. In addition, 60

gas reserves are composed of associated gas. However, o

gas production in the country has remained constant at 78.1BcM, mainly on account of poor global

economic conditions and the resultant sluggish demand forcing the industry to resort to production cuts


economic cycles, resulting in a plunge in the oil sector GDP of the kingdom in 2009.

from 1.081 trillion Saudi riyals in 2008 to 647 billion riyals in 2009. The

gross domestic income from oil production too fell to 46.7 percent

2010 too, analysts estimate the growth of the Kingdoms combined GDP at 3.3

percent as against 0.6 percent in 2009 of which the Kingdoms non-oil sector GDP is likely to grow by 4.6

percent in 2010 as against 3.7 percent in 2009. Oil sector growth is however estimated at a modest 2.9

010 supported by investments by the government and private market participants in the oil

crude oil hydrocarbon products, recovering from the drastic contraction of

P a g e : 18

The Kingdom of Saudi Arabia is the largest oil producer and exporter globally with over 264 billion barrels

of the world reserves and has sizeable spare capacity that can be

reserves are located in eight main fields including the Ghawar, the worlds


light gravity, with the rest either medium or heavy.

.

ranking fifth among the worlds gas

to the tune of approximately 33.3

, in the form of associated gas, while other noticeable fields are Safiniya and Zuluf. In addition, 60

However, over the last two years

, mainly on account of poor global

esort to production cuts.


economic cycles, resulting in a plunge in the oil sector GDP of the kingdom in 2009. The kingdoms oil

from 1.081 trillion Saudi riyals in 2008 to 647 billion riyals in 2009. The

percent from 60.7 percent

the Kingdoms combined GDP at 3.3

oil sector GDP is likely to grow by 4.6

s however estimated at a modest 2.9

010 supported by investments by the government and private market participants in the oil

crude oil hydrocarbon products, recovering from the drastic contraction of


Figure 5: Geographical spread of KSA Oil and Gas Fields

Source: Saudi Aramco

Saudi Arabias oil & gas sector operations are dominated by the state

Saudi Aramco is the worlds largest oil company in terms of proven reserves and prod

hydrocarbons. Besides, Saudi Arabias

Council for Petroleum and Minerals have oversight of the sector and Saudi Aramco directly. The Supreme

Council is responsible for petroleum and natu

Saudi Aramcos strategic planning. The Ministry is responsible for national planning in the area of energy

and minerals, including petrochemicals.


Compared with 2008, Saudi Arabia's oil production

declined, although exploration activities


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Geographical spread of KSA Oil and Gas Fields

Saudi Arabias oil & gas sector operations are dominated by the state-owned oil company,

Saudi Aramco is the worlds largest oil company in terms of proven reserves and prod

Saudi Arabias Ministry of Petroleum and Mineral Resources


Council is responsible for petroleum and natural gas policy-making, including contract review, as well as


and minerals, including petrochemicals.


Compared with 2008, Saudi Arabia's oil production fell drastically in 2009. Oil drilling for production

declined, although exploration activities have been steadily on the rise. The top oil exporter and OPEC's

P a g e : 19

owned oil company, Saudi Aramco.

Saudi Aramco is the worlds largest oil company in terms of proven reserves and production of

Ministry of Petroleum and Mineral Resources and the Supreme


making, including contract review, as well as


in 2009. Oil drilling for production

. The top oil exporter and OPEC's


most influential member pumped 8.22 million ba

million bpd pumped in February 2009.

Saudi Arabia, like the other OPEC members subject to output limits, saw its crude output fall after the

organisation announced supply curbs of 4.2 million bpd in Dece

drilling for oil in top oil exporter Saudi Arabia in 2010 is expected to remain the same as last year, but state

oil giant Saudi Aramco would increase gas drilling activities.

Aramcos focus on gas came as the kin

after it completed a crude expansion

(bpd).

The number of oil rigs in use stood

already concentrating on gas drilling more than on oil.

number of rigs used in the kingdom to 104 from 130.

Falling global oil consumption has left the kingdom sitting on

allowed it to shift attention from oil to booming gas demand that is growing by 7 percent annually.

The oilfield service sector has been battered over the past year as oil and gas producers cut spending on

new wells amid weak demand. Top oilfield service companies expect to see global recovery in the sector

this year.


In February 2010, Saudi Arabia has reported finding new gas in the northern Jalamid area,

could be commercially exploited. Tests showed the Jalamid

at 12.1 million cubic feet per day (mmcfd). It can produce larger quantities of gas under normal production

conditions, and assessments will continue.

Spotlight on Emerging Economies

During the last decade or so Saudi Arabia's trade ties with foreign countries have gone through a marked

change which is reflective of prevailing global realities. While countries such as the United States,

Britain and France continue to maintain considerable political and economic clout, new power

equally important. Hence Saudi Arabia's strengthening of trade relations with China, India, Brazil, South

Korea, South Africa and other such eme


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most influential member pumped 8.22 million barrels per day (bpd) in February 2010 compared to

million bpd pumped in February 2009.


organisation announced supply curbs of 4.2 million bpd in December 2008. According to industry sources,


oil giant Saudi Aramco would increase gas drilling activities.

Aramcos focus on gas came as the kingdom continued to step up efforts to meet soaring gas demand and

after it completed a crude expansion project in 2008 to boost output capacity to 12 million barrels per day

ood at around 100 in 2010. Exploration in gas is the drive and they are

already concentrating on gas drilling more than on oil. Decreased activity on oil

number of rigs used in the kingdom to 104 from 130.

Falling global oil consumption has left the kingdom sitting on its biggest supply cushion in years and



amid weak demand. Top oilfield service companies expect to see global recovery in the sector


reported finding new gas in the northern Jalamid area,

could be commercially exploited. Tests showed the Jalamid-3 discovery well in Al


s will continue.

Spotlight on Emerging Economies


change which is reflective of prevailing global realities. While countries such as the United States,

Britain and France continue to maintain considerable political and economic clout, new power


Korea, South Africa and other such emerging economies makes sense.

P a g e : 20

rrels per day (bpd) in February 2010 compared to 7.9


mber 2008. According to industry sources,


to step up efforts to meet soaring gas demand and

to boost output capacity to 12 million barrels per day

as is the drive and they are

Decreased activity on oil in 2009 led to a fall in the

its biggest supply cushion in years and



amid weak demand. Top oilfield service companies expect to see global recovery in the sector

reported finding new gas in the northern Jalamid area, which it said

l-Sannara reservoir flowing



change which is reflective of prevailing global realities. While countries such as the United States, Japan,

Britain and France continue to maintain considerable political and economic clout, new power centres are



With the increase in oil consumption driven by emerging economies, Saudi Arabia is focusing on exports to

these nations. Asia, including Japan,

of Saudi Arabia's crude oil exports, as well as the majority of its

exports. China is ranking fifth as a destination for Saudi exports.

In February 2010, Saudi Arabia, the biggest oil exporter, agreed to almost double crude shipments to

and study enhancement of joint projects as Asias third

planned refineries. It is expected to raise crude supply to India to 40 million tons a year, or about 770,000

barrels a day, from 25.5 million tons a year.


Saudi Arabia is pressing ahead with the biggest offshore oil development in its history, despite having

about 4 million barrels per day (bpd) of idle crude production capacity. Development of the supergiant

Manifa oilfield, containing an estimated 10 billion barrels of reserves, is on time and on budget.

Oil production from Manifa will start in 2013, two years before the projects scheduled completion. Manifa

is one of several oil developments the kingdom is

1.5 million bpd reached in June 2009.

Completion of the project, which has an estimated US$ 11 billion price tag, was originally planned for

but the development was deferred after crude tumbl

July 2008. The construction of a causeway and 31 connected artificial drilling islands had been built off the

Saudi Gulf coast, in the shallow waters of Manifa Bay. All the contracts have been awarded and

progressing satisfactorily as per the current plan.

The islands could accommodate a great many rigs, while additional drilling in the deeper parts of the bay

would be carried out from 13 offshore platforms. The first rigs were already installed on so

islands and had started drilling. Aramcos plan is to drill large numbers of wells beneath the seabed, with

long horizontal sections radiating out from the islands like wheel spokes. The extended reach drilling would

allow the complex oilfield, which contains at least six reservoirs of oil

other like upturned bowls, to be exploited with fewer disturbances to the delicate coastal marine

ecosystem than with conventional drilling. Output from Manifa is projected to

90 million cubic feet per day of natural gas and 65,000 bpd of condensate, a high quality light crude oil

often produced with gas.


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South Korea, China, and India, now receives an estimated 50 percent

's crude oil exports, as well as the majority of its refined petroleum product and

exports. China is ranking fifth as a destination for Saudi exports.

In February 2010, Saudi Arabia, the biggest oil exporter, agreed to almost double crude shipments to

and study enhancement of joint projects as Asias third-largest economy sought


ns a year.






is one of several oil developments the kingdom is pursuing to maintain its production capacity at the record

1.5 million bpd reached in June 2009.

Completion of the project, which has an estimated US$ 11 billion price tag, was originally planned for

but the development was deferred after crude tumbled from the record US$ 147 per barrel it reached in


Saudi Gulf coast, in the shallow waters of Manifa Bay. All the contracts have been awarded and

progressing satisfactorily as per the current plan.


would be carried out from 13 offshore platforms. The first rigs were already installed on so

islands and had started drilling. Aramcos plan is to drill large numbers of wells beneath the seabed, with

long horizontal sections radiating out from the islands like wheel spokes. The extended reach drilling would

hich contains at least six reservoirs of oil-soaked rock stacked on top of each

other like upturned bowls, to be exploited with fewer disturbances to the delicate coastal marine

ecosystem than with conventional drilling. Output from Manifa is projected to reach 900,000 bpd of crude,

90 million cubic feet per day of natural gas and 65,000 bpd of condensate, a high quality light crude oil

P a g e : 21


China, and India, now receives an estimated 50 percent

refined petroleum product and LNG

In February 2010, Saudi Arabia, the biggest oil exporter, agreed to almost double crude shipments to India

ought to increase supply for






pursuing to maintain its production capacity at the record

Completion of the project, which has an estimated US$ 11 billion price tag, was originally planned for 2011,

147 per barrel it reached in


Saudi Gulf coast, in the shallow waters of Manifa Bay. All the contracts have been awarded and are


would be carried out from 13 offshore platforms. The first rigs were already installed on some of the

islands and had st

Documents

KSA Construction Industry Report Jan 20111