Source: U.S.-Saudi Business Council (USSBC)
The value of awarded contracts witnessed an astounding surge during Q1’24 as the value reached SAR118.8 billion ($31.7 billion).
This continues the impressive pace that was witnessed in 2023, which finished the year with SAR270.6 billion ($72.2 billion) in awarded contracts. The value of awarded contracts during Q1’24 grew by 79 percent YoY and marks the second highest value during a quarter on record since Q3’15, when it reached SAR147.1 billion ($39.2 billion).
On a QoQ basis, the value of awarded contracts jumped 35 percent after reaching SAR56.5 billion ($15.1 billion) during Q4’23. Despite the Kingdom’s GDP declining by 1.7 percent during Q’24 on the back of continued oil production cuts, the non-oil economy grew by a solid 3.1 percent. The private sector’s contribution in the growth of the Kingdom’s non-oil economy was evidenced by a 3.4 percent increase. The construction sector’s GDP growth stood at 2.4 percent. The Kingdom’s oil & gas sector, led by Saudi Aramco, spearheaded the increase, while Vision 2030 giga-projects such as Neom and the Red Sea development contributed substantially.
The SAR118.8 billion ($31.7 billion) in awarded contracts were led by the oil & gas, real estate, and water sectors, as they accounted for 84 percent of the total. The oil & gas sectors accounted for 43 percent of the projects alone. The real estate sector also witnessed sizeable contracts across the hospitality, residential, mixed-use, and commercial areas. Other contributing sectors that garnered large projects awards included industrial, urban development, and transportation.
Value of Awarded Contracts by Year (SAR Millions)
Overview of Awarded Contracts By Sector During Q1 2024
Oil & gas lead all other sectors during Q1’24 as it accumulated its highest value of awarded contract in a quarter on record. The oil & gas sector reached SAR51.2 billion ($13.7 billion) or 43 percent of the total and was led by large projects at the Jafurah Unconventional Gas Plant, the Master Gas System Expansion, and pipeline expansion work. European, Indian, and Chinese contractors were the main recipients of the project awards, while local contractors contributed to smaller projects.
The real estate sector remained a leading contributor to the growth of awarded contracts as it reached SAR24.4 billion ($6.5 billion) or 21 percent of the total. This follows a strong 2023 for the sector when it attracted SAR83.5 billion ($22.3 billion) in contract awards, the second highest on record. The breakdown of the real estate sector revealed that residential real estate attracted SAR3.2 billion ($853 million) or 13 percent of all real estate projects. Hospitality registered SAR4.8 billion ($1.3 billion) or 20 percent in awarded contracts. Mixed-use garnered SAR1.4 billion ($371 million) or 6 percent. Commercial real estate captured the largest share, reaching SAR15 billion ($4 billion) or 61 percent.
The water sector registered the third highest value of awarded contracts with SAR24 billion ($6.4 billion) or 20 percent of the total. This marks the highest value of awarded contracts for the water sector in a quarter on record. Significant investments by Neom to construct dams as part of the infrastructure development plan lead the push. A number of water treatment developments along with increasing water
interconnectivity contributed to the sector’s growth.
Overview of Awarded Contracts By Region During Q1 2024
The Eastern Province accounted for the highest share of awarded contracts during Q1’24 with SAR53.1 billion ($14.2 billion) or 45 percent of the total. The oil & gas sector accounted for the highest share as 12 contracts were awarded worth SAR46.1 billion ($12.3 billion) or 87 percent of the Eastern Province’s total. The real estate sector attracted 12 contracts worth SAR4.2 billion ($1.1 billion) or 8 percent of the total. The industrial sector witnessed six contracts worth SAR1.2 billion ($310 million) or 2 percent of the total. The remaining six contracts worth SAR1.6 billion ($437 million) or 3 percent were awarded to the water, power, and petrochemical sectors.
The Tabuk region captured the second highest value of awarded contracts with SAR24.9 billion ($6.6 billion) or 21 percent of the total. There were 13 contracts awarded in Tabuk, which was dominated by Neom across numerous sectors. Neom awarded seven contracts worth SAR24 billion ($6.4 billion), while Red Sea Global awarded three contracts worth SAR671 million ($179 million). The water sector accounted for the highest share with SAR17.6 billion ($4.7 billion) or 71 percent of Tabuk’s total.
The Makkah region tallied the third highest value of awarded contracts with SAR16.7 billion ($4.5 billion) or 14 percent of the total. The real estate sector had the largest share of awarded contracts with 21 projects worth SAR8.7 billion ($2.1 billion) or 52 percent of the total. A single contract worth SAR5 billion ($1.3 billion) was awarded in the industrial sector pertaining to the construction of Ceer’s auto manufacturing plant. The water sector witnessed two contracts worth SAR2 billion ($528 million). The remaining sectors included oil & gas and power.
Breakdown of Awarded Contracts Across Top Performing Sectors
Oil & Gas
The oil & gas sector surged to unprecedented levels during Q1’24 as it reached SAR51.2 billion ($13.7 billion) on 19 contracts. The oil & gas sector already surpassed last year’s total of SAR42 billion ($11.2 billion), and represents the highest tally for a quarter on record. On a YoY basis, the sector grew by SAR46.8 billion ($12.5 billion) or 1,059 percent, whereas it grew by SAR43.6 billion or 577 percent QoQ. Saudi Aramco awarded projects at a number of its developments such as the Riyas NGL complex, and multiple packages for its Master Gas System Expansion (MGSE) across the Eastern Province. Furthermore, of Saudi Aramco’s 17 contracts, 14 were above SAR1 billion ($267 million).
Saudi Aramco awarded two large contracts in the amount of SAR6.6 billion ($1.8 billion) each in January as part of the Riyas NGL development at the Jafurah Unconventional Gas Plant. Both contracts were awarded to a joint venture between Spain’s Tecnicas Reunidas and China’s Sinopec Engineering Group for work on packages one and two of phase two. According to BNC, package one will include the construction of fractionation trains with the objective of processing 510 thousand barrels per day of NGL from two trains. Each of the two train will process 255 MBD and incorporate fractionation, treatment, dehydration, and refrigeration units. Package two will include constructing common facilities that will provide feed and product surge storage, chemical storage, and utilities. Package one is expected to be completed by the fourth quarter of 2027 while package two is expected to be completed by the second quarter of 2027.
The next largest contract awarded by Saudi Aramco was in the amount of SAR6.4 billion ($1.7 billion) to China Petroleum Engineering & Construction Corporation (CPECC) in February. The contract calls for the development of package one within phase three of Saudi Aramco’s MGSE. According to BNC, the project will include the installation of eight compression trains, with designated booster gas compression stations.
It will also include the expansion of permanent accommodation facilities at east-west pump stations. The
project is expected to be completed by the second quarter of 2028.
Package two of phase three for Saudi Aramco’s MGSE was awarded to China’s SEPCO Electric Power Construction Corporation. The project was awarded in the amount of SAR5.6 billion ($1.5 billion) in February. According to BNC, SEPCO will construct a new booster compression station along the western side of the east-west pipeline corridor. Upon completion, the pipeline’s daily gas transmission capacity will grow from 12 billion to 17.5 billion cubic feet. The project is expected to be completed by the second quarter of 2028.
Packages four and ten were awarded in the amount of SAR3.8 billion ($1 billion) each in February.
Package four was awarded to Turkey’s Mapa Construction Company and calls for the construction of 56- inch east-west gas pipelines, known as EWG 3.4 pipelines and covering a distance of 300 kilometers.
The project is expected to be completed by the fourth quarter of 2029. Package ten was awarded to a joint venture between Italy’s SICIM Saudi Arabia and the local Nesma & Partners Contracting Company also in February. The project will also include the installation of 56-inch EWJZG-1 pipeline from Sector one to Sector two, covering a distance of 310 kilometers. The project is expected to be completed by the fourth quarter of 2029.
The remaining 11 packages of phase three of Saudi Aramco’s MGSE project involve the construction and installation of 56-inch gas pipelines to local and foreign contractors that will span an additional 3,000 kilometers.
Real Estate
The real estate sector witnessed approximately 105 contract awards during Q1’24 as it reached SAR24.4 ($6.5 billion). On a YoY basis, the real estate sector grew by SAR9 billion ($2.4 billion) or 58 percent, while growing by SAR8.1 billion ($2.2 billion) QoQ. Commercial real estate captured the highest value of awarded contracts with SAR15 billion ($4 billion) on 40 projects. On a YoY basis, commercial real estate
grew by SAR11.3 billion ($3 billion) or 305 percent, while surging by SAR13.5 billion ($3.6 billion) or 885 percent QoQ. Hospitality was the second highest real estate category as it reached SAR4.8 billion ($1.3 billion). On a YoY basis, hospitality declined by SAR1.4 billion ($382 million) or 23 percent but grew by SAR3 billion ($800 million) or 168 percent QoQ. Residential real estate garnered SAR3.2 billion ($850 million). Residential declined by SAR2.8 billion ($741 million) or 47 percent YoY and dropped SAR3.5 billion ($934 million) or 52 percent QoQ. Lastly, mixed-use real estate reached SAR1.4 billion ($371 million) for the quarter. Mixed-use declined by SAR1.1 billion ($297 million) or 44 percent YoY and by SAR4.8 billion ($1.3 billion) QoQ.
The largest contract was awarded in January within commercial real estate and pertained to the construction of a sports stadium in the Jeddah Central District. The contract was awarded by the Jeddah
Central Development Company to a joint venture between the local Sama Construction for Contracting and China Railway Construction Corporation in the amount of SAR4.1 billion ($1.1 billion). The stadium is expected to seat 45,000 people and have a roof that will feature technology to regulate sunlight and indoor temperatures. The project is expected to be completed by the second quarter of 2026.
Another contract to develop a sports stadium was awarded in February in the amount of SAR3.6 billion ($960 million). The Saudi Arabian Football Federation awarded the contract to a joint venture between Belgium’s BESIX and the local Al Bawani Co. Ltd. The project calls for the construction of the Dammam football stadium in Dammam Sports City and is expected to seat 45,000 people. According to BNC, it will also include developing six buildings covering 548 square meters and will be the home stadium of Ettifaq FC. The project is expected to be completed by the fourth quarter of 2027.
Within hospitality, Neom awarded a contract to the local Al Bawani Co. Ltd. in the amount of SAR1.9 billion ($507 million) in March. The project calls for the development of steel structure works for Trojena Ski Village. The project will be the Kingdom’s first outdoor ski resort and will be spread over 57 square kilometers with elevation ranging from 1,500 meters to 2,600 meters. The project is expected to be completed by the fourth quarter of 2028.
The Jeddah Central Development Company awarded two additional contracts for the development of an opera house and an oceanarium and coral farm building. Both contracts were awarded to the local Modern Building Leaders with the opera house netting SAR1.8 billion ($480 million) and the oceanarium SAR1.5 billion ($400 million). The opera house is expected to host up to 2,400 people of which 1,500 seats will be in the main theater, 700 in the medium theater, and 200 in the training hall. The opera house is expected to be completed by the fourth quarter of 2027. The oceanarium will contain a research laboratory and visitor attraction center that will accommodate 500 marine species. It is expected to be completed by the fourth quarter of 2026.
A sizeable contract was awarded by the Misk Foundation in January for the development of the ‘Ilmi’ Science and Technology Center in the amount of SAR1.5 billion ($400 million). The project involves the construction of a science, technology, reading, engineering, arts, and mathematics (STREAM) learning center in Misk City covering a span of 27,000 square meters. The project was awarded to the U.A.E.’s ALEC Engineering & Contracting. It is expected to be completed by the fourth quarter of 2027.
Water
The water sector surged during Q1’24 to reach SAR24 billion ($6.4 billion) in awarded contracts from 14 deals. The water sector has already reached 80 percent of 2023’s total value of awarded contracts due to a number of sizeable projects including dam developments, desalination plants, water network expansion, and wastewater channels. It also marks the highest tally in a quarter on record for the water sector. The water sector grew by SAR14.1 billion ($3.8 billion) or 143 percent YoY and by SAR9.9 billion ($2.6 billion) or 70 percent QoQ.
The largest contract in the water sector was awarded in January by Neom to Italy’s Webuild Group for the development of water dams at Trojena mountain in the amount of SAR17.6 billion ($4.7 billion). According to SGP, Webuild will construct three dams to form a freshwater lake for the ski resort that will employ over 10,000 people. The main dam will be made of roller-compacted concrete (RCC) and will be 145 meters high, 475 meters long, and a volume of approximately 2.7 million square meters. The second dam will also be made of RCC, while the third will be in rock, with a volume of 4.3 million square meters. The artificial lake will cover an area of 1.5 square kilometers and will have an island reserved for botanical dives and walks.
A large contract was awarded in March by the Royal Commission for Riyadh City to a joint venture between local companies Water & Environment Technologies Company and Al Bawani Co. Ltd. in the amount of SAR1.7 billion ($450 million). According to BNC, the project will include the construction of a sewage treatment plant boasting a design capacity of 29,850 cubic meters per day (cm/d), along with a treated sewage effluent (TSE) facility capable of processing 160,000 cm/d. The plant will handle approximately 40,000 cm/d of water sourced from the National Water Company. Additionally, the project will encompass the construction of storage tanks for TSE, brine, and treated water, with a combined volume totaling 491,226 cubic meters. The project is expected to be completed by the first quarter of 2028.
The Saudi Water Partnership Company (SWPC) awarded a contract in January to the U.A.E.’s TAQA in the amount of SAR1.5 billion ($400 million). According to BNC, the project is located at the Juranah Independent Strategic Water Reservoir and will involve building, owning, and operating the Juranah reservoir. The strategic tanks will have a total storage capacity of 2 million cubic meters along with an operational tank with a capacity of 500,000 square meters to support the potable water distribution system.
Contract Awards Outlook
Saudi Arabia’s construction sector is experiencing exponential growth, marked by significant developments in social and physical infrastructure, enhanced quality of life, and substantial foreign direct investments (FDI). In the first quarter of 2024, the sector witnessed an astounding surge in the value of awarded contracts, reaching SAR118.8 billion ($31.7 billion). This continues the impressive momentum from 2023, which concluded with SAR270.6 billion ($72.2 billion) in awarded contracts. The value of awarded contracts in Q1’24 grew by 79 percent YoY and 35 percent QoQ, despite a 1.7 percent decline in the Kingdom’s GDP due to continued oil production cuts. Notably, the non-oil economy grew by 3.1 percent, with the private sector contributing significantly with a 3.4 percent increase, and the construction sector’s GDP growth standing at 2.4 percent.
Central to this growth is the Kingdom’s Vision 2030, which aims to diversify the economy away from oil dependency. Key projects such as Neom and the Red Sea development have been pivotal, driving substantial investments in infrastructure. The oil & gas, real estate, and water sectors accounted for 84 percent of the total awarded contracts in Q1’24. The oil & gas sector alone represented 43 percent of the projects, with significant developments at the Jafurah Unconventional Gas Plant and the Master Gas System Expansion.
Foreign direct investment (FDI) has been instrumental in diversifying the economy and driving the construction sector’s growth. Reforms to business regulations and various incentives have made it easier for foreign investors to enter the market. FDI brings in much-needed capital, technology, and expertise, fostering joint ventures and partnerships with local firms, which enhances project execution capabilities and promotes technology transfer.
Foreign contractors have significantly enhanced the construction sector by bringing advanced construction techniques and project management skills. In Q1’24, foreign contractors partnered with local players in large project awards across numerous sectors. These collaborations are vital for the successful execution of large-scale developments and the training of local workers, thereby enhancing the skills of the Saudi labor force.
The private sector’s contribution to the economy is also growing, driven by increased participation in various construction projects. Public-private partnerships (PPPs) have been effective in mobilizing resources and expertise. Private companies are introducing innovative construction technologies and practices, improving efficiency and quality. The growth of the private sector is creating numerous job opportunities, addressing unemployment, and boosting economic activity
Overall, Saudi Arabia’s construction sector is poised for continued growth, supported by substantial investments in infrastructure, robust performance in the oil & gas sector, and significant contributions from the private sector. The sustained high levels of the CAI and ongoing mega-projects under Vision 2030 will further propel the sector, ensuring long-term economic diversification and development.
Notable Contracts During Q1 2024:
