ANALYSIS: Saudi Arabia Projects H1 2020 with covid-19 update

Description

This analysis module will cover:

• Opportunities and challenges in the kingdom’s projects market
• Analysis of the pipeline of planned projects and contract awards 2020-2022
• Key policies and drivers shaping the outlook for projects in Saudi Arabia
• Political and economic background
• The barriers and challenges that may arise
• Sector-by-sector breakdown of future project plans
• Key drivers of projects in each sector
• Saudi Arabia’s most valuable key projects and major project sponsors

With the largest economy and population in the GCC, Saudi Arabia has traditionally been the largest projects market too.  But the fall in oil prices has seen the amount of work awarded more than halve as the government lacks the cash to push ahead with its projects plans.

There are signs, however, that this is changing. In 2019, the kingdom retained its position as the largest projects market in the region, overtaking the UAE for the first time since 2015.

The rise from $27bn in 2018 to more than $42bn last year is encouraging although the data is somewhat clouded by the fact of the 2019 total, about $16bn is comprised of the Marjan oil and gas megaproject. If we exclude that single project programme, then the market was actually flat last year.

Looking forward, Riyadh will be keen to maintain momentum. The raising of funds from the Aramco IPO will help finance its projects programme, while there are signs that the PIF’s raft of self-styled ‘gigaprojects’ are starting to crystallise with the first set of construction contracts awarded along the Red Sea.

Another record budget announced at the end of 2019 provides further encouragement although it is still important for investors and the project supply chain to see increased and accelerated facts on the ground in the form of more tenders and contract awards. The hope is that 2020 will build on 2019’s growth and reaffirm Saudi Arabia’s position as the regional market to be in.

Saudi Arabia Projects H1 2020 is the update to last year’s H1 report. Focused on data, it is aimed at helping companies create strategies for targeting and growing the market. It uses almost exclusively data from MEED Projects (www.meedprojects.com), the region’s leading online projects tracking service. With 15,000 active projects tracked and more than 35,000 in total in the database, MEED Projects makes it possible to quantify current, historical and future trends in the projects market in the region.

Political climate: On 1 December, Saudi Arabia formally assumed the presidency of the G20 group of the world’s most powerful nations. Slated to take place in November 2020, the summit provides the kingdom with an opportunity to present itself as a leader on the world stage, beyond the region and outside of the energy sector.

Fiscal consolidation: Announcing Saudi Arabia’s 2020 budget on 9 December, the Ministry of Finance said the kingdom’s budget deficit was set to rise to about SR187bn in 2020, an increase of 43 per cent on the 2019 deficit. The projected rise in the budget deficit in 2020 adds new pressure to the kingdom’s finances and Riyadh has responded by cutting its spending plans for the year.

Strategic plan: Launched in 2016, Vision 2030 aims to diversify the Saudi economy away from oil and create new jobs by stimulating private sector investment, encouraging new high-tech industries, and privatising state companies and assets.
Project contract awards: Despite higher announced budgeted expenditure and rising oil prices, 2018 actually saw lower total project spending compared with the two previous years. However, the increase in oil and gas project awards in 2019 resulted in higher project spending. Major projects awarded last year are Berri Field Development: GOSP, Marjan Field Development: Offshore GOSP4 Development – Package 1 and The Avenues Riyadh: Mall.

Outlook for projects: Despite the challenges, Saudi Arabia remains the largest single projects market in the region with well over$1 trillion worth projects in the pipeline, including the massive $500bn Neom gigaproject to build a completely new city in the kingdom’s northwest.

In terms of its requirements and diversity of project sectors, it continues to be unrivalled, which is why for most companies it remains the number one target. An aggressive 2020 budget and the launch of several key projects like the $10bn King Salman International Park highlight that the government remains committed to the retain its reclaimed position as the number one market in the region.

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