Aramco plans new venture for $160bn of projects

09 June 2015

New project management entity to concentrate on infrastructure

  • Talks in the early stages
  • As much as $160bn of work could be on offer in next 10 years
  • New firm will focus on non-core projects

Saudi Aramco is planning to form a project management company that will target the SR600bn ($160bn) of government infrastructure projects planned for the kingdom over the next decade.

Aramco intends to form the company in partnership with up to five international project management firms. The new entity will then sell its services to other government bodies in Saudi Arabia that are developing infrastructure. It is estimated that the potential workload totals about SR600bn, which would require some 15,000 staff to manage.

It is understood that selected firms have been approached by Aramco to express interest in forming the new company. Many of the world’s leading project management providers have worked with Aramco in the past, including:

The project management company will take considerable strain away from Aramco, which in recent years has been relied upon to deliver some of the kingdom’s biggest construction projects.

“Aramco has been viewed by many as the de facto development arm [of the Al-Saud family] for the last few years, so it is a good idea for them to have an affiliate that can take the strain and leave them to concentrate on their core operations,” says a senior oil and gas consultant based in the kingdom. “This will allow them to do that.”

Aramco has not been mandated to do anything by Riyadh and the new plan is being viewed more as a study about how any new company might look, rather than a locked-in plan that will happen.

“Aramco is testing this out and putting it out there to see if it is a viable proposition,” says an oil and gas executive based in Al-Khobar. “There is still some way to go before you could call it a certainty.”

Sources close to Aramco have repeatedly said over recent years that these projects have diverted the oil company’s attention away from its core hydrocarbon businesses. It is the world’s largest oil company and produces about 10.4 million barrels of oil a day.

Multibillion-dollar schemes include the King Abdullah University of Science and Technology (KAUST) near Jeddah, the King Abdullah Sports City development near Jeddah, the King Abdullah Petroleum Studies Research Centre (Kapsarc) in Riyadh, and the King Abdulaziz Centre for Knowledge & Culture in the Eastern Province. Most recently, Aramco was tasked with delivering 11 sports stadiums. Construction was due to start this year, although this plan is now being scaled back considerably.

Aramco has extensive experience in handling multibillion-dollar megaprojects and has worked closely with internationally renowned engineering consultancies for decades.

Several of the firms being approached by Aramco already have a long-term agreement in place with the oil major to provide engineering services, including project management, for hydrocarbon schemes across the kingdom.

The general engineering services plus (GES-plus) contract is held by Jacobs Engineering, SNC Lavalin, KBR and WorleyParsons.

The GES-plus was conceived to increase the amount of in-kingdom engineering talent and the success of the initiative is mixed. A shortage of local engineers has led to expatriates making up the numbers to meet the in-kingdom quotas in some cases and many are bought in on expensive terms and conditions.

“GES-plus was a great idea in principal, but many felt at the time that it may have been better to send the local engineers overseas to gain the most experience,” says an executive from an engineering consultancy based in Saudi Arabia. “In-kingdom engineering is expensive compared to other regions.”

The new initiative is expected to be different and is more focused on the capability to push many of Riyadh’s key initiatives through, rather than as a means to ramp up engineering and project management skills of locals.

However, many also believe that if a company is formed under the umbrella of Aramco, it will attract local graduates due to the desirable brand image the company has in Saudi Arabia.

Aramco was not available for comment when contacted by MEED.

Stay informed with the latest in the Middle East
Download the MEED app today, available on Apple and Android devices

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications