AFTER more than three years of strong growth, the kingdom’s construction market is slowing down as the Saudi government trims project spending.
Much of the 20 per cent cut in expenditure called for in the 1994 budget is likely to fall on public construction programmes. Wise contractors are shifting their attention to the private market, where activity is still at high levels. Most are trimming their payrolls and carefully monitoring cash flow.
However, few are pulling out of a market that for more than two decades has produced some of the most attractive construction opportunities in the developing world. ‘The market is turning down, but we are not pulling out,’ says a project manager with a leading UK construction company. ‘That would mean throwing away a 15-year investment in building a presence in this market.’
Some major public opportunities are still in prospect. The main sectors are:
Electricity. Four major thermal plants are planned. Prequalifying applications were submitted in December for the turnkey contract to build a 2,400-MW thermal power plant at Ghazlan for the Saudi Consolidated Electric Company in the Eastern Province (Sceco-East). The new plant is an expansion of the existing 1,600-MW thermal plant at Ghazlan, the kingdom’s oldest thermal power plant. Bids for the contract to supply another 600 MW of combined- cycle generating capacity in Rabigh in a project that will raise total capacity to about 2,200 MW are still under evaluation. The bidders were the Zurich-based ABB Asea Brown Boveri, General Electric Company (GE) of the US and Belleli of Italy. In addition, Mitsubishi Corporation of Japan has been invited to quote for another 260-MW steam turbine to be installed at the plant.
ABB, GE and Siemens of Germany have quoted for the contract to build Riyadh’s PP9 thermal power plant. Contract award is expected in the first half of 1994. Bids for the first 1,000-MW unit of the Shuqaiq thermal plant are due this year. Bids for the contract to design the Shuaiba thermal plant, which is to have an initial capacity of 1,000 MW with the option of increasing this to 2,500 MW, were submitted at the end of 1993.
Contracts are being awarded for expanding the existing gas turbine power stations in Mecca, Medina, Tabuk, Jouf and Abha. A continuous flow of substation, transmission and distribution work is creating opportunities for smaller companies. Plans for a national grid are being implemented slowly. There are two 380-kV transmission lines from the Gulf to Riyadh, one passing through Al-Kharj. The 380-kV link from Riyadh to Qassim has been recently completed. A 380-kV link between the southern and western regions is planned. Long-term proposals call for a high-tension connection between Riyadh and the west coast.
Water. The water sector has produced some of the largest projects of the past 18 months. Plans for plants with a combined capacity of 180 million gallons a day (g/d) are being implemented. They are the 20 million-g/d Jubail reverse osmosis unit, the 60 million-g/d Al-Khobar multi-stage flash (MSF) plant, which also has 440 MW of steam turbines, and the 100 million-g/d Shuaiba MSF plant, the Middle East’s largest single desalination unit. These projects will only scratch at the surface of future needs. The Saline Water Conversion Corporation has already devised plans for more than 200 million g/d of additional water processing capacity.
Oil and gas. The sole major oil project in 1994 is the modernisation of the Ras Tanura refinery. Bids are due in April for four packages encompassing a continuous catalytic reformer/naphtha hydrotreater, a hydro-cracker and a sulphur recovery unit. The job involves capital spending of about $1,000 million. The programme manager is Brown & Root of the US. Contracts should be awarded by the end of 1994.
A $93 million lump sum turnkey contract to build a gas-oil separation plant for Saudi Aramco in Haradh has been awarded to Babcock Contractors, the UK-based construction company. The $200 million-250 million lump sum turnkey contract to build a gas facility in the Berri field is still in the balance. The present phase of the northern areas programme, which involves boosting output in the Marjan, Safaniya and Zuluf fields, is drawing to a close. Fluor Arabia, the local affiliate of Fluor Daniel of the US, is programme manager for the northern areas programme.
Telecoms. Sweden’s Ericsson is low bidder for the challenging contract to install at least 500,000 new telephone lines in the most important national telephone expansion for more than a decade. The project includes setting up microwave, fibre-optic and satellite routes, and establishing a subscriber radio system for the rural communications project. It also includes constructing support buildings and setting up a maintenance system. Seven companies were individually invited to quote for the scheme. AT&T of the US, after a lump sum discount, quoted about $50 million for a mobile phone project.
Hospitals. Five major public hospitals were under evaluation at the start of 1994. They were the contract to complete the Health Ministry’s 640-bed Gulf Hospital in Dammam for which France’s Thinet International is low bidder; the Dawadimi hospital (see News); the rebid for the National Guard hospital in Al-Hasa; the contract to build hospitals in Shaqra and Zulfi for which the local Arabian Gulf Construction Company in partnership with the Riyadh-based Endeco Company was low bidder; and the contract to build the 150-bed hospital at Al-Zulfi, for which the low bidder is Arabian Gulf and Endeco. More project opportunities are emerging in the private sector. They include the expansion of the Dr Sulaiman Fakeeh hospital, for which Mowlem of the UK is the favoured bidder.
Contractors say that opportunities still exist for companies willing to be innovative. The private sector, particularly commercial and residential projects, is active. A new wave of opportunities is being created by the government’s fina ncial constraints. The local Al-Rajhi Banking & Investment Corporation has agreed to build and lease a residential district for Riyadh’s Imam Mohammad Ibn Saud Islamic university of Riyadh, a project the government would have done in the past.
The SR 600 million scheme is the first of its kind, but may not be the last. As a sign of a new trend in co-operation between government and the private sector in the project market, this innovative approach to major construction work deserves close study from contractors looking for future opportunities.