There can be little doubt that 2005 is going to be another busy year for civil contractors in the kingdom. Blessed with last year's record earnings of almost SR 400,000 million ($120,000 million), the government has set aside SR 54,000 million ($14,400 million) to be spent on new and ongoing projects this year - a 29 per cent increase on budgeted expenditure for 2004. Add to this the major investment programmes planned by Saudi Aramco and Saudi Basic Industries Corporation (Sabic), a highly liquid private sector and a low interest environment, and the construction industry can be assured of one of its busiest years to date. The government's priorities are clear. At SR 17,200 million ($4,590 million), the largest chunk out of its project budget will be spent on much-needed infrastructure projects in the water, sewerage and desalination sectors. State-owned Saline Water Conversion Corporation (SWCC) will implement most of these projects, the largest of which is the estimated $900 million water conveyor now under tender in the Western Region. There is a firm emphasis on building up educational infrastructure. A total of SR 14,700 million ($3,920 million) has been set aside, most of which will be used to fund the construction of 1,420 new schools and the rehabilitation of 2,000 existing institutions. Significant investments will also be made in the transport sector, which is to receive a total of SR 8,400 million ($2,240 million) from the government in 2005. The bulk of the funds will be used to build 6,700 kilometres of new roads, ports, railroads and the long-delayed first-phase development of King Abdulaziz International Airport in Jeddah. Within built-up areas, the government plans to spend SR 7,200 million ($1,920 million) on municipality services. Construction of inner-city roads, intersections and bridges, road lighting and cleaning-related projects will account for most of the spending. The health sector too will get a welcome shot in the arm, with SR 4,600 million ($1,250 million) set aside for the construction of 420 new primary care centres, 23 hospitals and the expansion of existing health facilities. Contractors specialised in residential housing will benefit from the government's capital increase in the Real Estate Development Fund, which provides housing loans to Saudis. With the local population growing at about 3 per cent a year and half the 23 million inhabitants below the age of 20, housing features high on the government's agenda. After recording healthy growth of 7.5 per cent in 2004, private sector construction is expected to put in another strong performance this year. The boom is driven by government spending, high liquidity and low interest rates, which have enabled businesses and individuals to borrow at comparatively cheap rates from local banks. Due to the lack of investment opportunities in the kingdom, many private Saudi investors have in recent years identified real estate as one of the most promising growth markets. Residential and commercial real estate projects have mushroomed across the kingdom. A measure of the well-being of the kingdom's construction market is the performance of Saudi Arabia's cement works, which are all producing at full capacity - about 21 million tonnes a year (t/y) of cement and 32 million t/y of clinker. With demand growth expected to remain consistently strong, expansion projects on most of the kingdom's eight cement companies are well under way. A contract award is still pending at Arabian Cement Company (ACC), which plans to install a 7,000-tonne-a-day (t/d) cement line and expand utility capacity and its Rabigh plant. A tender is due to be released at the end of February by Saudi Cement Company (SCC) for the expansion of its existing Hofuf plant. The project calls for the installation of a new 10,000-t/d clinker line and the upgrade of the plant's fifth clinker line from 3,500 t/d to more than 4,000 t/d. Contractors will also be keeping an eye on the kingdom's most dynamic industrial sector - petrochemicals. Sabic alone is pressing ahead with a major expansion programme covering 11 projects, including the estimated $3,000 million-4,000 million grassroots olefins complex at Yanbu and a $2,000 million-3,000 million expansion at its Jubail-based affiliate, Eastern Petrochemical Company (Sharq).

Expansion

Large-scale projects are also coming up in oil and gas. Next in line is Aramco's estimated $1,700 million Hawiyah natural gas liquids (NGL) recovery programme, which calls for the construction of a grassroots NGL plant and the expansion of the existing Hawiyah gas and Juaymah fractionation plants. Bids for two major packages on the Hawiyah NGL plant and the Juaymah gas fractionation plant expansion went in on 29 January. Tender documents are due to be issued in February for the estimated $220 million project to expand the existing Hawiyah gas plant.

In addition, Aramco is gearing up to receive bids from international contractors on 8 February on the estimated $1,000 million-1,500 million onshore Abu Hadriyah, Fadhili and Khursaniyah (AFK) oil fields development in the Eastern Province. The fast-track project is being tendered on a hybrid front-end engineering and design (FEED)/engineering, procurement and construction (EPC) basis. Opportunities also abound in the power sector, where the need for more generation capacity is ensuring a continuous flow of work. Several power plant expansion projects are expected to be tendered by Saudi Electricity Company (SEC) throughout the year. A contract award is expected in the first quarter on the 1,200-MW upgrade of Riyadh's PP9 power station. In addition, contractors are awaiting progress on two independent water and power projects (IWPPs), at Shouaiba and Jubail, planned by SEC with SWCC, and The Power & Water Utilities Company for Jubail & Yanbu (Marafiq) respectively.