Saudi Aramco has told all of the international contractors planning to bid on any of its engineering, procurement and construction (EPC) contracts that it expects them to have in-kingdom EPC (IK-EPC) status by 2013.

The IK-EPC initiative has been developed with a view to increase local participation of Saudi Arabians in mega-projects carried out by the state-owned oil company. International contractors can qualify by meeting Aramco’s criteria on the amount of Saudis they employ in professional positions and how much training is offered to local university graduates.

Another option is forming a joint venture company with a local engineering contractor to ensure that local talent works on large-scale Aramco contracts.

“Aramco has given contractors enough time to sort out IK-EPC, but there are still several who are not qualified under the company’s different criteria,” says a Saudi Arabia-based oil and gas source. “Many companies have realised that both options are not cheap, but take away Aramco’s contracts from the kingdom’s oil and gas industry and you have nothing much left.”

Contractors have argued that maintaining a large engineering capability in Saudi Arabia is not cost effective when you have minimal contracts with Aramco under execution. One contracting source says that he is doubtful his company, a major international contractor, will make the necessary investment.

The IK-EPC programme is similar to the general engineering services plus (GES plus) contract that Aramco has rolled out with five international engineering companies for the provision of localised engineering and project management services.