RIYADH: Saudi Arabia saw a 79 percent increase in the value of construction contracts awarded during the first quarter of 2024, reaching SR118.8 billion ($31.65 billion), a new analysis showed.
The latest US-Saudi Business Council report reveals that this figure is the second-highest on record, following SR147.1 billion awarded in the third quarter of 2015. Compared to the fourth quarter of 2023, contract values jumped by 35 percent.
The increase is driven primarily by major investment in the oil and gas sector, along with heightened activity in the real estate sector due to Vision 2030 giga-projects and expansion in the water sector.
The record figures highlight Saudi Arabia’s strategic push, driven by increased foreign investment and key partnerships. Despite broader economic challenges, this growth underscores the Kingdom’s transformation into a major hub for large-scale infrastructure projects, signaling continued economic progress and development.
“Saudi Arabia’s construction sector is experiencing exponential growth, marked by significant developments in social and physical infrastructure, enhanced quality of life, and substantial foreign direct investments,” said Albara’a Al-Wazir, director of economic research at USSBC.
The report also noted strong growth in Saudi Arabia’s non-oil economy, which expanded by 3.1 percent in the first quarter of 2024. This was despite a 1.7 percent decline in the Kingdom’s gross domestic product, attributed to ongoing oil production cuts under the OPEC+ agreement.
The non-oil economy’s resilience and steady growth reflect ongoing structural changes aimed at reducing dependency on energy and enhancing overall economic stability.
“The Kingdom’s oil and gas sector, led by Saudi Aramco, spearheaded the increase, while Vision 2030 giga-projects such as Neom and the Red Sea development contributed substantially,” he said.
Additionally, the construction sector’s GDP grew by 2.4 percent during the same period.
The continued expansion underscores the sector’s vital role in Saudi Arabia’s economic development and its emergence as a key hub for large-scale construction endeavors.
Contract Awards Index
The USSBC Contract Awards Index rose to 415.89 points in the first quarter, up 54 percent from the previous month and 33 percent from the fourth quarter of 2023. This marks seven consecutive quarters above the 200-point mark and 36 months above the 100-point threshold, indicating anticipated growth in construction activity.
“The CAI grew to 390.24 points in January, 438.85 points in February, before settling at 415.89 points in March. This CAI eclipsed the 400-point mark for the first time since September 2013 when it reached 419.42 points,” said USSBC.
Oil and gas sector dominates
The report highlighted a 1,059 percent year-on-year surge in projects awarded in the oil and gas sector, reaching SR51.2 billion in the first quarter of 2024.
Saudi Aramco issued two major contracts, each valued at SR6.6 billion, in January for the Riyas NGL development at the Jafurah Unconventional Gas Plant. These contracts were awarded to a joint venture between Spain’s Tecnicas Reunidas and China’s Sinopec Engineering Group for phases one and two.
In February, Saudi Aramco granted a SR6.37 billion contract to China Petroleum Engineering & Construction Corp. for the installation of eight compression trains in phase three of the Master Gas System Expansion in the Eastern Province.
Real estate sector momentum
The real estate sector secured 105 contracts worth SR24.4 billion in the first quarter, representing a 58 percent increase from the previous year.
The report noted that commercial real estate projects led the sector with SR15 billion in awarded contracts during the first quarter, followed by residential projects at SR2.8 billion and mixed-use developments at SR1.4 billion.
The largest real estate contract, valued at SR4.1 billion, was awarded by Jeddah Central Development Co. in January for a sports stadium in the Jeddah Central District. The stadium, expected to accommodate 45,000 people, is slated for completion in 2026.
In February, the Saudi Arabian Football Federation awarded a SR3.6 billion contract for the development of the Dammam football stadium in Dammam Sports City.
In the hospitality sector, NEOM’s giga-project allocated SR1.91 billion to Al Bawani Co. Ltd for steel structure works at Trojena Ski Village.
Additionally, Jeddah Central Development Co. awarded two further contracts: SR1.8 billion for an opera house and SR1.15 billion for an oceanarium and coral farm.
Water sector contracts surge
In the first quarter of 2024, contracts awarded in Saudi Arabia’s water sector surged to SR24 billion across 14 deals, marking a 143 percent increase from the same period in 2023.
The largest contract, valued at SR17.6 billion, was awarded by NEOM in January to Italy’s Webuild Group for the development of water dams at Trojena Mountain.
Another major project, worth SR1.7 billion, was granted by the Royal Commission for Riyadh City to a joint venture between Water & Environment Technologies Co. and Al Bawani Co., to construct a sewage treatment plant with a capacity of 29,850 cubic meters per day.
In January, Saudi Water Partnership Co. also awarded a SR1.5 billion contract to UAE-based TAQA for the construction and operation of the Juranah Independent Strategic Water Reservoir.
Regional distribution
According to USSBC, the Eastern province led Saudi Arabia in awarded construction contracts during the first half of 2024, totaling SR53.1 billion.
The Tabuk region followed with SR24.9 million in contracts, while the Makkah region recorded SR16.7 billion.
USSBC attributed the overall increase in contract awards across various sectors to factors such as rising foreign direct investment, partnerships between foreign and local contractors, and a growing economic contribution from the private sector.
The surge in awarded construction contracts underscores Saudi Arabia’s burgeoning role as a leading destination for major infrastructure investments.
This growth, fueled by major projects in oil and gas, real estate, and water sectors, reflects the Kingdom’s robust economic activity despite global challenges.
With continued high investment and strategic partnerships, Saudi Arabia is poised for sustained development, enhancing its infrastructure and reinforcing its position in the global construction landscape.
