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Abu Dhabi, UAETuesday 11 December 2018

Saudi Aramco attracts 400 companies to localise supply chain content

Schlumberger, Baker Hughes and others are part of Aramco's In-Kingdom Total Value Add programme

The biggest deal during the quarter was Saudi Aramco’s $1.6bn acquisition of Arlanxeo, Holding a chemicals company in the Netherlands. Reuters
The biggest deal during the quarter was Saudi Aramco’s $1.6bn acquisition of Arlanxeo, Holding a chemicals company in the Netherlands. Reuters

Saudi Aramco, the world’s biggest oil producing company, has signed up more than 400 companies for its national supply chain initiative – part of efforts to increase use of locally produced goods and services.

Bakers Hughes, part of General Electric, Schlumberger, AZR Technologies and the Arabian Drilling Company are among companies that are part of Aramco’s In-Kingdom Total Value Add (IKTVA) programme, the company said in a statement. The initiative aims to locally source Aramco’s supply chain by incentivising international and local providers to invest within the kingdom.

Aramco launched IKTVA in December 2015. It aims to double the percentage of locally produced energy-related goods and services to 70 per cent by 2021, and export 30 per cent of total domestic energy goods and services produced in the kingdom over the same timeframe.

Regional oil companies such as Aramco, Abu Dhabi National Oil Company and Petroleum Development Oman have started to push for greater connection between their supply chains and local goods and services by making in-country value a priority for contractors engaging with them.

The 400 IKTVA partners supply a total of 24 commodities worldwide, and the programme also aims to develop the technical capabilities of young Saudis by creating 30 training centres by 2030.

A total of 16 training centres are operational at present, aiming to boost hydrocarbons-related research and development activities in the kingdom.

Arabian Drilling Company (ADC) has hired around 2,400 Saudi nationals since 2015, and aims to graduate 450 apprentices from its in‑house apprenticeship schemes, Aramco said. ADC’s spend on local procurement increased to 72 per cent in 2017 from 42 per cent in 2014 before it joined IKTVA.

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Meanwhile, Baker Hughes employs 1,400 Saudi nationals of its total 2,650 kingdom-based employees, and counts 1,350 local companies within its supplier base. The company has several facilities across the kingdom, including a drill bit plant, pressure control facility and the Dhahran Global Technology Centre, which works with customers to address reservoir challenges.

New York Stock Exchange-listed Schlumberger, one of the world’s biggest oilfield services companies, has leased 500,000 square metres of land at Saudi Arabia’s King Salman Energy Park, where it plans to establish an industrial complex serving local and regional markets. Construction began this year and the second phase is expected to complete in late 2019.

Schlumberger’s procurement from the Saudi market made up more than 37 per cent of total sales during 2017. The company aims to double local procurement by 2021 and wants Saudi nationals to make up 70 per cent of its local workforce by 2020.

AZR Technologies, an SME backed by Aramco’s entrepreneurship division Wa’ed, plans to align its operations with IKTVA in the years to 2021, Aramco added. It has "localised", or hired Saudi nationals for 70 per cent of all positions in oil well inspection, and plans to increase local procurement from 65 per cent of local procurement spend today, and create additional jobs for Saudis.