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Abu Dhabi, UAEMonday 18 June 2018

Saudi Aramco inks pacts to build two industrial units

The company plans to build an onshore drilling rig facility and a casting and forging unit in Ras Al Khair

<p>The planned project on the country&#39;s west coast forms part of a regional pivot to develop multibillion-dollar refining and chemicals schemes. Hamad I Mohammed / Reuters.</p>
<p>The planned project on the country&#39;s west coast forms part of a regional pivot to develop multibillion-dollar refining and chemicals schemes. Hamad I Mohammed / Reuters.</p>

Saudi Aramco, the world’s biggest oil producer, signed two agreements with the Royal Commission for Jubail and Yanbu (RCJY), a government body that manages free zones in the country, to set up two industrial projects at Ras Al-Khair Industrial City.

The commission will allocate two parcels of land to Aramco where it will build an onshore drilling rig facility and a casting and forging unit as the global energy major looks to diversify away from oil and expand into the marine related industries, according to a statement from the company. It did not specify the size of investments to set up the new industrial units.

The drilling and related equipment facility will be built across an 500,000 square metres area. The casting and forging unit, which will serve the maritime industry and the manufacturing of equipment related to the oil and gas supply chain, is being set up over an area of 300,000 square metres, according to the company.

Aramco is the main revenue earner for the kingdom and plans to raise its spending to US$414 billion over the next 10 years, including on infrastructure and drilling, as it moves to new business lines. The new capital expenditure target revealed earlier in December is higher than $334bn announced last year. Aramco’s vice president for procurement and supply chain management, Abdulaziz Al Abdulkarim, in March said that the company’s investment in a new energy industrial city in Saudi Arabia are estimated at $4.4bn while its investment in Ras Al Khair may reach 21.8bn Saudi riyals (Dh21.34bn).

Saudi Aramco awarded the first major contract for dredging, reclamation and marine structures for the planned construction of a shipyard complex in Ras Al Khair to a consortium comprising Saudi Archirodon and Huta Hegerfeld AG Saudia Company in August, according to media reports at the time, which did not give the financial details of the deal.

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The development of the special economic zones is at the heart of the country’s economic diversification plans and creating jobs for Saudi workforce.

Aramco said that the agreements with RCJY represent an important element of Saudi Aramco's ongoing commitment to establishing a supply chain and services ecosystem in Saudi Arabia and is part of its In-Kingdom Total Value Add (IKTVA) Program.

"These projects will support the growth and localization of the supply chain related to the energy sector and help enhance the speed of supply and reduce associated costs for Saudi Aramco,” Fathi Al-Saleem, Aramco’s manager of the Maritime Yard Department said. “The projects are in line with the objective of our IKTVA program, which is to maximise the local content in manufactured goods and services in Saudi Arabia, up to 70 per cent by the year 2021.”

The oil producer launched its IKTVA programme in December 2015 with an aim to double the percentage of locally-produced energy-related goods and services to 70 per cent by 2021 and export 30 per cent of the total domestic energy goods and services produced in the kingdom over the same time frame.