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Abu Dhabi, UAEThursday 13 December 2018

Saudi Aramco signs $27.5bn worth of deals at localisation event

The world's largest oil producing company aims to generate 70% content locally by 2021

Among the companies Saudi Aramco signed agreements with include global oil services giants such as Baker Hughes and Schlumberger. Bloomberg
Among the companies Saudi Aramco signed agreements with include global oil services giants such as Baker Hughes and Schlumberger. Bloomberg

Saudi Aramco, the world’s largest oil producing company, signed deals worth $27.5 billion (Dh101bn) with international and local firms, as it pushed for greater value generation in its local economy at a forum held in Dhahran.

Baker Hughes, Schlumberger, Honeywell, Siemens as well as the UAE’s National Petroleum Construction Company are among the 31 companies that signed preliminary agreements with the state producer.

“Companies that have invested here are ideally positioned to benefit further with our signing last month of 125 billion Saudi riyals in business at the Future Investment Initiative in Riyadh, much of which will have a direct impact on IKTVA,” said Saudi Aramco president and chief executive Amin Nasser.

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IKTVA stands for In-Kingdom Total Value Add, an Aramco programme launched in December 2015, which requires all of its suppliers to aim to attain 70 per cent local content and export 30 per cent of locally manufactured energy goods and services output by 2021.

"As of now, 51 per cent of each riyal Saudi Aramco earmarks for materials and services is spent locally,” added Mr Nasser.

Companies that comply with IKTVA could take advantage of the more than 1.7 trillion riyals being spent by the state producer on “localisation opportunities over the next decade,” the company said.

Aramco’s localisation initiatives come amid an increasing drive to commit to the kingdom’s Vision 2030, which lists increased domestic manufacturing capabilities as one of its key pillars.

In October, the state producer said it looked to be a “global market leader in the production of non-metallic materials such as hoses and flow lines” that are manufactured from petrochemical products rather than steel or other metals.

Plans for manufacturing capabilities in the segment come amid plans to boost domestic capacities upstream, as well as downstream, specifically chemicals where Aramco sees at least two to three million barrels of oil per day being consumed.

Last year, the Saudi state producer also signed two pacts with the Royal Commission for Jubail and Yanbu, a government body that manages free zones in the country, to set up industrial projects at the Ras Al Khair Industrial City in line with its IKTVA programme.

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.

The drilling and related equipment facility will be built across a 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.