Value of awarded contracts reaches SR220.8 billion in 2014

Updated 13 March 2015
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Value of awarded contracts reaches SR220.8 billion in 2014

The value of awarded contracts in Saudi Arabia recaptured the loss in momentum that was witnessed during the third quarter to reach SR61.9 billion. The fourth quarter surge resulted in the total value of awarded contracts to settle at SR220.8 billion in 2014. Although the value of contract awards fell by 25 percent compared to 2013, 2014 still registered a strong performance, according to a report by the National Commercial Bank (NCB).
The main contributing sectors were oil & gas (SR48 billion), power (SR33 billion) and transportation (SR20 billion). The sectors that were earmarked for expenditures by the government as part of the 2014 budget were also well represented such as healthcare (SR15 billion), urban development (SR15 billion), roads (SR15 billion) and education (SR10 billion). During Q4, 2014, the main contributors were urban development (SR12 billion) oil & gas (SR11 billion), healthcare (SR10 billion), the report said.
The SR220.8 billion in awarded contracts during 2014 reflects the strength of the construction industry as the total value of contracts has exceeded SR200 billion over the last four consecutive years. Both physical and social infrastructure related sectors continued to grow compared to 2013, however it was the reduction in the size of mega projects that caused the decline in 2014.
While the value of awarded contracts during 2014 reflect the lowest amount during the last four years, it should not be construed as a weakening of the construction industry. The government’s plan as part of its announced 2015 budget reflects its desire to keep capital expenditures propped up while being faced with significant reductions in its revenues as oil prices continue to slide. The Ministry of Finance announced that 2,572 contracts worth SR184 billion were signed during 2014, reflecting an increase over 2013 by 10 percent in volume and 17 percent by value.
The NCB report said construction Contracts Index (CCI) ended the year at 234.48 points, nearly halving 2013’s 465.03 points. The CCI exhibited volatile swings during 2014 but nonetheless settled evenly to end the year. October’s strong performance resulted in the CCI reaching its highest level during Q4, 2014, settling at 353.81. The CCI dropped to 269.06 points during November. Looking ahead, the supply of projects that are entering the execution phase appear to be solid as indicated by the CCI’s performance.
The Eastern Province and Riyadh captured nearly equal shares of the value of awarded contracts during Q4, 2014. A majority of the Eastern Province’s projects were attributed to contracts being awarded in the oil & gas sector. Numerous infrastructure related contracts were awarded in Riyadh with particular emphasis on urban development, water and government sectors. The Madinah region witnessed two large contracts being awarded within the urban development and mixed-use real estate sectors. As for Asir and Al-Jouf, two contracts were awarded in the healthcare sector pertaining to the King Faisal Medical City in Abha and the Prince Mohammed Medical City in
Al-Jouf.
Backed by the government’s desire to enhance the Kingdom’s economy by continually investing heavily into its industries, the investment climate is seen as very favorable over the medium to long-term. While the Kingdom is prepared to weather stiff shortfalls in its revenues, it has
maintained that it will continue to focus on its capital expenditures unabatedly. “Thus, we should expect the government’s unwavering strategy to build on its capabilities as the regional leader in attracting investments to continue into 2015,” the bank said.
The Ministry of Finance’s budget press release highlighted the government’s plans to maintain its capital expenditures and is willing to dip into its vast foreign reserves to accomplish this goal. “Our projections for capital expenditures during 2015 are that it will reach SR239 billion, which is 29 percent higher than the Ministry of Finance’s projections. The area that has received the most attention for 2015 was health & social affairs, marking a drastic increase of 48 percent over 2014’s budget,” the bank said.


Oil prices near 2019 highs after US ends all Iran sanction exemptions

Updated 42 min 53 sec ago
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Oil prices near 2019 highs after US ends all Iran sanction exemptions

  • Iran’s main oil buyers initially received sanction exemptions
  • US reiterates its goal to cut Iran oil exports to zero

SINGAPORE: Oil prices were near 2019 highs on Tuesday after Washington announced all Iran sanction waivers would end by May, pressuring importers to stop buying from Tehran.
Brent crude futures were at $74.40 per barrel at 0239 GMT, up 0.5 percent from their last close and not far off a 2019 peak of $74.52 reached on Monday.
US West Texas Intermediate (WTI) crude futures hit their highest level since October 2018 at $65.95 per barrel before edging back to $65.89 by 0239 GMT, which was still up 0.5 percent from their last settlement.
The United States on Monday demanded that buyers of Iranian oil stop purchases by May 1 or face sanctions, ending six months of waivers which allowed Iran’s eight biggest buyers, most of them in Asia, to continue importing limited volumes.
Before the reimposition of sanctions last year, Iran was the fourth-largest producer among the Organization of the Petroleum Exporting Countries (OPEC) at almost 3 million barrels per day (bpd), but April exports have shrunk well below 1 million bpd, according to ship tracking and analyst data in Refinitiv.
Barclay’s bank said in a note following the announcement that the decision took many market participants by surprise and that the move would “lead to a significant tightening of oil markets.”
The British bank added that Washington’s target to cut Iran oil exports to zero posed a “material upside risk to our current $70 per barrel average price forecast for Brent this year, compared with the year-to-date average of $65 per barrel.”
ANZ bank said in a note on Tuesday that “the decision is likely to worsen the ongoing supply woes being felt with Venezuelan sanctions, the OPEC supply cut, and intensifying conflict in Libya.”
The move to tighten Iran sanctions comes amid other sanctions Washington has placed on Venezuela’s oil exports and also as producer club OPEC has led supply cuts since the start of the year aimed at tightening global oil markets and propping up crude prices.
Ellen Wald, non-resident senior fellow at the Global Energy Center of the Atlantic Council, said the United States “seem to expect” Saudi Arabia and the United Arab Emirates to replace the Iranian oil, but she added “that this is not necessarily the way Saudi Arabia sees it.”
Saudi Arabia is the world’s biggest exporter of crude oil and OPEC’s de-facto leader. The group is set to meet in June to discuss its output policy.
“Should OPEC decide to end their supply cut program going into the second half of the year, this could limit oil’s upside in the coming months,” said Lukman Otunuga, analyst at futures brokerage FXTM.
Meanwhile, the Atlantic Council said the US move would hurt Iranian citizens.
“We’re going to see their currency collapse more, more unemployment, more inflation,” said Barbara Slavin, director for the Future of Iran Initiative at the Atlantic Council, adding that the US sanctions were “not going to bring Iran back to the (nuclear) negotiating table.”