Value of awarded contracts in KSA reaches SR82.8bn in Q2

Updated 06 October 2015

Value of awarded contracts in KSA reaches SR82.8bn in Q2

JEDDAH: There was a significant upswing in the value of awarded contracts in Saudi Arabia during the second quarter of 2015 as it reached SR82.8 billion. It marked a strong rebound from the previous quarter. Anchor sectors took hold of the majority of spending, as the roads and residential real estate accounted for approximately 57 percent of the total value (SR47.5 billion), according to NCB Construction Contracts Index Second Quarter 2015 released on Tuesday.

The report said power sector came third, with 14 percent of the value of awarded contracts during Q2, 2015. Beyond the roads and residential real estate sectors, the value of awarded contracts were varying across the remaining sectors during Q2, 2015. The value of awarded contracts in April jumped to SR51.3 billion, which had the highest monthly value of awarded contracts during Q2, 2015.
Despite falling oil prices, and accordingly oil revenues, the construction awarded contracts in the first half 2015 showed a higher pace than 2014, but likely to weaken in 2016. Furthermore, with the prospect of recording twin deficits in 2015, government’s large foreign reserves held by SAMA (Saudi Arabian Monetary Agency) should provide enough cushion to sustain an elevated level of spending during 2015 and beyond.
The NCB report said value of awarded contracts during H1, 2015 surpassed that of H1,2014 by 13 percent, reaching SR140 billion. The SR82.8 billion in awarded contracts during Q2, 2015 reflects the continued strength of the construction industry and also shows that the Kingdom can afford to keep spending close to its recent past levels, even at lower oil prices. Following the pattern of 2014, the physical and social infrastructure related projects continued their growth in Q2, 2015, with fewer of industrial mega projects.
The Construction Contracts Index (CCI) increased to record 341.98 points by the end of the second quarter of 2015, from 290.78 points recorded at the end of the first quarter of 2015, which was at the same level recorded in Q3, 2014. The CCI gradually rose from 305.11 in April to 325.76 and 341.98 points in May and June, respectively.
The concentration of contracts within the roads sector in the Makkah region, which had 42 percent share, witnessed a sizeable road project that was awarded by Umm Al Qura for Development & Construction, amounting to SR23.3 billon. Riyadh region captured 18 percent share of the total value of awarded contracts during Q2,2015. Riyadh also was the recipient of three roads contracts that were awarded by Arriyadh Development Authority.
The Jazan region came third (9 percent), as this share was attributed to the SR7.1 billion IGCC power plant contract that was awarded by Saudi Aramco.
The value of awarded contracts showed an increase in April, reaching SR51.3 billion. The roads, power, residential real estate, and industrial sectors were the largest contributors. Seven major contracts were awarded in the roads sector. The largest contract amounting to SR23.3 billion was awarded by Umm Al Qura for Development & Construction to Dallah Albaraka Group.
The second contract, which worth SR6.6 billion, was also awarded by Umm Al Qura for Development & Construction to Nesma & partners.
The third contract was awarded by Ministry of Transportation to Bin Tamy Saudi Pan in the amount of SR225 million for Taif, Al Baha and Abha road expansion, and implementation of service roads on both sides: Makkah Part (20km) and Taif Ring Road phase 4 (8km). The project is expected to be completed by the second quarter of 2018.
Within the power sector, three major contracts were awarded. The largest contract in the amount of SR7.1 billion was awarded by Saudi Aramco to JV of Air products & Acwa Holding to build multiple power plants. The current project deals with the construction of an air separation unit of the new IGCC power plant at Jazan refinery, which is the world largest industrial gas complex, to supply 75,000 metric tons per day (20,000 oxygen and 55,000 nitrogen).

The project is expected to be completed after 23 months. The second contract worth SR450 million and was awarded by Saudi Electricity Company (SEC) to Archiorodon for building a power plant named PP13 at Riyadh. The third contract was also awarded SEC at SR450 million to Al-Gihaz Holding to build Tabuk substation 380/kv, and associated facilities. The two projects are expected to be completed by 2016.
Within the residential real estate sector, three major contracts were awarded. The largest contract in the amount of SR5.2 billion was awarded by the Ministry of Interior to El Seif Engineering Contracting to build a residential compound in Najran – residential compound with 2800 residential units, which include 337 apartment buildings. The project is expected to be completed by the second quarter of 2018.
The second and third projects in the amount of SR750 mil- lion, and SR375 million were awarded by the Ministry of Hosing to Emdad Najed Group for constructing residential units, which include 985 apartments, 192 sqm each). The two projects are expected to be completed by the second quarter of 2018.
Within the industrial sector, three contracts were awarded. The largest EPC contract in the amount of SR1.08 billion was awarded to Taiwan’s CTCI and Japan’s Chiyoda Corporation by the Local National Industrial Company (Tasnee) to build a titanium sponge plant. The project is expected to be completed by the first quarter of 2017. The second contract was awarded to China National Building Materials Company by Arabian Cement Company in the amount of SR363.8 million. The objective of this project is the expansion of Rabigh Cement Plant. The project is expected to be completed by the second quarter of 2016.


Tankers defer retrofits to cash in on freight rates

Updated 19 October 2019

Tankers defer retrofits to cash in on freight rates

  • The rates for chartering a supertanker from the US Gulf Coast to Singapore hit record highs of more than $17 million and a record $22 million to China earlier this week

SINGAPORE: Tankers that had been scheduled to install emissions-cutting equipment ahead of stricter pollution standards starting in 2020 have deferred their visits to the dry docks to capitalize on an unexpected surge in freight rates, three trade sources said.

US sanctions on subsidiaries of vast Chinese shipping fleet Cosco in September sparked a surge in global oil shipping rates as traders scrambled to find non-blacklisted vessels to get their oil to market.

The rates for chartering a supertanker from the US Gulf Coast to Singapore hit record highs of more than $17 million and a record $22 million to China earlier this week.

By comparison, prior to the sanctions, shipping crude from the US Gulf to China cost around $6 million-$8 million.

The extraordinary spike in freight rates proved too good to miss for some shipowners who were due to send vessels to the dry docks for lengthy retrofitting and maintenance work.

“We can confirm several owners have postponed dry docking earlier scheduled for the months of October and November to take advantage of the skyrocketing freight rates,” said Rahul Kapoor, head of maritime and trade research at IHS Markit in Singapore.

The shortage of ships to move crude oil was so acute that some shipowners also switched from carrying so-called “clean” or refined fuels like gasoline to “dirty” cargoes that include crude oil, despite the costs of having to clean them later.

“Current rate levels are a no-brainer for pushing back scrubber retrofitting,” said Kapoor.

Starting Jan. 1, 2020, the International Maritime Organization (IMO) requires the use of marine fuel with a sulfur limit of 0.5 percent, down from 3.5 percent currently, significantly inflating shippers’ fuel bills.

Only ships fitted with expensive exhaust cleaning systems, known as scrubbers, which can remove sulfur from emissions, will be allowed to continue burning cheaper high-sulfur fuels.

Ships must be sidelined for up to 60 days for fitting these, according to IHS Markit and DNV GL.

While freight rates have abruptly come off their recent highs, shipowners can still profit from the higher charges.

“One cargo loading at current elevated rate levels can not only finance the scrubber capex, but also account for extra costs incurred to install the scrubber at a later date,” said Kapoor, referring to the capital expenditure of fitting the scrubber.

Freight rates are expected to hold firm for the rest of the year.

“With seasonal demand support and tanker supply deficit still pronounced, we expect (fourth-quarter) tanker freight rates to stay elevated and end the year on a high note,” Kapoor said.