Energy park lays foundation for Saudi industrial strategy

Energy park lays foundation for Saudi industrial strategy

The King Salman Energy Park (SPARK) will put Saudi Aramco’s program to boost domestic value on the right path and create a strong foundation for industry in Saudi Arabia as part of the Kingdom’s Vision 2030 reform plans.

Previously, industrial cities in Saudi Arabia were mostly built away from their consumer base. Despite efforts to support local content, the growth in consumer demand failed to match the development of the local industrial sector.

The Kingdom’s previous industry strategy set a maximum of 30 percent for local content and Saudization, but with the Saudi economic reforms and the correction stage among Vision 2030 objectives, that is set to increase. Soon, we should expect to see a new Saudi strategy for industry, which should reflect the plans, goals and strategies of Saudi Vision 2030.

Saudi Aramco’s In-Kingdom Total Value Add (IKTVA) program, which started three years ago, should greatly contribute to enlarging the local industrial content and providing jobs for Saudi citizens.

There was an expectation that 500,000 jobs would be provided, but no time frame was put forward for their creation. It is essential that the program makes a positive contribution to the reduction in unemployment, GDP growth and improvement in many other economic indicators. The Kingdom must gain the benefits from the billions of dollars that it invests annually in upstream and downstream projects and in activities related to its crude oil resources and energy sector.

SPARK will give the Saudi industrial sector and Saudi Aramco’s IKTVA program the right tools to achieve targeted goals. This is in line with economic reforms and transparency required under Vision 2030.

Saudi Crown Prince Mohammed bin Salman launched the energy park to support the Saudi industrial sector and diversify the economy away from oil dependency. The park is expected to attract major international and domestic companies, especially service providers to support oil production, refining, petrochemicals, electricity and water by maximizing local content and local talent.

The presence of large international and local companies will be a boon to the Kingdom and Gulf region. By 2035, when the three phases of the project are complete, an area of 50 square kilometers will have been created that will become a global industrial hub for energy-related manufacturing services. There is nothing similar in the region and the site is sure to attract some of the world’s biggest and most innovative energy industry names.

SPARK will give the Saudi industrial sector and Saudi Aramco’s IKTVA program the right tools to achieve targeted goals.

Faisal Mrza

The energy park will not only enable Saudi resources and talent in energy-sector support industries, but will also deliver world-class infrastructure within close proximity to all GCC countries who have hungered for such regional services. The park’s offering of a comprehensive ecosystem, logistics and dry port, as well as commercial and residential services, is a winning proposition from both a business and lifestyle perspective. It will be an appealing environment that will drive successful industrial ventures.

This is one of the major infrastructure projects in the industrial sector as a part of Vision 2030’s economic diversification. The industrial portfolio will play a major role as the Kingdom moves ahead with developments and economic reforms.

SPARK will contribute not only to Saudi Aramco’s activities, but also to the Kingdom’s industries in general and will further facilitate Saudi Aramco’s mission to achieve 70 percent of local content for energy-related industries and services by 2021.

As for the challenges that the energy park might face, there is no competition of any significance from more developed industrial hubs in the GCC or the Middle East.

From a compatibility aspect for major international service providers, since the energy park will be built to Saudi Aramco’s high standards, there is no issue to consider. The only challenge that needs to be overcome is to adopt foreign investment regulations as stated by Saudi Vision 2030. Former foreign investment policies won’t support strategic, huge projects, such as SPARK, which are set to attract major service providers.

  • Faisal Mrza is an energy and oil marketing consultant. He was formerly with OPEC and Saudi Aramco. He is the president of #Faisal_Mrza Consulting. Twitter: @faisalmrza

 

 

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