Doing Business In Saudi Arabia - Bna

Given the astronomical growth in construction costs and the shortage of labor, industry
analysts predict that the size of any finance deal is also bound to grow. Additionally,
the latest regulatory reforms are expected to bring about more foreign players to the
Saudi market, in terms of investors in the country’s infrastructure and basic industries,
as well as new entrants into the banking sector. Many bankers are keeping an eye on
the upcoming financing needs for the country’s railway expansion including the
Landbridge railway network, mining ventures including Maaden’s phosphate mine and
the aluminium smelter, petrochemical sector, oil sector, water and power.
The Saudi government and the Saudi private sector are embarking on a number of
new mega projects, which entail some form of financing. A study by the Samba
Financial Group revealed that the total cost of projects is about $282.67 billion, with
the oil and gas sector representing one fourth of the total. Major among these projects
include the Rabigh Integrated Petrochemical and Refinery project, the Jubail Export
Refinery, the Yanbu Export Refinery, the Ras Tanura Integrated Petrochemical and
Refinery project, and Jizan Export Refinery.
In the petrochemical sector, the Saudi Basic Industries Corporation is taking the lead
boosting its overall production capacity to 60 million tons per annum. Some of the
projects in the petrochemical sector include the Yansab petrochemical complex,
expansion at the Saudi European Petrochemicals Company and at the Saudi Ethylene
& Polyethylene Company, Phase II of the National Chevron-Phillips Company, and
expansion at the Sahara Petrochemical project.
In the mining sector, the Saudi Arabian Mining Company (Ma’aden) is spearheading a
number of private-public partnership projects, namely, Al-Jalamid Phosphate project
and Ras Al-Zour project, which is a spin-off of the Al-Jalamid project, whereby the raw
material will be transported by rail from Al-Jalamid to Ras Al-Zour for further
processing and then shipping overseas. The Ras Al-Zour project will also include a
smelter, which will involve long-term financing, around $8 billion, from local and
international sources.
In the water and power sector, the Saudi government is moving fast forward with the
privatization of this vital sector. Major among the projects include Marafiq’s three
IWPP in Jubail and Yanbu, Water & Electricity Company’s (WEC) IWPP projects,
which include, Shoaiba, Ras Al-Zour, and Shuqaiq.
As for power sector’s IPP projects, the Saudi Electric Company (SEC) is implementing
the PP 11, Rabigh, and Qurrayah. Notwithstanding, the SEC is also investing into
augmenting capacity at Jizan, PP 10, Rabigh, Tabuk, Najran, Juba, and Qurrayah.
Additionally, Maaden’s Ras Al-Zour smelter will have its own power plant and SABIC’s
SADAF plant will be built on a BOO basis.
The largest private investment in Saudi Arabia will center around the Economic Cities
that will be built in some remote sights of Saudi Arabia to enhance the region’s
economy and to create jobs in that area. These economic cities are expected to
attract close to $80 billion in investments. The frontrunner is the King Abdullah
Economic City at Rabigh, which will focus on promoting energy and transportation
related industries. The Prince Abdulaziz bin Mousaed Economic City in Hail will be
designed around transportation and related logistical services. The Knowledge
Economic City in Madinah will include a Technology and Knowledge-Based Industries
5/13/2008