Saudi Aramco inks $11bn deal to create 5,000 supply chain jobs

Halliburton

• Aramco signs 59 corporate procurement deals with international firms
• Foreign direct investment inflows continue to grow
• Global partners develop local workforce

Saudi Aramco signed agreements with dozens of manufacturers on Tuesday, with potential to create 5,000 new jobs in the kingdom over the next decade as the energy major looks to boost local capabilities. 

The 59 corporate procurement agreements (CPAs), valued at $11 billion, are expected to reinforce Aramco’s supply chain and result in the development of materials manufacturing facilities across the country.

The deals, which cover multiple commodities such as drilling chemicals, wellheads, switchgears, vibration monitoring systems, pipes, compressors and structure steel, were finalised with 51 companies including global giants Baker Hughes and Halliburton.

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The agreements follow an announcement last month by the Ministry of Investment (Misa) that 928 new foreign investment licences were issued in the third quarter of 2022, up nearly 9 percent annually although slightly down on the previous quarter.

Foreign direct investment inflows continued to grow in the first half of 2022 following a bumper 2021, which saw a 257 percent jump from 2020.

In the second quarter of this year inflows totalled $2.1 billion, up 6.6 percent compared to Q1.

“Saudi Arabia’s economic landscape is changing,” Khalid Al-Falih, minister of investment, said.

“Guided by the belief that growth cannot be achieved alone, the kingdom has embarked on a journey to create longlasting partnerships with the global private sector.”

Under their agreements, supplier partners will establish local facilities, transfer technology, perform local research and development, and develop the local workforce and supply chain, while gaining preferred status with Aramco, its joint ventures and affiliates.

Ahmad A Al-Sa’adi, Aramco senior vice president of technical services, said: “Our significant investments in a network of accomplished local suppliers strengthens Aramco’s resilience, ensuring that we remain the world’s most reliable energy company.

“We are also extensively building commercial ecosystems globally by partnering with some of the world’s top energy, logistics and manufacturing companies.”

Mohammad A Al-Shammary, Aramco vice president of procurement and supply chain management, added: “The CPA holders will be our future strategic manufacturing partners for these commodities, and the agreements further broaden our localisation infrastructure across the Aramco network.”

Since the launch of its CPA pillar, which falls under the company’s In-Kingdom Total Value Add (Iktva) programme, Aramco said it has entered into over 100 agreements which it says have “driven localisation in critical commodities”. 

Iktva launched in 2015 with the goal of establishing a “world class” supply chain in Saudi Arabia. Since inception the programme has contributed more than $130 billion to the kingdom’s gross domestic product, while creating more than 100,000 jobs for Saudis. 

Saudi Arabia’s growing business appeal to global companies was revealed last month as a total of 70 multinational firms have so far been issued licences to relocate their regional headquarters to Riyadh as part of a major push to attract more overseas investment.

The figure represented more than a threefold increase on a year ago. Misa also said that it has partnered with 25 public agencies to help attract new firms to Riyadh.

Earlier this year the kingdom created the National Incentives Committee, which has been described by analysts as a “major development” in the country’s investment policy.

“The creation of the committee is in line with a number of other steps the kingdom has recently taken to attract foreign investment and to position itself as a regional business hub,” said Sarah Al-Shawwaf, senior vice president of Albright Stonebridge Group.

She added that while the extent of these incentives is still unclear, past precedent suggests that they may be “quite generous, depending on the project”.

This month Saudi Aramco reported a net income of $42.4 billion for the third quarter of 2022, an increase of 39 percent year-on-year.

Aramco president and CEO Amin Nasser said that the company’s strong earnings and record free cash flow in the third quarter reinforce its ability to generate significant value through its low-cost, low-carbon intensity upstream production and strategically integrated upstream and downstream business.