by Perry Williams
LONDON — International contractors competing for work with state energy giant Saudi Aramco are starting to envisage a less rosy future. Following five years of fevered project activity in both exploration and refining, Aramco has in the past six months embarked on a strategy of delaying schemes because of faltering global demand. Now a shift in Aramco’s contracting strategy threatens to cloud the picture further.
The company’s latest five-year business plan, for the period 2010-14, stipulates that the majority of construction work for megaprojects should be given to international firms that partner with local contractors.
Aramco has previously been seen as immune from government regulations governing the hiring of Saudi nationals.
Big construction projects have historically been outsourced in their entirety to multinational contractors. While they engage a small minority of the domestic workforce, young Saudi people are most likely to work on Aramco’s biggest projects as part of a local firm via sub-contracts.
Aramco’s change to contract terms will mean both design and construction fall under the Saudisation policy, where previously it was only construction. The change is likely to be viewed as a major hindrance by international firms, which often complain that Saudi nationals lack the necessary skills. From the government’s perspective, mandating local employment quotas on companies is the best way to provide employment for Saudis.
Saudi Aramco, as the largest employer in the kingdom, also feels international contractors need to do more in terms of training and development, leaving a legacy beyond their construction work. With $60bn to be spent over the next five years and project opportunities drying up elsewhere, contractors have little choice but to comply with Aramco’s shift in strategy.