Developing a competitive energy sector

To secure our long-term future, we are always seeking ways to optimize costs, enhance the reliability of our supply chain, and identify greater efficiencies in our operations.

Nowhere is this more important than in our home base of Saudi Arabia. Opportunities to realize these improvements coincide with Vision 2030, the Kingdom’s strategy to attain greater levels of sustained economic growth and diversification.

Launched in 2015, iktva is our global supply chain efficiency initiative that will help facilitate the further development of a diverse, sustainable, and competitive energy sector ecosystem in the Kingdom. Our iktva measurement continued to improve, with a goal to localize 70% of expenditures for goods and services by 2021. To support further growth to reach our 2021 target, we hosted the iktva Small- and Medium-Sized Enterprises Forum and Exhibition at the Dhahran Expo that illustrated to 1,000 enterprises the breadth of opportunities Saudi Aramco offers.

By investing in the domestic oil and gas ecosystem, we plan to enhance the reliability of our supply chain and optimize operational costs and inventories, which strengthen our ability to meet our commitments to customers around the globe. As the base of small- and medium-sized enterprises expands, and as national leaders in the oil and gas ecosystem advance to become regional and international players, economic growth and job creation will be accelerated. This transition will enhance the business climate in the Kingdom and generate new opportunities for us to operate even more efficiently and achieve significant cost savings.

In 2017, we pursued a number of initiatives in the domestic energy sector consistent with our localization strategy, including forming two joint ventures to help optimize drilling costs: Saudi Aramco Nabors Drilling (SANAD), with Nabors Industries Ltd. for onshore rigs, and Aramco Rowan Offshore Drilling (ARO), with Rowan Companies plc for offshore rigs. The ventures, which own and operate the rigs, commenced operations in 2017 and are expected to deliver approximately 5,000 local jobs.

Engineering opportunities and partnerships

Engineering and construction are potential high growth sectors closely tied to our business objectives. In pursuit of opportunities to reduce costs, strengthen our supply chain, and spur job creation, we marked a pair of milestones toward our ambition of executing 80% of our engineering work in-Kingdom.

First, we entered an in-Kingdom joint venture with Jacobs Engineering Group, which aims to provide professional program and construction management services for social infrastructure projects, including government projects, on an arm’s length basis within Saudi Arabia. The joint venture will help build capacity in the Kingdom and create opportunities for other players in this sector, with the potential to deliver approximately 3,000 jobs. Second, we established centers of engineering excellence at five local contractor offices.

We signed a number of other Memoranda of Understanding with international companies aligned with our strategic objectives. Each of the agreements is designed to enable greater efficiency and improved performance in our operations, along with the added benefits of creating high value jobs for Saudis and furthering the Kingdom’s economic diversification. These agreements cover areas such as digitization initiatives, gas turbine maintenance and repair, human capital development, and oil field goods and services.

Localizing our supply chain

The King Salman International Complex for Maritime Industries and Services is envisioned to become a world‐class maritime complex and a hub for regional maritime engineering, construction, and related expertise. The complex, which is expected to generate more than 80,000 jobs by 2030, targets localizing essential links of our supply chain related to offshore drilling and shipping activities. Expected benefits include reduced response times, improved agility, and cost optimization.

Plans for the maritime complex include facilities to construct vessels and offshore drilling rigs and platforms; associated capabilities for maintenance, repair, and overhaul; an engine manufacturing plant; a maritime academy; and offshore engineering, procurement, construction, and installation capabilities.

In 2017, we established International Maritime Industries, a joint venture with Dubai-based engineering firm Lamprell plc, the National Shipping Co. of Saudi Arabia (Bahri), and Hyundai Heavy Industries in South Korea for the maritime yard. Major operations are expected to commence in 2019, with full production capacity of the facility reached in 2022.

With McDermott International Inc., we signed a binding Memorandum of Understanding for the construction of facilities at the complex, including fabrication for offshore oil and gas developments at Ras al-Khair. We also awarded the engineering, procurement, and construction contract for dredging and reclamation.

A park for energy

A major component of the expanding in-Kingdom energy ecosystem is King Salman Energy Park. In 2017, we began planning for development of Phase I of the park. Located in the Eastern Province, the project is expected to attract international third-party manufacturers and suppliers of goods to the energy sector to locate their facilities in the Kingdom.

Completion of Phase I of the park in 2021 is designed to deliver the infrastructure and services needed to attract investments by energy-related manufacturing and services companies – many of which are the company’s supply chain partners. After full development is complete in 2035, King Salman Energy Park is anticipated to create an estimated 100,000 direct and indirect jobs.