It’s the season of the largest, the longest and the first in the region’s construction sector. And it’s hard to expect the Gulf’s economic powerhouse Saudi Arabia not to join the race.

Be it real estate, industries, oil and gas, infrastructure or tourism, in every segment of the construction market new Saudi projects are hitting headlines.
Government spending has always powered the kingdom’s growth. But an unprecedented investment vigour in the private sector is also playing a major role in driving the construction sector to new heights.
The ‘stimulative’ 2005 budget announced on the back of robust oil prices has provided a fillip to the sector which has already seen strong growth in the past year with huge real estate and industrial projects.
High oil output and a windfall from record prices for its oil exports have meant that Saudi Arabia has emerged from two decades of deficits.
The kingdom recorded a 2004 budget surplus of SR98 billion ($26.1 billion) for 2004 – for the second year in a row – and set a balanced budget for 2005 fiscal with revenues and expenditures projected at SR280 billion ($74.6 billion). Growth of gross domestic product (GDP) this year is estimated at 16.9 per cent at current prices and 5.3 per cent at fixed prices, according to the Finance Ministry.
The 2005 fiscal budget has doubled the spending on new projects in Saudi Arabia,  with allocations set at SR75.5 billion.
While a significant portion of the allocations will be used to cut down public debt, the budget has made allocations for:
• The establishment and renovation of 1,420 schools, 22 colleges, four university hospitals, and 61 training colleges and centres;
• The construction and renovation of 420 primary healthcare centres in various parts of the kingdom. This figure is three times the allocations made in the last budget;
• Setting up of 23 new hospitals with a total of 3,150 beds; and
• Construction of 6,700 km of roads.
State spending for the year includes SR17.2 billion for new water, sewage and desalination projects and dams, SR15.6 billion for roads and ports, SR14.7 billion to build schools and universities and SR4.6 billion for new hospitals and healthcare centres. Allocations have also been made for new infrastructure projects in industrial cities of Jubail and Yanbu.
In addition, the kingdom has just allocated SR2 billion from its budget surplus to build low-cost housing units for the poor and needy in various parts of Saudi Arabia.
According to Brad Bourland, chief economist, Samba Financial Group, the stimulative budget for 2005, combined with the Saudi Aramco expansion plans, major power and water projects, numerous planned IPOs and other capital market developments and robust construction and real estate sectors, will all contribute towards strong economic growth.
Two key initiatives made recently will provide a considerable boost to development in the kingdom: the go-ahead for projects worth SR30 billion ($8 billion) in Makkah and the launch of a mega industrial city in Jubail.
Late last year, Saudi Arabia’s Crown Prince Abdullah gave the green light to massive development projects in Makkah, which include a plan to expand part of the Grand Mosque, to enable the built prayer areas to accommodate 200,000 worshippers; as well as to construct hotels, residential towers and commercial centres. This initiative will provide a major impetus to the already-booming real estate construction market in Makkah and Madinah, which is witnessing the construction of mega projects such as the SR12 billion Jabal Al Omar residential tower development and the Al Bait Towers, which will boast the first Islamic time-share property (see page 94).
Under the second initiative, Saudi Arabia launched work on a new multi-billion-riyal industrial city, when Crown Prince Abdullah laid the cornerstone of Jubail 2,  to be built near the existing Jubail Industrial City on the kingdom’s east coast. The government has allocated SR14 billion towards the 16-sq-km industrial zone and expects it to attract a further SR210 billion of private money over the next two decades, project officials said (see page109).
Saudi Arabia is increasingly looking at the private sector to further its growth in a number of areas.  A landmark scheme in this regard is the Saudi Landbridge project – the first ever rail link between the Red Sea and the Arabian Gulf. This project is believed to be one of the longest railway lines and the largest build-operate-transfer (BOT) projects ever undertaken in the Middle East (see page 132).
Another major project that is expected to draw private sector participation is the $1.5 billion Shoaiba IWPP (independent water and power project). The Water and Electricity Company (WEC) has opened bids to build, own and operate (BOO) the project. The 650 MW to 900 MW and 880,000 cu m per day IWPP is believed to be the world’s first oil-fired IWPP and will be the world’s largest private desalination plant when complete. The project is intended to form the template for WEC’s future IWPP developments in the kingdom.
Meanwhile the much-talked-about expansion plan for King Abdul Aziz International Airport has gone back to the drawing boards for a total redesign, according to a spokesman for the Presidency of Civil Aviation.
Industry
With the launch of work on Jubail 2 industrial area, Saudi Arabia has reiterated its commitment to industrial growth and investment.
In addition, the kingdom has laid out ambitious plans for establishing an exclusive industrial zone at Ras Al Zour situated about 60 km north of Jubail. Work on the new zone will start with the setting up of a major aluminium and fertiliser export plant, which officials believe will be the biggest step yet to diversify the oil-driven economy.
The 640,000 tonnes-a-year aluminium smelter and 3 million tonnes a year di-ammonium phosphate plant are estimated to cost SR22 billion.
Spearheading growth in the oil and industrial sectors are the giant conglomerates Saudi Aramco and Saudi Basic Industries Corporation (Sabic). 
Saudi Aramco moved forward in March on two new mega projects as it signed landmark contracts with some of the world’s leading engineering and construction firms for the Khursaniyah Oil and Gas Programme and the Hawiyah Natural Gas Liquids (NGL) Recovery Programme.
The estimated $2-3 billion  Khursaniyah Programme will develop oil and gas production facilities for the onshore Abu Hadriya, Fadhili and Khursaniyah oil fields near Jubail Industrial City, with capacity reaching 500,000 barrels of crude oil daily by the end of 2007. The Hawiyah NGL Recovery Programme will produce an additional 310,000 barrels of ethane and NGL products daily through the Hawiyah NGL plant near the Ghawar Field and an expansion of the Ju’aymah Gas Fractionation Plant not far from Ras Tanura.
Italy’s Snamprogetti was selected for the execution of the Khursaniyah production facilities while a consortium of Bechtel Overseas of London and Technip of Rome was selected for the Khursaniyah gas plant.
Saudi Aramco also awarded five contracts to build the world’s largest NGL processing plant at Hawiyah to recover ethane and NGL from approximately 4 billion scf/d of sales gas. 
Aramco is also considering revamping its Ras Tanura refinery at a cost of around $4 billion to $5 billion and adding a petrochemical complex. Other plans include setting up a 400,000 barrel-per-day export refinery in the Red Sea city of Yanbu.  
Sabic, the Middle East’s largest petrochemicals company – currently the world’s number two in ethylene-glycol production – is expected to become number one upon the completion of several ongoing expansion projects. The group has recently launched work on a 150,000-tonne per year alpha olefins plant, which is being developed by its subsidiary the Jubail United Petrochemical Company (JUPC).
Many of its other subdiaries have launched expansion plans. These include Saudi Arabian Fertiliser Company (Safco) – which is building its fourth fertiliser plant in Al Jubail Industrial City, Hadeed – which is doubling its capacity for flat products among other developments (see page 102), and Eastern Petrochemical Company (Sharq) – which has launched its third expansion project.
Roads
The Ministry of Transport is currently working on 264 projects with a total length of 10,728 km and with a total value of SR11 billion. Among them is the new SR600 million Taif-Baha-Abha Road, which was kicked off in Taif recently.  The first phase covers the expansion of the road up to Baljurashi in the Baha region with a length of 200 km (see table).
Among the other major road projects that have recently been tendered are the Riyadh Ring Road (Northern-Western leg) and upgrading of the 113 km Taif-Abha road into a dual carriageway.
Real estate
A large number of private developers are spearheading projects in the kingdom.  While the focus of interest is undoubtedly the holy cities of Makkah and Madinah – where Makkah Construction and Development Company and Jabal Omar Development company are leaders in the sector – Jeddah, Riyadh, and Dammam/Dhahran are also seeing a surge in real estate projects, including commercial, residential and shopping complexes.
Rikaz Developers, a leading real estate development company, last month launched its Royal Amwaj project in the Eastern Province. The company initiated its flagship project – City Fanar early last year (see page 136). Other major developers include Oula Development Company, Al Hokair Group and  Saudi Real Estate Development Company (Sredco) which has a string of projects in Jeddah (see page 142).
Tourism
While Saudi Arabia’s primary focus in the tourism sector has traditionally been on catering to the domestic tourist and providing family-oriented recreational opportunities, the kingdom has drawn up tourism projects worth SR50 billion. The Supreme Commission for Tourism (SCT), which is promoting this sector, intends to carry out a number of projects on the Red Sea coast. Apart from coastal resorts on the Red Sea, the government also plans tourist centres in the kingdom’s rural areas to ensure continuous development of urban and rural areas.
A large number of investment opportunities are being opened up for private participation including the Higher Commission for Arriyadh Development’s Thumamah Park (see page 100) and Saleh Al Doribe Group’s Al Bundoquiya Island project (see page 114).
Several hotel properties are taking shape in the kingdom – the highest density being in Makkah – which will be managed by some of the leading hotel chains in the world. A showpiece hotel set to open later this year is the Hilton Palace (Qasr Al Sharq), which will be the only seven-star luxury property in Saudi Arabia.
Outlook
All in all, the construction sector can look forward to a busy year, given the continuing strong oil prices and the level of investment being put into real estate, oil and gas, industry and infrastructure development.