Some of the leading players operating in the Saudi market, i.e., Emerson, Cameron, Flowserve, Pentair and the like, have shown increased enthusiasm to expand their operations across the board.
The above expansion partly has been triggered by Saudi Aramco, the largest buyer and end-user of valves and allied products.
The company prefers suppliers that are manufacturing their products in Saudi Arabia by utilizing the local sources. The IKTVA (In-Kingdom Total Value Add) program is designed to support and feed this goal. The stated intent of this program is to localize 70 per cent of the company’s supply chain’s content by 2021 while raising energy-related exports to 30 per cent. By doing so, the company aims to create thousands of jobs for young Saudis. Aramco also stated that having the inventory rooted in the local marketplace greatly increases reliability and results in added efficiency. (Source: Dr. Mohamed Al-Shammari, VP, Saudi Aramco). The IKTVA program features a scoring mechanism based on the spending record of suppliers across the local market and is a key component of “Aramco’s procurement award system”.
Aspiring players, looking to set-up manufacturing facilities, are granted low-cost, long-term “Industrial Financing” by the Saudi Industrial Development Fund (SIDF) duly followed by the commercial banks.
In line with Saudi Vision 2030 and Saudi Aramco’s IKTVA program, Siemens delivered its first (of five) gas turbines built in Saudi Arabia in 2016. The turbine was produced at the Siemens Dammam Energy Hub, Saudi Arabia’s first gas turbine manufacturing facility and the largest in the Middle East. The Ras Al-Khair Maritime Project, King Salman Energy Park, PlasChem, Jizan Economic City, KAEC, and other industrial parks dotted across Saudi Arabia are examples of great efforts to provide best-in-class infrastructure to attract investment and stimulate localization.
Local presence required
Demand for rapid Saudization, the diminishing supply of expatriate workers, and rising costs of work visa maintenance are genuine issues faced by leading valve players working in Saudi Arabia. Training and coaching of production/supply chain staff is an area of absolute necessity for all market players to retain value-adding employees.
As the Saudi valves market is moving forward to reach its USD 5 billion potential by 2024, manufacturers with a significant local presence will have a definite edge over importers and distributors.
Localization is the key to attract megabuyers like Saudi Aramco, SABIC, Saudi Govt Projects, EPC Contractors, SWCC, or Ma’aden.
Winners shall be those who succeed towards achieving sizeable market share. They will be able to do this by developing a clear understanding of Saudi end-users, installing experienced teams, product differentiation and market segmentation, superior service and QC-standards, implementing economies of scale, achieving cost and process optimization and devising a rational localization plan, setting up local manufacturing to stimulate the national and local economy.
The recent downturn in oil prices along with the Coronavirus pandemic has slowed down the Saudi market in general. A rebound is expected to start in 3Q 2020, with the demand for valves in non-oil & gas expected to take the lead.
The global valves market was valued at USD 69.7 billion in 2018 and is forecasted to grow at a CAGR of 7 per cent from 2019 to 2027. (Source: Transparent Market Research Group, 2019). The everincreasing worldwide regulations for “stringent workplace safety” to manage industrial processes has increased the global demand for valves. Increased industrialization has led to stringent regulations for industries such as chemicals, oil & gas, water desalination, pharmaceutical, and others. Several regulating authorities in different regions are beginning to adhere to stricter standards. Fugitive emissions is a major area where valves play a vital role. All these factors also come into play in the Saudi Arabian market.
Due to the critical role of valves in process optimization, vendors are currently focusing on introducing efficient valves with increased pressure control capacities. It is encouraging to note that various multinational valves manufacturers are adopting strategic alliances, joint venture partnerships and acquisition strategies to proficiently compete in the regional markets.