KHOBAR (Saudi Arabia) • Saudi Aramco plans to build the Gulf's largest shipyard through a joint venture with three companies - a US$5.2 billion (S$7.2 billion) project aimed at helping to reduce the economy's reliance on oil.
Low oil prices have drastically slowed Saudi Arabia's economy, so it is trying to create manufacturing jobs and produce goods and services which traditionally it has imported.
Its strategy is to use large amounts of government money and the procurement budgets of big state-run enterprises, such as national oil firm Aramco, to attract foreign expertise to develop strategic industries.
Aramco said it has signed a shareholder agreement with National Shipping Company of Saudi Arabia (Bahri), a state-controlled firm which ships oil for Aramco, London-listed United Arab Emirates engineering firm Lamprell, and South Korea's Hyundai Heavy Industries.
The 4.3 sq km shipyard will be located at Ras Al Khair on Saudi Arabia's east coast.
"The directors expect that the Maritime Yard will be the largest in the Arabian Gulf in terms of production capacity and scale," Lamprell said in a statement.
Major production is expected to start in 2019, with the yard hitting full capacity by 2022.
It will be able to work on four offshore rigs and over 40 vessels a year, including three very large crude carriers (VLCCs), Aramco said.
The government will cover about US$3.5 billion of the total cost, with the remainder funded by the joint venture, said Lamprell, which will invest up to US$140 million and own 20 per cent of the venture.
Aramco will own 50.1 per cent, investing as much as US$351 million.
Bahri will invest up to US$139 million for a 19.9 per cent stake and Hyundai up to US$70 million for 10 per cent.
The government's Saudi Industrial Development Fund has agreed to provide a debt facility worth about US$1 billion.
As part of the deal, Saudi Aramco's parent firm will buy 20 jack-up drilling rigs, as well as offshore support vessels and services from the joint venture, Lamprell said.
Bahri will buy at least 75 per cent of its commercial vessel requirements over 10 years from the venture - a minimum of 52 commercial vessels including a "significant number" of VLCCs, Lamprell said.
US oilfield services and equipment provider McDermott International has said it will build a fabrication yard at the Ras Al Khair complex and move some of its operations gradually from Dubai to Ras Al Khair by the mid-2020s.