Saudi Aramco Reaffirms its Commitment to its Flagship Localization Initiative
Saudi Aramco has reaffirmed its steadfast commitment to its In-Kingdom Total Value Add (iktva) localization program by celebrating the accomplishments made by both the company and its suppliers since its launch a year ago.
At a ceremony attended by HRH Prince Saud bin Naif bin Abdulaziz, Amir of the Eastern Province, as well as government dignitaries, and business and supplier executives, H.E. Khalid Al Falih, Minister of Energy, Industry, and Mineral Resources and Chairman of Saudi Aramco, said in a keynote speech: “iktva represents a pioneering and model program, among other major programs which the Saudi Arabian government is working on to expand and diversify the economy, localize strategic industrial and economic sectors, and create jobs, in alignment with Saudi Vision 2030.”
Mr. Al Falih said that the localization of the Saudi economy by both the public and private sectors, has reached 35% in 2015 and is expected to reach 50% by 2021, 59% by 2025, and 70% by 2030. “These ambitious targets will be pursued through an integrated program to encourage suppliers to procure their goods and services locally,” he said.
Mr. Al Falih added that the national localization program, the iktva initiative, and similar other programs, represent strong incentives to strengthen and complement Kingdom’s industrial transformation strategy, which rests on three pillars: first, the development of new industries and economic activities based on the strengths of the current economic platform; second, a legal and legislative framework that provides an enabling business environment and the incentives needed to achieve an integrated and competitive industrial sector; and third, a Saudi economy that is competitive in global markets thanks to strong industrial and exports sectors.
iktva is Saudi Aramco’s flagship localization initiative, designed to drive domestic value creation, with the aim of achieving 70% localization of all spending on goods and services and enabling the export of 30% of Saudi energy sector products by 2021. As well as enabling a sustainable Saudi energy sector, iktva provides a level playing field for suppliers through consistency and transparency in application and process. Uniform evaluations for both service and material suppliers will be consistent across the company, creating supplier-focused partnerships.
In his keynote address, Saudi Aramco President and CEO Amin H. Nasser said that while the current low oil price environment has posed challenges for the oil and gas industry, particularly for service providers and suppliers, a long term perspective is required and will ensure iktva succeeds. “Iktva can be part of the building blocks for a thriving and competitive world class Saudi energy sector as Saudi Aramco champions massive investments that will create new industries, which will need completely new localized supply chains,” he said.
Reflecting on the achievements that have been made since iktva was launched in December 2015, Nasser said, that overall, the share of local manufacturing has reached SR10 billion ($2.6 billion), or 43%, which is an increase of 16% from 2015 levels, the highest level of local content in the Company’s history. “We remain committed to procuring goods and services worth more than SR1 trillion over the next decade. Therefore, vast opportunities are there for all our suppliers by ensuring that 70 percent of those riyals are adding value in the Kingdom,” he said.
To-date, iktva has been embedded in over SR60 billion worth of contracts. Furthermore, Saudi Aramco has completed the “Third Party Certification” of the iktva baseline for the top 100 suppliers, which includes key metrics for local value creation.
Nasser called on suppliers not to limit their presence only to final assembly operations, but rather, to establish and develop their manufacturing supplier base, and regionalize their research and development (R&D) alongside their operations in the Kingdom. “We are after true value add, not numbers that hide the true position,” he said, adding: “if we can do this – driven by the high and growing demand for your products and services in the Kingdom and the region – we will all have a much more responsive, efficient, and reliable holistic system.”
“Our partners are the lifeblood of iktva and their success is our success. Iktva is now a key driver of Saudi Aramco’s procurement process because diversifying the economy, growing the private sector and increasing energy sector efficiency through localization are integral to Vision 2030,” Nasser said.
In his closing remarks, Nasser said that the passion and desire of young Saudis to make a difference and a make a mark in their careers is a powerful incentive to ensure that iktva is a success. “This priceless resource can be the lifeblood of our nation’s transformation.”
Saudi Aramco has been working diligently to enable the training and development support systems required to meet the critical needs for highly trained and highly productive Saudi manpower through partnerships with government training institutes. In partnership with TVTC, 12 national training centers are now operational Kingdom-wide, with a target of 28 by 2030. Between them, they will have the capacity to graduate up to 360,000 young Saudi men and women in a wide range of disciplines.
During the Forum, Saudi Aramco awarded five supplier companies the “iktva Excellence Awards” in recognition of their steadfast commitment and significant contributions to the iktva goals and objectives. The awardees included:
- Schlumberger for “Highest in Saudi Workforce”
- Arabian Pipes Company for “Highest in Localized Goods and Services”
- Arabian Drilling Company for “Best in Employee Recognition”
- General Electric Oil & Gas for “Best in Supplier Development”
- Halliburton for “Best in Training & Development”
On the sidelines of the iktva Forum 2016, Saudi Aramco also signed agreements and MOUs with several strategic partner companies, including:
- Saudi Aramco-Rowan JV to own, manage, and operate offshore drilling rigs in Saudi Arabia.
- Saudi Aramco-Nabors JV to own, manage, and operate onshore drilling rigs in Saudi Arabia.
- Saudi Aramco-Siemens MOU to formalize the collaboration efforts on digitization.
- Saudi Aramco-Siemens MOU to formalize the collaboration efforts on fuel treatment.
Agreements in local manufacturing development were ALSO signed with Jubail Energy Services Company (JESCO) and ArcelorMittal Jubail for oil country tubular goods (OCTG), and a separate agreement with J-Power Systems Corporation Japan for submarine electrical cables. Additionally, two agreements were signed with the National Maritime Academy and the National Aviation Academy to help further develop human capital in the Kingdom. The soft launch of the National Maritime Academy will accommodate 1400 students while the full launch will target 2000 students. In addition, the National Aviation Academy will facilitate the sustainable growth of the Kingdom’s aviation sector through highly trained and qualified Saudi professionals while enabling a vibrant Saudi aviation industry. The soft launch will accommodate 400 students and the full launch will target 1400 students.
The iktva Forum 2016 was an opportunity for key iktva stakeholders to engage in two-way dialogue through two panel discussions. Titled “Advanced steps to deliver Vision 2030” and “Value creation through localization,” the discussions focused on ways and means to advance Saudi Aramco-supplier engagements to higher levels of commitment and implementation of the iktva objectives. Senior Saudi government and private sector representatives, supplier executives and Saudi Aramco management participated in these discussions.