Saudi Aramco Launches ‘Local Content Development’ Supplier Initiative

Saudi Aramco today launched its In-Kingdom Total Value Add (IKTVA) program, aimed at increasing investment, economic diversification, job creation and work force development within the Kingdom of Saudi Arabia. The IKTVA program launch event was presided by HRH Prince Saud bin Nayef bin Abdulaziz, Governor of the Eastern Province; H.E. Dr. Tawfiq Al-Rabiah, Saudi Arabia’s Minister of Commerce and Industry; and H.E. Abdullatif Al-Othman, Governor of the Saudi Arabian General Investment Authority. Amin H. Nasser, President and CEO of Saudi Aramco said: “IKTVA is a step-change in our commitment to local content development that is now required across our domestic and international supply chain.” He added: “Sourcing a majority of materials, goods and services that we require locally will enable Saudi Aramco to, not only embed greater competitiveness and efficiency in our operations, but will also help us fulfil our potential in support of the Kingdom’s growth, job creation and economic diversification objectives.” “IKTVA will create win-win, mutually beneficial partnerships between Saudi Aramco and our suppliers. The scale of our diversified energy business and associated capital expenditure programs clearly create significant opportunities for those suppliers ready, willing and able to invest in Saudi Arabia and partner with Saudi Aramco on a long-term, sustainable basis.” IKTVA is underpinned by mandatory ‘local content development’ of suppliers and contractors that prioritizes the purchase of goods and services from a local supplier base. Three critical objectives guide the program: doubling the percentage of locally-manufactured energy-related goods and services to 70% by 2021; helping raise the export of Saudi-made energy goods and services to 30% over the same time frame; and, creating direct and indirect jobs within the energy related sector for a growing and talented Saudi population. Vice President of Materials Supply, AbdulKarim Abdulaziz, said: “The IKTVA program will help make our supplier relationships more strategic, mutually beneficial and focused on long term value creation. The initiative will help recognize the full value and potential that all our suppliers can bring to the table. Our goal is to create a win-win, more formal and systematic mechanism that puts everyone on an equal footing and increases competition to drive growth.” IKTVA will provide a level playing field for domestic and international suppliers though greater consistency and increased transparency in application and process. Uniform evaluations for both service and material suppliers will be consistent across the company, providing investment stability and assurance. The program will first establish a 3-year baseline score for each supplier measured against key metrics for local content and value creation. After this, Saudi Aramco and each supplier will jointly develop an IKTVA action plan to increase the IKTVA score and impact. Performance will be tracked and measured on an ongoing basis.  A new function - the Industrial Development & Strategic Development Supply Department - has been created within Saudi Aramco Materials Supply to champion and integrate the IKTVA program and optimize the supply chain. Nassir Al-Yami, Manager, Industrial Development & Strategic Supply Department said: “Through IKTVA we can and will do much more to deepen our local manufacturing and supply chain capabilities. We are encouraging a local supply chain that has deep roots here in the Kingdom and is committed to being part of our future success.” The IKTVA program was developed after consultation with representatives from Saudi Aramco’s major supply sectors. The IKTVA program takes effect immediately and applies to all international and domestic suppliers, including manufacturers and service providers.