U.S. Companies Seek New Investments in Saudi Arabia Amid China Competition

The U.S. is seeking to boost investments by American companies in Saudi Arabia as the world’s largest oil exporter develops its infrastructure and expands hydrocarbons production.

“There is a lot of opportunities and those opportunities are across the board,” Francisco Sanchez, the under secretary for international trade at the U.S. Department of Commerce, told reporters in Riyadh during a trade mission today. “In petrochemicals, there seems to be a heavy emphasis in investment. There seems to be a commitment to improve the health care system here.”

The U.S. is facing increasing competition from Chinese companies as the world’s second-largest oil consumer forges closer ties with Gulf Arab countries to meet its energy demand. China in November overtook the U.S. as the main buyer of Saudi oil and Saudi Arabian Oil Co. and Saudi Basic Industries Corp. are investing in refining and petrochemicals projects in China.

Saudi Arabia, home to about a fifth of global crude oil reserves, is spending $400 billion over a five-year period, starting from 2009, to build infrastructure, expand energy production and boost economic growth.

Sanchez led a delegation of 11 companies, specializing in health care, wastewater management and engineering. Cambridge, Massachusetts-based CDM Inc., Dallas, Texas-based HKS Inc. and White Plains N.Y.-based ITT Water and Wastewater were among the companies looking for opportunities in the kingdom.

Commercial Relationship

“My main purpose on this mission is to lead these 11 companies that are here to look for business opportunities,” Sanchez said.

A delegation of 200 Saudi government and business leaders attended the U.S.-Saudi Business Opportunities Forum in Chicago in April. Senior Saudi officials including Oil Minister Ali al- Naimi and Finance Minister Ibrahim al-Assaf attended the event, as well as leading U.S. companies including Exxon Mobil Corp. and The Boeing Co.

“With this conference, when I saw the number of U.S. companies participating, I thought they are finally paying attention to the business opportunities in Saudi Arabia,” said Usamah al-Kurdi, a member of the Shoura Council and chairman of a Shoura committee that aims to develop U.S.-Saudi relations. “American companies weren’t moving fast enough.”

Chinese Competition

Companies from China, Europe and the U.S. are competing to win contracts to build railways, petrochemical and electricity plants and water facilities. The kingdom’s five-year spending plan is the largest stimulus package in the Group of 20 nations as a percentage of gross domestic product.

“In absolute terms, the U.S. is the biggest trading partner with Saudi Arabia,” said John Sfakianakis, chief economist at Riyadh-based Banque Saudi Fransi. “But they are losing market share. Chinese companies are competing on all fronts.”

Saudi imports from China represented 11.4 percent of the kingdom’s total in 2009, compared with 4.1 percent in 2000, according to data from Banque Saudi Fransi. Saudi imports from the U.S. were 14.2 percent of the total in 2009, down from 19.7 percent in 2000.

Bilateral trade between the U.S. and Saudi Arabia was $67.3 billion in 2008, according to data provided on the website of the U.S.-Saudi Arabian Business Council. Two-way trade between China and Saudi Arabia has grown to more than $40 billion in 2008 from $290 million in 1990.

China and Saudi Arabia aim to boost trade to $60 billion, by 2015, the state-owned Saudi Press Agency reported in January, when Chinese Trade Minister Chen Deming was visiting the kingdom.

To contact the reporter on this story: Glen Carey in Riyadh at gcarey8@bloomberg.net

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