Saudi Aramco’s Fuel Halt Will Affect New Cement Supply, NCB Says

Saudi Arabian Oil Co.’s decision to halt subsidized fuel for expansion of Saudi cement makers will affect supplies next year, according to the investment arm of the country’s largest lender by assets.

“We expect demand to remain strong in 2012, led primarily by government projects,” NCB Capital said today in an e-mailed report. “However ongoing fuel issues with Saudi Aramco could delay the 4.5 million tons of new capacity expected in 2012.”

Saudi Aramco, as the company is known, said in October it won’t supply subsidized fuel to Yanbu Cement (YNCCO) Co. because the maker failed to secure a fuel agreement for new production lines before starting construction. Saudi Aramco also refused this year to provide fuel supply for new production line at Southern Province Cement Co. (SOCCO)

Saudi Arabia, the world’s largest crude exporter, is facing a shortage in natural gas feedstock for local manufacturers as demand is growing faster than supply. The Arab world’s largest economy plans to spend $400 billion on infrastructure projects between 2009 and 2014. The country said in March it will start building 500,000 new homes for its growing population.

Construction contracts valued at 95 billion Saudi riyals ($25 billion) were awarded during the third-quarter, NCB Capital said. This is more than the combined value of contracts awarded during the first half of 2011 and a 104 percent increase from the same period a year earlier, according to the bank.

To contact the reporter on this story: Wael Mahdi in Khobar at wmahdi@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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