Jan. 10 (Bloomberg) -- Saudi Aramco, the world’s largest state-owned oil company, agreed in principle to award Drake & Scull International a construction contract for commercial buildings at a new energy research complex in Saudi Arabia, two people with knowledge of the deal said.
The King Abdullah Petroleum Studies and Research Center, or Kapsarc, includes energy and environment research centers, conference and education centers, a library and a housing complex. The project, located in the capital Riyadh, was designed by architect Zaha Hadid. The two people declined to be identified because the contract has yet to be signed.
“We are bidding for the project, but no contract has been signed,” Zaina Tabari, chief corporate affairs officer of the Dubai-based construction-engineering contractor, said yesterday. “We are in the final stages of negotiations.”
Construction companies in Dubai are searching for work outside the emirate after the global credit crisis led to the cancellation of half the planned projects. Property prices slumped by almost 60 percent since their peak in mid-2008, according to an estimate from Ahmed Badr, an analyst at Credit Suisse Group AG.
Drake & Scull closed 0.9 percent higher at 1.08 dirham. The shares have gained 3.9 percent this month after rising almost 16 percent in 2010, giving the company a market value of 2.4 billion dirhams ($650 million).
Tabari declined to comment on the value of the contract or Drake & Scull’s bid. Aramco also declined to comment on the project.
“It’s a positive to see that they are being awarded more projects in Saudi,” said Majed Azzam, a real-estate analyst at Alembic HC Securities in Dubai with an “overweight” rating on the stock. “Securing this contract would increase their backlog sustainably and validate their expansion in Saudi.”
Drake & Scull submitted a bid to build commercial buildings for the project in October, MEED magazine reported in November. Turkey’s Baytur Construction & Contracting Co., El-Seif Engineering & Contracting and Saudi Oger also bid, MEED said.
In May, Saudi Aramco awarded South Korea’s SK Engineering & Construction Co. a $506 million contract to build the residential buildings at Kapsarc, MEED said.
Drake & Scull said on Nov. 9 that it would be making an acquisition in Saudi Arabia, though it hasn’t yet announced the transaction. That was one day after the company said it bought a 65 percent stake in a Saudi Arabian mechanical, electrical and plumbing company for 243 million riyals ($65 million).
The company formed a partnership with Al Zamil Group to establish a foothold in Saudi Arabia, where the government is spending about $400 billion on infrastructure projects in the next five years.
Drake & Scull said Dec. 21 that it had an order backlog valued at 5.5 billion dirhams at the end of September.
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