Saudi Aramco announces major supply chain shakeup

State-owned oil giant wants to double to 70% the amount of goods and services it sources from the local market by 2021

Aramco has raised its local sourcing target of 70% by 2021.
Aramco has raised its local sourcing target of 70% by 2021.

Saudi Aramco wants to double to 70% the amount of goods and services it sources from the local market by 2021 as part of a $300bn investment in its supply chain over the next years, according to its chief executive officer Amin Nasser.

The local sourcing target of 70%, part of the oil giant’s In-Kingdom Total Value Add (IKTVA) program, comes amid significant economic uncertainty in Saudi Arabia, with the largest economy in the Middle East trying to adjust to a projected period of sustained lower oil prices.

This has led to reduced state spending which has hampered economic growth. To counter act this, Saudi Aramco wants to focus on local sourcing for its supply chain, which Nasser says could potentially create 500,000 direct and indirect jobs for Saudi nationals.

This is according to the text of a speech published on Aramco's website.

"It puts local content at the heart of our procurement process, and will be a requirement of doing business with Saudi Aramco going forward," Nasser said, suggesting that suppliers and service providers catering to the remaining 30% of
Saudi Aramco’s supply chain will need to show some level of support to the local Saudi economy.

"Companies that build a deep and lasting relationship with the kingdom by setting up shop here and investing in workforce development will capture the major share of Saudi Aramco's spend on materials and services," Nasser added.

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