How Aramco’s Local Supply Chain is Unlocking Value

Khalid Hajri, VP of Procurement at Saudi Aramco, has discussed how its Corporate Procurement Agreements (CPAs) have strengthened the local supply chain

Khalid Al Hajri serves as the Vice President of Procurement at Saudi Aramco. In this role, he oversees all aspects of procurement for capital projects and operational materials and services. His responsibilities include managing Aramco's inventory assets and driving localisation efforts through the In-Kingdom Total Value Add (iktva) program, which aims to increase local content in procurement activities.

Aramco recently signed 40 CPAs worth US$6bn. The signings took Aramco’s total number of CPAs to more than 250, with a combined value of more than US$40bn. It is part of Aramco’s efforts to continuously operate through a resilient local supply chain that will allow the company to maintain its reliability.

Khalid spoke on the CPAs' impact on the company and the support it has offered to transform Saudi Arabia’s economy.

What is the rationale behind Aramco's use of Corporate Procurement Agreements (CPAs)?

The rationale is simple: we recognise that proximity to our suppliers is key component in resilience.

Through CPAs, which have a five or ten-year lifespan, we actively seek to reinforce Aramco’s supply chain strength. These agreements provide our suppliers with visibility on future demand, drive investment, foster innovation, and ultimately contribute to a vibrant local industrial sector.

How do CPAs benefit Aramco and its suppliers?

CPAs allow us to identify companies that share our vision of sustainable growth and those seeking to build “win-win” strategic partnerships.

They supply us with strategic commodities essential for our projects and day-to-day operations. CPAs provide long-term assurance, facilitate investments, and grant suppliers a preferred status with Aramco.

How do CPAs contribute to boosting the local economy?

CPAs are a key pillar in our In-Kingdom Total Value Add (iktva) program, which aims to ensure 70% of Aramco’s procurement spend remains in Saudi Arabia.

Since its launch in 2015, the program has made significant progress, currently standing at 65% iktva compared to our starting point of 35%. CPAs have driven the establishment of more than 165 new manufacturers, including those producing critical drilling equipment and Analyzer System Integration technology for the first time in the Kingdom.

Aramco

Can you provide some examples of the impact of CPAs on the local economy?

As the economy matures, suppliers that were once attracted by CPAs to bring technology into the Kingdom are now starting to export it to more than 50 countries. Our suppliers have increased their spending by 13 times on developing small and medium enterprises, further diversifying the local industrial base.

We've seen an 80% increase in Saudis hired by our suppliers and a 250% increase in spending on the training and development of Saudis. Currently, 16 National Training Centers have been established in the Kingdom, covering more than 60 trades, with over 60,000 Saudis graduated to date.

How do CPAs drive technological innovation within Aramco?

The long-term nature of our CPAs allows us to build deep and lasting relationships with suppliers. These agreements include a provision for CPA holders to join a committee with Aramco to discuss the latest advances and how they could be harnessed.

This encourages the transfer of technology into the Kingdom through local operations and the promotion of local research and development.

As a result, we've seen a 750% increase in local research and development by our suppliers. CPAs are pivotal in championing new technologies, enhancing energy efficiency, and attracting emerging technologies.

Aramco

Can you give specific examples of technological innovations supported by CPAs?

One example is the advent of non-metallic centralisers, a novel solution that surpasses traditional centralisers in several key areas.

These innovative centralisers are lighter, facilitating easier manoeuvrability within the wellbore, optimising operational efficiency, and contributing to the localisation of cutting-edge technologies within the oil and gas sector.

Additionally, the developing and implementing of electrochemical sensors for hydrogen sulphide detection in gas monitors stand out. These sensors require minimal power to operate yet deliver unparalleled performance in terms of linearity, repeatability, and rapid response, enhancing safety measures and reducing preventive maintenance costs.

What future opportunities do CPAs present in light of Saudi Arabia's economic transformation?

With the ongoing economic transformation in Saudi Arabia, opportunities are expected to support further localisation, enhance local capability, and leverage the already well-developed industrial ecosystem and highly skilled workforce.

CPAs create stakeholders value, reinforce Aramco’s supply chain strength, and allow for deep and lasting relationships with suppliers.

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