Aramco signs long-term supply agreement with Siemens Energy

The German company will supply turbines and generators for oil fields

Crude oil storage tanks stand at the oil refinery operated by Saudi Aramco in Ras Tanura, Saudi Arabia, on Monday, Oct. 1, 2018. Saudi Aramco aims to become a global refiner and chemical maker, seeking to profit from parts of the oil industry where demand is growing the fastest while also underpinning the kingdom’s economic diversification. Photographer: Simon Dawson/Bloomberg
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Saudi Aramco, the world's largest oil-exporting company, signed a long-term service agreement with Siemens Energy to obtain equipment for its oil fields.

The German company, which was spun off from the Siemens Group last year, will supply a range of turbines and generators for four major oil fields.

The 15-year contract will also enable Siemens Energy to expand its localisation efforts through using high-tech industry and training of a skilled local workforce.

The value of the contract was not disclosed.

The agreement with Aramco "is expected to help achieve the highest efficiency, reliability and availability of Aramco’s plant, with optimised parts management and with a core local team dedicated to the plants’ needs", said Gianluigi Di Giovanni, vice president generation and industrial service, Middle East and North Africa at Siemens Energy.

Last year, Saudi Aramco signed partnership agreements worth more than $21 billion with international companies to work across its value chain in the energy sector.

The kingdom mandated localisation requirements for all international partners in its energy sector.

Saudi Aramco through its 'In-Kingdom Total Value Add initiative' or IKTVA looks to increase local production and aims to meet at least 70 per cent of its procurement spending from Saudi Arabia's companies by 2021. Other national oil companies such as the UAE's Adnoc also enforce similar manufacturing requirements on foreign partners.

The local manufacturing component required by Aramco from its partners rose to 56 per cent in 2019, compared with 35 per cent in 2015.

Earlier this year, the kingdom said it will stop giving contracts to any company that has its regional headquarters outside the country from 2024 in an effort to incentivise localisation of business and derive more value from its foreign partners.

Siemens is among a number of companies that said it would move its regional headquarters to Saudi Arabia.

Siemens Energy was spun off on September 28 as part of a broader restructuring programme within the German industrial firm.