How To Become A Saudi Aramco Supplier
This blog contains information on how to become a Saudi Aramco supplier. For information on how to set up a company in Saudi Arabia, steps costs and timelines, see our blog: How to Set Up a Company in Saudi Arabia?
How To Become A Saudi Aramco Supplier
Saudi Aramco, officially known as Saudi Arabian Oil Company is the largest oil producer and one of the largest integrated energy and chemicals companies in the world.
The company is primarily state-owned and has its headquarters in Dhahran, Saudi Arabia.
It is the most profitable company in the world, with profits over the last 12 months hitting USD 279.4 billion, a figure equal to the combined total of global tech giants Apple, Alphabet and Microsoft.
With such success, it is little wonder that demand to work with Aramco as a supplier is fiercely competitive and there are strict requirements to be met and rigorous standards to adhere to.
This article looks at the process of becoming a supplier for Aramco, the requirements to be met and other key areas of consideration.
Saudi Aramco has a workforce of over 50,000 employees and an enormous supply chain network involving 10,000 companies in its home country. However, as a global organisation with operations and business around the world, it requires manufacturers, material vendors and service providers from abroad to help meet its operational requirements.
It has a guideline document for any current or future suppliers and a supplier portal called Supplier Network Collaboration (SNC) which helps it manage the flow of products/services, information and finance and contains information on inventory tracing, supplier approvals, analytics, agreements and terms and conditions.
Any international companies that wish to become a registered supplier for Saudi Aramco must also meet the requirements of its IKTVA programme (In-Kingdom Total Value Add).
What is IKTVA?
The IKTVA programme was introduced in 2015 to support the goals of Saudi’s Vision 2030 and National Transformation Programme. It’s intended to grow the local manufacturing sector, provide job opportunities for the Saudi population and stimulate the Saudi economy. It’s now an integral part of Saudi Aramco’s procurement process and as such a requirement for all companies that wish to do business with Saudi Aramco.
The Supplier IKTVA Formula
IKTVA = ((A+B+C+D+R) / E) + I
The IKTVA formula was created as a method to calculate the percentage of Saudi Aramco’s spending that stays within Saudi Arabia or helps to further Saudi’s goals of growing its local employment levels and increasing the amount of locally sourced goods and services in its supply chain. The formula and IKTVA programme require that suppliers provide quantitative and qualitative data on the following key components during application and on an ongoing basis:
A. Details about goods and services, amortization and depreciation of invested CAPEX and expat compensation
B. Saudi workforce compensation
C. Training and development of Saudis
D. Supplier development spend
R. Local research and development
E. Company revenue (from Saudi Aramco)
I. Includes exports, environmental and social governance, cybersecurity, regional headquarter programme
Being accepted as a Saudi Aramco supplier is incredibly competitive and the IKTVA formula is one of the primary considerations for the awarding of contracts, it is therefore in the supplier’s interest to increase their IKTVA score as much as possible to increase the potential of doing business with Saudi Aramco.
The data generated from the IKTVA formula must be verified by a Saudi Aramco certified third party and submitted in advance of participation in the IKTVA programme. Suppliers will also be required to submit annual IKTVA reports to Saudi Aramco to ensure that they are continuing to meet the required standards.
How Can my Company Participate in IKTVA?
Participation in the IKTVA is a two-step process:
In the initial phase, the company must carry out the IKTVA survey which Saudi Aramco uses to measure and identify your company’s current IKTVA score. This can be done by completing the following three steps:
1. Download the IKTVA package which includes the survey and other supporting documents.
2. Complete the survey and get it certified by one of Aramco’s approved audit firms.
3. Submit all certified documents via the IKTVA survey submission form on the Saudi Aramco website.
Once the baseline IKTVA value has been established, step two involves working with Saudi Aramco to create a 5-year IKTVA action plan to improve your IKTVA ratio.
The plan will involve using the data already generated and mapping out how you intend to achieve the goals set forth in the IKTVA programme.
Is IKTVA the Only Consideration for Winning Business with Saudi Aramco?
Local value creation is one of the primary goals of Saudi Aramco and Saudi Arabia as a whole. It’s therefore critically important that any company wishing to become a supplier for Saudi Aramco have a high IKTVA score. However, that’s not to say that cost, quality, safety and environmental impact are not of importance. These factors will remain a priority when it comes to the decision on which companies to award contracts to, but IKTVA will certainly be given high importance.
For any existing Saudi Aramco suppliers or companies considering an application, being able to demonstrate that your company is taking measures to support Saudi’s localisation goals will be highly advantageous.
Saudisation will continue to be vital for any companies operating in Saudi Arabia and may require significant investment for international suppliers who will likely have to consider restructuring supply chains, reorganising logistical elements or establishing manufacturing/assembly centres in Saudi. However, showing a commitment to local job creation and adding value within KSA is sure to add considerable weight to international supplier applications and gain favour with important decision makers.
How Can PRO Partner Group help?
The application process to become a Saudi Aramco registered supplier can be complicated, especially for foreigners who are not proficient in Arabic and need support communicating with the authorising agency. Missing or insufficient documentation can result in delays or a rejected application. Having an expert on your side can help you avoid these challenges and streamline the application process. Sovereign PRO Partner Group have connections with key government agencies in Saudi Arabia and can guide you through the Saudi Aramco supplier registration process and liaise with all parties involved on your behalf.
If you need assistance with Saudi Aramco supplier registration or any other company setup, restructuring, local partner or PRO support matter in Abu Dhabi, Dubai, the wider UAE, Oman, Qatar or Saudi Arabia, then please do get in touch with us on +971 (0)4 456 1761 for Dubai, +971 (0)2 448 5120 for Abu Dhabi, +966 (0)50 759 8601 for Saudi Arabia, email us at email@example.com or complete the contact form below and we will be delighted to assist you.