Aramco’s IKTVA Program: Transforming Saudi Arabia’s Oil and Gas Industry

The oil and gas sector plays a pivotal role in Saudi Arabia’s economic landscape.

As Saudi Aramco is the world’s largest oil company, it comes as no surprise that it has been at the forefront of initiatives aimed at nurturing the nation's economic growth while simultaneously fostering self-sufficiency.

One such initiative is the In-Kingdom Total Value Add (IKTVA) program, which has emerged as a cornerstone in transforming the oil and gas industry in Saudi Arabia. This blog explores the IKTVA program, its objectives and how the IKTVA score is calculated.

Understanding IKTVA

The IKTVA program was introduced by Saudi Aramco in 2015 with a clear mission – to drive localization, boost economic diversification and create a sustainable ecosystem within the Saudi oil and gas industry.

IKTVA aims to maximize the value generated within the Kingdom, encouraging local content development, technology transfer and the growth of small and medium-sized enterprises (SMEs). This initiative seeks to reduce Saudi Arabia's dependency on foreign goods and services, consequently enhancing the nation's economic stability and reducing its exposure to global oil price fluctuations.

IKTVA Score Calculation

The IKTVA score is a critical component of the program, serving as a key performance indicator for suppliers and service providers operating within Saudi Arabia. The score is calculated by measuring the percentage of local content within a company's operations, products or services. To calculate this score, a simple formula is used:

IKTVA Score = (Local Value Added / Total Value Added) x 100

Local Value Added (LVA) is the value generated within Saudi Arabia, which includes expenditures on Saudi labor, goods and services. Total Value Added (TVA) is the sum of all costs and expenses incurred in the operation, production or service delivery.

For example, if a company has a total value added of $1 million and $600,000 of this value is generated within Saudi Arabia, the IKTVA score would be:

IKTVA Score = ($600,000 / $1,000,000) x 100 = 60%

This score reflects the extent to which a company contributes to the local economy, and a higher score indicates a greater commitment to localization and economic development. The IKTVA score is crucial for companies wishing to engage with Saudi Aramco, as it is used as a primary evaluation metric during procurement and supplier selection.

Benefits of IKTVA

The IKTVA program offers a range of benefits, not only for Saudi Aramco but also for the entire nation and its economy. Some of these benefits include:

1. Economic Diversification: IKTVA encourages a diverse range of economic activities within the Kingdom, reducing the nation's dependence on oil revenues.
2. SME Development: The program fosters the growth of small and medium-sized enterprises, providing them with opportunities to participate in the oil and gas industry's supply chain.
3. Job Creation: By promoting hiring local talent and utilizing local goods and services, IKTVA contributes to job creation and human capital development.
4. Technology Transfer: Companies operating in Saudi Arabia are encouraged to transfer knowledge and technology, which helps in building local capabilities and expertise.
5. Sustainability: Reducing the carbon footprint of the oil and gas industry through efficient and environmentally friendly practices is a key focus of IKTVA.

Looking Ahead

Aramco’s IKTVA program is a transformative initiative that has paved the way for economic growth and diversification in Saudi Arabia.

By calculating the IKTVA score, companies can measure their contribution to the local economy and demonstrate their commitment to localization. IKTVA compliance is often a prerequisite for companies seeking to engage in business with Saudi Aramco. Meeting the program's requirements opens the door to a wide array of business opportunities within the lucrative Saudi Arabian oil and gas sector.

IKTVA encourages the development of a skilled local workforce by emphasizing the hiring of Saudi nationals. Policies can be explored that facilitate the entry of skilled expatriates who contribute to transferring knowledge and technology to the local workforce. This could involve creating pathways for expatriates with specialized skills to work collaboratively with Saudi nationals, fostering skill development and knowledge transfer.

As the program continues to evolve, it will play an increasingly significant role in reshaping the nation's oil and gas industry, making it more sustainable, self-reliant and globally competitive.

Need to Know More?

For questions or more information on the IKTVA program, please contact Senior Manager Adnan Alam at [email protected].

This blog was published on November 22, 2023, and due to the circumstances, there are frequent changes. To keep up to date with all the latest updates on global immigration, please subscribe to our alerts and follow us on LinkedIn, X, Facebook and Instagram.