Bahri, Lamprell, Hyundai Heavy are partners and will build VLCC's starting in 2019.
Saudi Aramco plans to build the Gulf's largest shipyard through a joint venture with three companies that it announced on Wednesday, a $5.2 billion project aimed at helping reduce the economy's reliance on oil.
Low oil prices have drastically slowed Saudi Arabia's economy so it is trying to create manufacturing jobs and produce goods and services which traditionally it has imported.
Its strategy is to use large amounts of government money and the procurement budgets of big state-run enterprises, such as national oil firm Aramco, to attract foreign expertise to develop strategic industries.
Aramco said it had signed a shareholder agreement with National Shipping Co of Saudi Arabia (Bahri), a state-controlled firm which ships oil for Aramco, London-listed United Arab Emirates engineering firm Lamprell Plc, and South Korea's Hyundai Heavy Industries Co.
"The directors expect that the Maritime Yard will be the largest in the Arabian Gulf in terms of production capacity and scale," Lamprell said in a statement.
Major production is expected to start in 2019 with the yard hitting full capacity by 2022.
It will be able to work on four offshore rigs and over 40 vessels a year including three very large crude carriers (VLCCs), Aramco said.
The government will cover about $3.5 billion of the total cost, with the remainder funded by the joint venture, said Lamprell, which will invest up to $140 million and own 20 percent of the venture.
Aramco will own 50.1 percent, investing as much as $351 million.
Bahri will invest up to $139 million for a 19.9 percent stake and Hyundai up to $70 million for 10 percent. The government's Saudi Industrial Development Fund has agreed to provide a debt facility worth about $1 billion.
As part of the deal, Saudi Aramco's parent firm will buy 20 jack-up drilling rigs as well as offshore support vessels and services from the joint venture, Lamprell said.
Lamprell shares jumped 13 percent after the announcement.
Bahri will buy at least 75 percent of its commercial vessel requirements over 10 years from the venture - a minimum of 52 commercial vessels including a "significant number" of VLCCs, Lamprell said.
U.S. oilfield services and equipment provider McDermott International has said it will build a fabrication yard at the Ras Al Khair complex and move some of its operations gradually from Dubai to Ras Al Khair by the mid-2020s.
By Andrew Torchia & Reem Shamseddine