Neom becomes real-world building project
26 April 2023
This package on Neom also includes:
> SITE REPORT: World’s largest piling project shifts to The Line’s marina
> INTERVIEW: Neom to fix construction
> MOVIE SET: Neom advances plans to be leading movie destination
> TUNNELS: Neom tenders Delta Junction tunnel contracts
> OXAGON: Work to start for $1.5bn Oxagon wind turbine plant
The launch of Neom by Saudi Arabia’s Crown Prince Mohammed bin Salman at the Future Investment Initiative (IFI) in Riyadh in October 2017 challenged the world’s imagination and marked the beginning of Saudi Arabia’s gigaprojects era.
Strategically located close to neighbouring Jordan and Egypt, the 26,500 square-kilometre project is about the size of Belgium. With a $500bn price tag, it quickly became known as the world’s largest construction project.
In the six years that followed, there has been a steady wave of announcements detailing the individual components of Neom. Each launch has been accompanied by marketing campaigns showcasing slick computer-generated imagery (CGI) of futuristic cities that aim to change how mankind will live.
Unless working on these projects directly, Neom has been an abstract idea for most people. That started to change in January when Neom released a progress video of construction work on Sindalah Island, which is due to open its doors in 2024. Then in March, MEED visited Neom to witness the work progressing The Line, which is now the world’s largest piling project.
The images of construction equipment toiling on site showed that after six years of planning, Neom is here.
In 2022, there were $13.6bn of contract awards at Neom, surpassed only by Saudi Arabia, the UAE and Qatar
Awards soar
As Neom morphs from a futuristic concept into a real-world building project, the construction industry has started to benefit from a sharp increase in contract awards, which by mid-April 2023 totalled $27bn.
As construction activity ramps up, the data shows that Neom is no longer a single project offering tactical opportunities. It has become a strategic market in its own right.
In 2022, there were $13.6bn of contract awards at Neom, surpassed only by Saudi Arabia, the UAE and Qatar.
On a submarket level, the total value of contract awards exceeds the Saudi capital Riyadh, where there were $11bn of awards, and Dubai, which has traditionally been regarded as a hotbed of construction, with $9.3bn of awards in 2022.
As tendering activity continues for major contracts, Neom’s prominence as a projects market will likely increase further.
So far, four major components of Neom have been officially launched by Prince Mohammed. They are The Line, Trojena,
Oxagon and Sindalah Island. Meanwhile, work has also progressed on other projects that have yet to be officially launched with the full CGI treatment, such as Neom International airport and the Gulf of Aqaba.
The Line was the first to be launched in January 2021 as a 170-kilometre linear belt of hyper-connected, car-free communities. Then in July 2022, the designs of The Line’s mirrored buildings were revealed. They are 200 metres wide and 500 metres above sea level, running entirely on renewable energy. Once complete, The Line will accommodate 9 million residents.
Piling work has started for the first modules of buildings that make up The Line (click here for images of the site). Infrastructure work for The Spine, the infrastructure corridor parallel to The Line that includes the high-speed rail, is also advancing.
Floating city
The second major project launch was Oxagon industrial city in November 2021. It will be built around an integrated port and logistics hub, with its octagonal design minimising environmental impact and optimising land usage. The city will feature the world’s largest floating structure and be powered by 100 per cent clean energy.
The first major area of construction for Oxagon is the expansion of the existing Duba port. A contract for the first phase of that project was awarded earlier this year and a second phase is being tendered.
In March 2022, Prince Mohammed announced Trojena. Located in the mountains, it has temperatures 10 degrees Celsius lower than other regional cities and offers the potential for snow-covered ski slopes.
Trojena dams face countdown to make it snow
Trojena received added impetus in October last year when it was selected to host the ninth Asian Winter Games in 2029. Trojena will have two competition clusters for the games: a snow cluster for sports, including alpine skiing, snowboarding and slalom; and an ice cluster for sports, including ice hockey, figure skating and curling. The games village will have 14 luxury hotels and be powered entirely by renewable energy.
Construction contracts covering major infrastructure elements such as three major dams are at the tendering stage. Procurement activity is also starting for major buildings such as The Vault, which is a 198-metre-high, 253-metre-wide and 864-metre-long building that will serve as the gateway to Trojena.
Sindalah, Neom’s first luxury island destination, was announced in December 2022 and construction work is advancing (see main image). Once complete, the island will feature a marina, hotels and a golf course.
Delivering these projects is a major challenge for the construction sector. Resource scarcity is a key issue for all projects in the kingdom, with construction companies already struggling to meet the demand for their services and expertise. Neom, along with its owner, the Public Investment Fund (PIF), is taking steps to address these challenges by investing in local construction firms, attracting international companies, improving payment terms and adopting alternative procurement methods. Despite these efforts, the construction sector faces sustained pressure.
New economy
Neom is much more than just a collection of construction projects. While other projects in the region offer opportunities for the construction sector and associated asset management services such as facilities management and hotel operation, the scale of Neom means it is creating a new economy.
It is an economy that not only aims to support the development of nine sectors to achieve the goals outlined in Vision 2030, but also intends to transform the way those sectors operate.
The industrial city Oxagon will play a key role. Neom plans to create an integrated port and logistics hub that will be home to seven innovative sectors: sustainable energy, autonomous mobility, water innovation, sustainable food production, health and wellbeing, technology and digital manufacturing, and modern methods of construction.
The Neom green fuels project is key to Oxagon’s clean energy ambitions. The integrated facility will produce hydrogen to be synthesised into carbon-free ammonia. Full construction work began on the project earlier this year after it reached financial closure. The facility is expected to be commissioned in 2026.
Neom, US-based Air Products and Acwa Power each have a 33.3 per cent stake in Neom Green Hydrogen Company, the special project vehicle implementing the project.
Aviation is another major area of investment. Neom plans to start operating its own airline, Neom Airlines, at the end of 2024 from the existing Neom Bay airport before operating from Neom International – a greenfield development inland close to Tabuk at the end of The Line.
Neom will morph from a construction project into a full-fledged economy
International airport
Plans for the international airport are advancing. US firm Aecom has been awarded a contract to provide project management consultancy services, and a series of construction and supply contracts are due to be tendered this year.
Although not confirmed, it is understood the first phase of the airport will have the capacity to handle 25 million passengers a year. A second phase could take the capacity up to 50 million a year. There is an aspiration for the airport to become the largest in the world, with a capacity of 100 million passengers a year.
Another sector developing quickly is media. In April, Neom furthered its ambition to become the region’s leading TV and film production hub by opening more stages at its Media Village. The village now has four stages offering 12,000 sq m of production space. Six more stages are under development. Neom is also increasing its resort-style accommodation for cast and crew.
As well as gaining access to filming locations across Neom’s varied landscapes, companies using the facilities can enjoy Neom’s highly attractive production incentives, including cash rebates of over 40 per cent.
As these sectors and others advance, Neom will morph again from a construction project into a full-fledged economy. When launched in 2017, its GDP was projected to reach $100bn by 2030 – equivalent at the time to more than one-seventh of the kingdom’s GDP of $688bn. By focusing on nine high-value sectors, the Neom economy will be an affluent one. Its GDP per capita is projected to become the highest in the world.
Main image: Construction work is advancing on Sindalah Island, which is planned to open in early 2024. Credit: Neom
MEED's April 2023 special report on Saudi Arabia includes:
> GIGAPROJECTS: Saudi Arabia under project pressure
> ECONOMY: Riyadh steps up the Vision 2030 tempo
> CONSTRUCTION: Saudi construction project ramp-up accelerates
> UPSTREAM: Aramco slated to escalate upstream spending
> DOWNSTREAM: Petchems ambitions define Saudi downstream
> POWER: Saudi Arabia reinvigorates power sector
> WATER: Saudi water begins next growth phase
> BANKING: Saudi banks bid to keep ahead of the pack
Register for MEED's guest program now to access this article.
Exclusive from Meed
-
Decarbonising the global energy grid3 May 2024
-
-
GE Vernova invests in Xlinks2 May 2024
-
Awards buoy Oman’s green hydrogen strategy2 May 2024
-
All of this is only 1% of what MEED.com has to offer
Subscribe now and unlock all the 153,671 articles on MEED.com
- All the latest news, data, and market intelligence across MENA at your fingerprints
- First-hand updates and inside information on projects, clients and competitors that matter to you
- 20 years' archive of information, data, and news for you to access at your convenience
- Strategize to succeed and minimise risks with timely analysis of current and future market trends
Related Articles
-
Decarbonising the global energy grid
3 May 2024
As the effort to tackle the climate crisis continues, global demand for renewable energy has been increasing. Unfortunately, the windiest and sunniest parts of the world are not necessarily where the need for energy is highest. This is where transmission plays a big role, linking energy generation to energy use as a product of global interconnection, and diversifying production from renewable sources to create a steadier supply of clean power.
Transporting energy across vast distances is not easy though. From the regulatory complexities of navigating cross-border infrastructure projects to the high costs of financing and the need for long-term planning and advanced technical capabilities, the challenges involved in successfully deploying long-distance transmission projects are varied. Overcoming these challenges is not a single party affair, but requires close collaboration across government, industry and non-governmental organisations.
We conducted a study with nearly 600 industry experts from across the world who highlighted the pressing need for co-ordinated global action to rapidly develop grid infrastructure. Integrating renewable energy into existing grids was cited by participants as one of the most significant barriers to achieving net-zero objectives, alongside supply chain vulnerabilities and ability to access the required capital.
Multiple challenges
From a technical standpoint, there are multiple considerations when implementing cross-border interconnections. Regions can operate using different technical parameters, such as different voltages or frequencies. Even within the same country, interregional variations can create bottlenecks. Adopting regional or international grid codes could mitigate these issues.
Further challenges emerge when we take trading into account. This is where regulation can act as an enabler, facilitating the flow of electricity between countries. The European Union’s efforts to co-ordinate the design of its member state’s energy markets enables an increasingly smooth transmission of energy across the continent. Alongside this, existing infrastructure is outdated, requiring significant upfront investment to upgrade. Clarity on regulatory requirements and more transparency around plans for grid buildout, derisk funding for capital-intensive mega projects.
Coordinated action is vital for the transfer of energy across borders and access to renewable sources of energy
Positive benefits
Despite these challenges, the upside must be stressed. Integrating power systems across borders has many positive societal benefits, decreasing costs and hence energy bills through economies of scale, increasing energy security and lowering the environmental impact of operations. On the latter more specifically, larger power systems are able to integrate higher shares of variable renewables. Globally, the sun is always shining and the wind blowing somewhere.
A common element, therefore, emerges: the need for increased cross-border co‑ordination. Whether it is bilateral, multi-lateral or unified, different models of inter-jurisdictional arrangements are needed for large-scale projects to support global energy interconnections. Our Xlinks project, which is using high-voltage direct current (HVDC) for transmission, is a standout example.
Such projects represent what is needed more in the world, the combination of infrastructure and renewable power across borders, bringing together the public and private sectors for energy security, supply and affordability in an environmentally friendly way. Transporting clean energy using HDVC cables is a crucial step in powering a net-zero and equitable future, and more of this is needed to aid the transition to lower-carbon and prosperous economies.
Political, technical and market hurdles can be overcome through collaboration and partnerships. Leveraging the collective expertise and resources of governments, regulators and the private sector can help ensure interconnections are developed quickly enough to support the energy transition. Grid buildout takes time. We have the resources required to meet ambitions, but stopping now is not viable. We must continue planning, building and maintaining large-scale infrastructure projects to meet the rising demand.
Coordinated action is vital for the transfer of energy across borders and access to renewable sources of energy. This was the message from Cop28 and the UAE Consensus: to help progress and secure a cleaner, brighter future for us all, we must break down barriers and come together.
https://image.digitalinsightresearch.in/uploads/NewsArticle/11736994/main.gif -
Libya allocates $1.2bn for upstream oil project
3 May 2024
Register for MEED's guest programme
Libya has allocated LD6bn ($1.23bn) to develop the Hamada NC-7 concession in its latest budget, which was approved by Libya’s eastern-based parliament on 30 April, according to industry sources.
The field development project was previously estimated to be worth between $4bn and $5bn.
The project aims to develop 2.7 trillion cubic feet of gas reserves in the NC-7 block of the Ghadames basin.
A consortium led by Italy’s Eni and including France’s TotalEnergies and UAE-based Adnoc operates the block.
Development of the field was included in the 2024 annual budget of LD90bn ($18.5bn), excluding an item for development projects, which the Benghazi-based government of Osama Hamad unanimously approved.
Hamad came to power in March 2023 and is allied with the military commander Khalifa Haftar, who controls the east and large parts of the southern region of Libya.
Progress on developing the Hamada NC-7 concession has been slow amid concerns among politicians about the involvement of foreign oil companies in key hydrocarbon assets.
On 15 December 2023, the Tripoli-based Ministry of Oil & Gas issued a statement condemning the terms of the planned gas development contract between Libya’s state-owned National Oil Corporation (NOC) and the consortium led by Eni.
In the statement, the Ministry of Oil & Gas described the deal as a “violation of Libyan legislation on oil contracts”.
Earlier this year, NOC announced a plan to execute 45 greenfield and brownfield projects to try to boost the country’s oil production from 1.25 million barrels a day (b/d) to 2 million b/d.
Farhat Bengdara, the chairman of NOC, said that the projects had a total estimated cost of $17bn-$18bn.
Bengdara also confirmed plans to launch an oil and gas licensing round at the end of 2024 or early 2025.
Libya is aiming to hit its 2 million b/d target within three years.
Bengdara said that gas monetisation will remain a strategic focus as the country pushes to increase exports to Europe.
Libya is only using 25% of the capacity of its Greenstream pipeline to Italy.
The North African country also flares significant volumes of natural gas and has 12 projects under way that aim to reduce gas flaring to almost zero, according to Bengdara.
In recent years, Libya has struggled to execute large projects amid significant political instability.
https://image.digitalinsightresearch.in/uploads/NewsArticle/11735260/main.gif -
GE Vernova invests in Xlinks
2 May 2024
US-headquartered GE Vernova has invested $10.2m in Xlinks First, the investment company established by UK-based startup Xlinks to deliver the $18bn Morocco-UK power project.
This investment equates to a minority shareholding in the company, which is developing a project comprising wind and solar generation as well as battery storage, with a total combined capacity of 3,600MW, to be transmitted from Morocco to the UK.
Xlinks said the investment will “further accelerate delivery and buildout of the project”.
GE Vernova joins at least four other investors in the project.
Other investors include Africa Finance Corporation, which invested $14.1m in April; Abu Dhabi National Energy Company (Taqa), $30.7m; the UK’s Octopus Energy, $6.23m; and France’s Total Energies, $25.4m.
The planned electricity generation and battery storage facilities, located in south Morocco, will be connected exclusively to the UK via 4,000-kilometre high-voltage, direct current (HVDC) cables.
In December last year, Xlinks signed a contract with Canada-headquartered WSP to provide technical advisory services for the project.
WSP will support Xlinks with route optimisation, power systems and interface management for the plan to construct the project.
The Morocco-UK power project entails building 10,500MW solar and wind farms in Morocco’s Guelmim-Oued Noun region and sending 3,600MW a day of energy exclusively to the UK via four 3,800-kilometre HVDC cables.
The HVDC network is envisaged to run from the UK’s south coast, passing France, Spain and Portugal undersea and then onshore to a planned solar and wind energy project in Morocco.
This renewable energy-sourced electricity amounts to nearly 8% of the UK’s current requirements, equivalent to powering 7 million homes by 2030.
https://image.digitalinsightresearch.in/uploads/NewsArticle/11734222/main5830.jpg -
Awards buoy Oman’s green hydrogen strategy
2 May 2024
Commentary
Jennifer Aguinaldo
Energy & technology editorOman has awarded two additional land blocks designed to develop green hydrogen projects.
The latest land block concessions in Dhofar were awarded to two consortiums. One comprises a team of France's EDF Group and EDF Renewables, with partners Japanese Electric Power Development Company (J-Power) and the UK-headquartered Yamna Company.
Another team comprises UK investment firm Actis and Australian metals firm Fortescue.
This brings the total number of land blocks awarded through the public auction process spearheaded by Hydrogen Oman (Hydrom) to four, exclusive of the four legacy initiatives signed or agreed upon already.
*Budgets are MEED estimates if not publicly disclosed. Sources: MEED, HydromA limited gas supply and network strongly incentivises Oman to build a green hydrogen-centric downstream sector that will provide feedstock to domestic industrial plants and generate derivatives for the local and export markets.
Stakeholders have implemented a strategy, including setting up an infrastructure company catering to these projects. The target is to generate 1 to 1.5 million tonnes a year (t/y) of green hydrogen by 2030 and 7.5 to 8.5 million t/y by 2050.
The blueprint envisages a complete green hydrogen ecosystem, from the production of renewable energy and its distribution to electrolysis plants and hydrogen derivatives conversion plants to storage and export terminals.
Omani ports' existing relationships with European stakeholders and growing alliances with other countries could also help seal future offtake agreements for the planned facilities.
As things stand, the consortiums that won the land auctions and the legacy initiative partners provide much gravitas to Oman's green hydrogen programme. They comprise energy old guards such as BP and Shell that are keen to decarbonise, private companies aiming to balance their investment portfolios with clean energy investments, and offtakers or trading companies that are grappling with net-zero targets.
Yet the most obvious question remains. Given the eye-popping foreign direct investments these complex projects entail, not all are likely to achieve a final investment decision within three years. This seems to be the window required for the projects to start production before 2030.
But like any emerging industry, the risks can only be properly assessed and mitigated as the first projects move toward the execution phase.
https://image.digitalinsightresearch.in/uploads/NewsArticle/11733331/main.gif -
Operationalise loss and damage fund says Al Jaber
2 May 2024
Steps must be taken to ensure a fully functioning Loss and Damage Fund, following an agreement at Cop28 to operationalise the fund, according to Cop28 President Sultan Al Jaber.
“While delivering an agreement to operationalise the Fund at Cop28 was a huge breakthrough for climate progress more needs to be done,” Al Jaber said during the first board meeting of the fund on 30 April.
The Loss and Damage Fund, which was first proposed in the 1990s, aims to help developing countries cope with the impact of extreme global warming events such as droughts and floods.
Al Jaber cited the need to build a fully functioning fund, which will be endorsed at Cop29 in Baku, which will be “disbursing funds soon after and a Fund that delivers lasting, positive, socio-economic impact for decades to come."
"While it took over three decades to establish this Fund, climate change has not stood still. Every region of the world is now vulnerable…the impacts of climate change are a clear and present danger to lives and livelihoods everywhere."
Al Jaber’s message resonates closer home given the recent storms hitting the UAE, which brought some emirates to a standstill in mid-April.
Heavy rainfall inundated Dubai and the Northern Emirates on 16 April, causing flooding and significant property and infrastructure damages.
A total of $792m has been pledged for loss and damage funding arrangements – of which $662m has been pledged to the Fund to date – including a $100m contribution each from the UAE and Germany and $75m from the UK.
https://image.digitalinsightresearch.in/uploads/NewsArticle/11732746/main.jpg