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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

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Colin Foreman

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    To see previous issues of MEED Business Review, please click here
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    Colin Foreman