meed-logo

line1 line2 line3
SIGN IN / REGISTER

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

https://image.digitalinsightresearch.in/uploads/NewsArticle/10787833/main.gif
Colin Foreman

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Kuwait cancels oil financing tender

    6 June 2023

    Kuwait’s national oil company Kuwait Petroleum Corporation (KPC) has cancelled its tender for a consultant to study financing options for the country’s state-owned oil and gas companies.

    In a statement published by KPC’s Higher Purchase Committee it said that the companies that purchased tender documents are eligible for a refund.

    The invitation to bid on the tender was issued on 18 December 2022.

    KPC did not give a reason for the cancellation of the tender.

    Kuwait has been looking to increase efficiency and restructure its state-owed oil and gas companies for several years.

    In 2020, a contract for a study to look into the restructuring was won by UK-based Strategy&, a subsidiary of the financial services company PwC.

    The plan was expected to cut costs and merge many of the state-controlled companies in the country’s oil, gas and petrochemicals sector.

    At the time, KPC said that the mergers would slash the number of large state-controlled companies in the sector from eight to four.

    In 2020, local reports said the Supreme Petroleum Council (SPC) and KPC had already approved plans to restructure the oil sector.

    It is thought that the restructuring could have significant benefits for KPC in the long term.

    A similar restructuring by Abu Dhabi National Oil Company (Adnoc) helped to open the door for increased foreign investment in the UAE’s energy sector.

    After a sweeping restructuring, in December 2017 Adnoc listed 10 per cent of Adnoc Distribution, the largest operator of retail fuel service stations and convenience stores in the UAE. This raised $851m, making it the largest initial public offering in Abu Dhabi in a decade.

    In May 2022, KPC said that it was considering selling shares in its downstream subsidiary Kuwait National Petroleum Company (KNPC), with the Higher Purchase Committee tendering a contract for a feasibility study regarding the potential “partial divestment of shares in KNPC”.

    At the time, the announcement about the potential share sale from the Higher Purchase Committee surprised many within Kuwait’s oil and gas sector.

    Despite Kuwait publicly discussing the restructuring of its oil and gas sector for several years, very little concrete progress has been made towards making the planned mergers.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/10915058/main.gif
    Wil Crisp
  • Region positions itself for sustainable future

    6 June 2023

    Commentary
    Colin Foreman
    Editor

    At the end of November, the region will host the UN’s climate change conference for the second time in two years. Cop28 in the UAE, like Egypt’s Cop27 last year, will bring world leaders together to discuss energy transition and the fight against climate change.

    Arresting climate change will arguably be humankind’s greatest challenge over the coming decades. To succeed, people from all over the world will need to work with each other, which is why events like Cop28 that bring countries together are so important – despite the criticism they can attract. 

    At the project level, cooperation will also become an increasingly important trend.

    This year there are clear signs that governments are jointly working on projects that will contribute to the fight against climate change. 

    Some of the best examples are in the transmission and distribution sector. In recent months, significant steps have been taken across a range of interconnection projects to link countries’ electricity grids. 

    Efficiency is the main driver for these projects. Particularly for GCC nations, the capacity to obtain large-scale solar energy affordably, combined with the marked differences in peak energy demands between the colder and hotter months, frequently leads to considerable surplus capacity.

    Smoothing out these peaks and troughs as part of a larger regional or international grid also means less power generation is required and reduced carbon emissions.

    As the shared challenge of climate change rises up the global agenda, more projects that pool resources, share expertise, and transcend borders and politics will be needed. 

    From regional collaborations on electricity grid interconnections to international climate conferences, the region is positioning itself at the centre of a more collaborative and sustainable future.

    This package includes:

    > Region plans vital big grid connections
    > Soaring data demand drives boom
    > Read the June 2023 MEED Business Review

     

    https://image.digitalinsightresearch.in/uploads/NewsArticle/10910825/main.gif
    Colin Foreman
  • Hospital boost for Jordan construction

    5 June 2023

    This package on Jordan's construction sector also includes:

    > Egis selected for Jordan hospital project
    > Jordan's largest construction project to move onsite
    > Hill wins work on Saudi-backed hospital project in Jordan
    > PIF to invest $24bn in six Mena countries

     

    Jordan’s construction sector will get a major boost this year as the country’s largest project prepares to move onsite over the summer after the first phase of its masterplan has been finalised.

    The $400m hospital project is being developed by the Saudi Jordanian Fund for Medical and Educational Investments Company (SJFMEI) on a build-operate-transfer (BOT) basis.

    For the hospital project, SJFMEI appointed US-based Hill International in partnership with the local sub-consultant Dar al-Omran to provide project construction management services last year. The project team is now preparing to tender construction contracts.

    “We have completed the first phase of the masterplan,” Said Mneimne, senior vice-president of Hill International, told MEED in an interview.

    “This summer, we will appoint a contractor for the enabling works. We will then appoint a contractor for the foundations and the structure,” he added.

    The scale of the project is a challenge for Jordan’s construction sector, and an international engineering, procurement and construction (EPC) contractor may be needed to deliver the project.

    “We have not yet decided what the contracting strategy will be,” Mneimne said. 

    The project involves the construction of a university hospital with 330 beds, 72 outpatient clinics, a children’s hospital, and a medical school with a total capacity of 600 students and a projected annual intake of 100 students.

    The project also includes five medical centres of excellence focused on disciplines such as cardiology, oncology, neurology, gastroenterology and orthopaedics. There will also be four scientific research centres in genomics and precision medicine, stem cells and regenerative medicine, health systems and public health, and bioinformatics.

    The built-up area is estimated at 110,000 square metres. It will be located on the airport road, near the Ghamadan area on the outskirts of Amman.

    A joint venture of Lebanon’s Dar al-Handasah (Shair & Partners) and Perkins & Will was appointed for the engineering design and supervision services.

    SJFMEI is a wholly owned subsidiary of the Saudi Jordanian Investment Fund (SJIF). Saudi Arabia’s Public Investment Fund (PIF) owns 95 per cent of the fund, while Jordanian banks hold the remaining 5 per cent.

    Ownership of the project will be transferred to the Jordanian government after the end of the investment period.

    The hospital is the largest active standalone project in Jordan, according to regional projects tracker MEED Projects. The second-largest project is the estimated $228m King Hussein Bridge Terminal and Freight Yard project, which is at the prequalification stage.

    Disappointing decade

    Major projects are needed after a disappointing decade for Jordan’s construction sector. 

    Data from MEED Projects shows a fluctuating trend in the value of construction and transport contracts awarded in Jordan over the past 10 years.

    In 2013, the total value stood at $1.429bn. A sharp rise in 2014 to $2.475bn marked the peak of contract awards during the period.

    A steep fall was witnessed in the subsequent years, with the total value plunging to just $662m in 2015, a dramatic decrease of nearly 73 per cent from the previous year. This downward trajectory continued, with the value plummeting further to a record low of $79m in 2020 amid the global economic disruption caused by the Covid-19 pandemic.

    A closer look at the data indicates periods of minor recovery, notably in 2017, when contract awards rose to $866m, following a particularly poor performance in 2016 at just $159m.

    Despite these rebounds, the overall trend illustrates a declining construction and transport sector in Jordan, with the years 2021 and 2022 recording values of $32m and $86m, respectively, a stark contrast to the highs of 2013 and 2014.

    The fluctuating values in contract awards reveal the industry’s volatility over the past decade, linked to regional instability, economic downturns and global disruptions including the Covid-19 pandemic.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/10914437/main.gif
    Colin Foreman
  • Political deadlock in Lebanon blocks reforms

    5 June 2023

     

    Lebanon’s political deadlock is likely to continue to weigh on the country’s economy and undermine security over the medium term, according to experts.

    The country currently has an interim government and has been without a president since former President Michel Aoun’s term ended at the end of October last year.

    Progress towards forming a new government is likely to be slow, with the legislature divided over who should replace Aoun as president.

    In March, the Iran-backed Hezbollah group and House Speaker Nabih Berri’s Amal Movement party – which together constitute Lebanon’s Shia base – announced their support for the Christian politician Sleiman Frangieh.

    Hezbollah and its allies have since tried to gather support for Frangieh as president, but strong opposition from the majority of the country’s Christian, Sunni and Druze political blocs has left him short of the 65 votes required to be elected in the 128-member legislature.

    Over recent weeks, members of Lebanon’s parliament that oppose Frangieh have started to rally around the former finance minister Jihad Azour.

    Azour currently serves as the director of the Middle East and Central Asia Department at the International Monetary Fund (IMF).

    As the parliament is divided, whether either candidate can obtain a majority vote remains uncertain. According to experts, even if a president is named, it will be extremely difficult for them to form a government.

    Nicholas Blanford, a non-resident senior fellow with the Atlantic Council’s Middle East programmes, says it will likely be some time before a government is formed.

    “Getting a president elected is only the first step,” he said. “Once the new president is in place, there is the tricky task of forming a new government.

    “As we’ve seen over the past 20 years, forming a new government can take months as people bicker and jostle for various lucrative and influential portfolios.”

    Barbara Leaf, the US assistant secretary for Near Eastern affairs, said on 31 May, during a Senate committee hearing, that the Biden administration was considering sanctions if a new president is not elected soon

    Outside pressure

    Only when a government has been formed will Lebanon be able to start initiating the series of reforms that the international community has demanded to unlock aid, grants and loans to try to put the country on the path to economic recovery.

    As Lebanon’s economic crisis has worsened and the security situation has declined, increasing pressure has been applied from other countries that want to try to restore stability in the region.

    Barbara Leaf, the US assistant secretary for Near Eastern affairs, said on 31 May, during a Senate committee hearing, that the Biden administration was considering sanctions if a new president is not elected soon.

    Separately, two members of the US House Foreign Affairs Committee called on the administration to impose sanctions on individuals involved in corruption to “make clear to Lebanon’s political class that the status quo is not acceptable”.

    In a letter to Secretary of State Antony Blinken on 30 May, they said: “We also call on the administration to continue pressing for full accountability for the August 2020 Beirut port blast and support independent, international investigatory efforts into egregious fraud and malfeasance by the governor of Lebanon’s central bank.

    They added: “We must not allow Lebanon to be held hostage by those looking to advance their own selfish interests.”

    French crackdown

    French officials have also taken action to try to crack down on perceived corruption by members of Lebanon’s political elite.

    In May, French prosecutors issued an arrest warrant for Lebanon’s central bank governor, Riad Salameh.

    The warrant followed Salameh’s failure to appear before French prosecutors to be questioned on corruption charges.

    In response, Salameh issued a statement saying that the arrest warrant violated the law.

    Salameh has been the target of a series of judicial investigations at home and abroad on allegations that include fraud, money laundering and illicit enrichment.

    European investigators looking into the fortune he has amassed during three decades in the job had scheduled a hearing in Paris for 16 May.

    A key problem is you still have the same cabal of oligarchs in power and it is likely they will still be represented in the next government
    Nicholas Blanford, Atlantic Council’s Middle East programmes

    Breaking the deadlock

    Analysts believe cracking down on corruption among Lebanon’s political elite is key to breaking the country’s political deadlock.

    “A key problem is that you still have the same cabal of oligarchs in power and it is likely that they will still be represented in the next government,” said Blanford. “These oligarchs do not want reform because if they implement a meaningful reform process, they run the risk of losing their positions of power.”

    While the country’s opposing political blocs continue to vie for power and the formation of a new government seemingly remains only possible after at least several months of negotiations, the outlook for Lebanon in the short term looks bleak.

    Meaningful government assistance for Lebanese citizens struggling with declining security and heightened economic pressures remains a distant prospect. High levels of emigration are also likely to continue as the country’s population seeks relief from the hardships at home.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/10907713/main.gif
    Wil Crisp
  • Saudi construction boom still in early stages

    5 June 2023

     

    Register for MEED’s guest programme 

    Construction activity associated with Saudi Arabia’s Vision 2030 and the kingdom’s gigaprojects is ramping up fast, but is still in the early stages.

    “MEED estimates that there are $879bn of projects planned, of which only about $50bn have been awarded so far,” said MEED’s head of content and research, Ed James, while opening MEED’s Saudi Giga Projects 2023 conference in Riyadh on 5 June.  

    While much work is still needed, progress is being made on projects with a step change in the total value of contracts awarded.

    “According to data from MEED Projects, the total value of contract awards in 2022 more than doubled compared to 2021,” said James. “In 2021, there was $11.9bn of contract awards, and in 2022 there was $24bn of awards.”

    The Saudi Giga Projects 2023 event has speakers from projects including Roshn, Diriyah Company, Red Sea Global, Boutique Group, King Salman Park Foundation, Sports Boulevard Foundation and the Royal Commission for AlUla.

    Saudi Giga Projects 2023 is followed by MEED’s Mena Construction Summit on 6 June, focusing on how the industry rises to the challenge of delivering projects amid unprecedented global demand and competition for resources.

    Companies speaking at the event include Al-Bawani Capital, Autodesk, Bechtel, Caldwell, Diriyah Company, Amana, DuBox, HKA, Jacobs, KEO Infrastructure, LITE Development & Consulting, Ministry of Investment Saudi Arabia (Misa), Mott MacDonald, MZ Engineering, Nesma & Partners, Oracle, Procore, Red Sea Global, Roshn, Parsons Saudi Arabia, Saudi Entertainment Ventures (Seven), Socotec and Thinkproject.

    Find out more about tomorrow’s event here.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/10913130/main.gif
    Colin Foreman