There has been significant progress on construction plans for Saudi Arabia’s NEOM city, estimated to be worth $500 billion (SR1.9 trillion), this year.
But equally critical work is also ongoing to secure the project’s future financial and logistical requirements.
Developer NEOM company kicked off the first in a series of so-called ‘Discover NEOM’ fundraising roadshows earlier this week.
Details were shared of investment opportunities and progress within NEOM company projects, including active and upcoming schemes.
NEOM company plans to host Discover NEOM tours in other Saudi cities and global markets, like the US, the UK, France, and Germany.
Oxagon (Photo Credit: NEOM)
The NEOM company has confirmed major construction and development awards since the start of 2023. It named international companies SNC-Lavalin, Jacobs, and Parsons, as well as the local Jasara, as delivery partners for The Line in February.
Plans for The Line envision a futuristic city without roads. It will be a 200-meter (m) wide and 500m-tall urban development addressing urban real estate challenges including pollution, traffic, and human congestion.
Other regions have also progressed. UK-based hotel group Yotel signed its first Saudi market agreement in January 2023 with NEOM.
Scheduled to open in 2025, the 300-key NEOM Yotel will be the first hospitality development to open at Oxagon.
Oxagon is planned as a clean industrial hub. It will have a plant producing 600 tonnes of hydrogen daily in the form of green ammonia from 2026. The Saudi Ministry of Industry and Mineral Resources issued an operating license for the plant in January.
That same month, General Hotel Management signed an agreement for The Chedi Trojena hotel. Construction on Trojena started in December 2022 and the project will be ready around 2026.
A mountain tourism destination, Trojena is also the host venue for the 2029 Asian Winter Games.
Sindalah Island, yet another region of NEOM city, formally launched in December 2022. Spanning 840,000 square meters, Sindalah will be a group of islands with an 86-berth marina, 413 high-end hotel rooms, and 333 serviced apartments.
NEOM city development roadmap
Macroeconomic trends are influencing the construction programs for NEOM city projects.
For instance, the Oxagon green hydrogen project’s cost has risen from original estimates of $5 billion to $8.5 billion. Co-developer Air Products said in February that inflation, spare parts and $1 billion of interest on loans have raised project costs.
Inflation alone led to a $500 million cost hike. Project financing, interest payments, and additional joint venture costs added a further $1.8 billion cost.
The remaining $1.2 billion hike is due to additional work to make the project more self-sufficient and reduce its operating costs.
NEOM company, like most Saudi gigaproject teams, must also contend with resource shortages in the local supply chain.
As the Vision 2030 deadline approaches, more resources will become necessary to deliver Saudi Arabia’s ambitious construction plans.
NEOM’s Trojena (Photo Credit: NEOM)
Collaborate to succeed
A Saudi-based tendering manager whose employer is involved with selected gigaproject schemes says: “There’s been an influx of several mega- and giga-sized project tenders recently.
“Progress in terms of procurement and awards has been decent, to say the least. But does that match the actual requirements for achieving these projects’ ambitious milestones?
“The targets are very ambitious and may be classed ‘unrealistic’ to a degree. So additional market resources could well be needed to not just meet the timelines, but also deliver the additional ‘wow factor’ that is normally required in regional construction projects,” the manager tells Economy Middle East.
The Public Investment Fund’s recent $1.3 billion investment in four Saudi construction companies could help ease the pressure. But more international-local partnerships will help serve demand.
“No contractor in the world has ever poured as much concrete or excavated the lengths of lands that Vision 2030 projects will require,” the tendering manager says.
“It will require bigger conglomerates of companies to join efforts.”