SAUDI ARABIA REVIEWING NEOM PROJECTS, CITING ‘LIMITED RESOURCES’

Sat 03 May 2025:

The CEO of Saudi Arabia’s futuristic city Neom launched a “comprehensive review” of the kingdom’s mega-project, signifying more belt-tightening to come with falling energy prices.

One person familiar with the review told The Financial Times on Monday that the scope of several projects surrounding Neom was being reviewed due to “an environment of limited resources”.

Neom is the flagship of Crown Prince Mohammad bin Salman’s Vision 2030 plan to transform the kingdom’s economy and reduce its dependence on oil revenue.

The kingdom has already had to scale back Neom, originally billed as a $1.5 trillion megacity project, which organisers claim will eventually be 33 times the size of New York City and include a 170km straight-line city known as “The Line”.

Instead of 1.5 million people living in the city by 2030, Saudi officials now anticipate fewer than 300,000 residents. Meanwhile, only 2.4km of the city will be completed by 2030.

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Saudi Arabia has begun operations at some of Neom’s larger projects, such as the Red Sea resorts, but others, like a desert ski resort with artificial snow to host the 2029 Asian Winter Games, have yet to materialise.

Saudi Arabia is trying to position itself as a luxury tourism destination, but for now, it needs oil revenue to invest.

Energy prices, however, have plunged amid economic uncertainty driven by American tariffs and an influx of more oil supply.

On Monday, Brent, the international benchmark, was trading at $64.27 per barrel, down 2.31 percent. Brent prices have tumbled about 20 percent since the start of the year.

For years, Saudi Arabia was the main proponent of restricting supply in an alliance alongside Russia dubbed OPEC+. The kingdom absorbed most of the production cuts within OPEC+, while Iraq, the United Arab Emirates, and Kazakhstan boosted production.

In April, Saudi Arabia led OPEC+ in a surprise move to boost production, in what energy analysts said was a move designed to punish “cheaters” exceeding the production limits.

The combination of lower oil prices and economic uncertainty is being felt in Saudi Arabia.

The International Monetary Fund says Saudi Arabia needs oil at $90 per barrel to balance its budget.

In April, Goldman Sachs painted a bleak picture for Saudi Arabia’s projects in a note to clients, projecting “pretty significant” budget deficits and more scaling back of mega-projects.

Neom has already faced one reshuffle. Nadhmi Al-Nasr, who managed Neom’s construction from 2018 to 2024, departed from his post in November.

Nasr earned a chilling reputation managing Neom. He bragged that he put everyone to work “like a slave”, adding, “When they drop down dead, I celebrate. That’s how I do my projects.”

Two other foreign executives also left Neom at the end of 2024, according to The Wall Street Journal.

Aiman Al-Mudaifer was appointed CEO of Neom in November after overseeing a real estate division of the kingdom’s nearly $1 trillion Public Investment Fund.

MbS has overall authority over PIF and is spearheading its investments across the kingdom.

SOURCE: INDEPENDENT PRESS AND NEWS AGENCIES

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