Riyadh set to wind up rail regulator

15 September 2008
Process of replacing Saudi Railways Organisation with new regulatory body will begin in October.

Riyadh will start winding up the Saudi Railways Organisation (SRO) in early October, creating a new regulator to oversee contract awards and the development of the country’s multi-billion-dollar rail programme.

Work to establish the watchdog will begin following the Ramadan and Eid festivals, as the SRO is phased out. The new body, owned by the Finance Ministry, will assume responsibility for all the kingdom’s rail projects.

These include the $5bn Saudi Landbridge/East-West railway and passenger concession, the $6bn Haramain high-speed rail project between the holy cities of Mecca and Medina, and the North-South minerals railway. It will also oversee the $4bn Mecca light rail network linking holy sites.

The incumbent watchdog is being wound up to avoid a conflict of interest arising from the SRO’s dual status as client on the Landbridge project and owner of the existing section of track between Riyadh and Dammam, which will form part of the completed route.

Once a winning bid is selected, the regulator will hand the rail line to the joint stock company running the entire scheme, which will link the Gulf and Red Sea coasts via Riyadh (MEED 2:11:07).

In July, Saudi Arabia’s Council of Ministers licensed the establishment of the Saudi Landbridge Company to run the project. The winning consortium is then expected to float this company on the Saudi stock exchange (Tadawul). SRO staff who have been working on the Landbridge scheme will be offered the choice of remaining on the project or joining the new rail regulator (MEED 8:7:08).

“This [plan] is contingent on a winning bidder being appointed,” says one source close to the SRO. “But all the requirements for the regulatory framework have been approved or are on the verge of being approved.”

Officials at the SRO confirm that the management structure at the new regulator is under discussion, and insist that talks on the award of the Landbridge concession are on track.

There has been speculation that communication has broken down between the SRO and the Tarabot consortium led by the local Acwa Power, which was selected as preferred bidder (MEED 7:3:08).

“We are waiting for the gov-ernment to make a decision,” says the source. “Unfortunately, that has taken some time due to the holiday season and Ramadan. Despite what has been said, Tarabot remains the preferred bidder and Trans Arab Cargo Consortium [Tracc] the reserve. Nothing has changed.”

However, members of Tracc remain hopeful that the rumours of a deteriorating relationship between the SRO and Tarabot turn out to be true, and that the restructuring of the SRO offers a fresh perspective on its bid within government. A final decision is still expected in the fourth quarter of the year.

“The government is still eval-uating both bids and there are other things to consider: the technical side and financial capabilities of the consortium,” says one official at a leading company in Tracc.

Once the regulator is in place, Riyadh is also likely to create a separate rail authority, similar to those that already exist for Saudi Arabia’s roads and shipping, to carry out high-level studies into potential projects on behalf of the government.

Meanwhile, four companies have been prequalified for the $4bn Mecca light-rail system. The firms, all local, are Saudi Binladin Group, Saudi Oger, Al-Harbi and Al-Mabani. Tenders are expected to be submitted by the end of October, with an award announced by the end of 2008. Construction of the line is expected to take 14 months.

The light rail system will be approximately 22 kilometres in length, and will closely resemble the overhead Dubai metro that is under construction in the UAE. The system, which will link the country’s holy sites at Mecca, Mina, Muzdalifah and Arafat, will have the capacity for up to 90,000 passengers an hour.

Saudi Arabia’s Municipalities & Rural Affairs Ministry, which has carried out a feasibility study, says a monorail will minimise disruption to the holy cities during construction, as no tunnelling will be required (MEED 21:05:08).

According to Riyadh-based consultant Samir Ashour, resident manager of Lebanese engineering group Khatib & Alami, which was involved in the study, the principle issue will be how to ensure the movement of the millions of people who will use the system during the Hajj (MEED 9:5:08).

The project will complement the Haramain high-speed rail link between Mecca and Medina.

Tenders for the first of three main contracts on the project are now set to be issued by the end of September. Originally expected in July, the issue has been delayed while the Municipalities & Rural Affairs Ministry completes certification of the six prequalified consortiums.

“There has been an administrative hold up, but we expect to have the tenders out very soon,” says an SRO official.

A MEED Subscription...

Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications