While the GCC Railway project remains under study, all eyes are on Saudi Arabia. Across the region, industry leaders are waiting to see how the kingdom manages three multi-billion-dollar projects that are set to transform its transport infrastructure.
Each scheme presents its respective client with its own challenges, which have forced an acceleration of the country’s notoriously slow decision-making process to keep the projects on schedule.
Unlike North Africa and the Levant, Saudi Arabia, along with its GCC counterparts, has no legacy rail network from colonial times on which to base its development work. In modern times, aviation has been the preferred method of crossing the vast desert hinterland of Saudi Arabia.
However, if the kingdom is to fully capitalise on its wealth of natural resources to accelerate its transition from oil dependence to economic sustainability, a functioning rail infrastructure is critical to the country’s trading apparatus. This year, there has been steady progress on all three projects.
Contract awards
In March, MEED revealed that the Tarabot consortium, led by the local Acwa, was to be named preferred bidder on the $5bn Saudi Landbridge project. The client, Saudi Railways Organisation (SRO), duly confirmed this in April.
Since then, Tarabot’s bid has been undergoing final analysis by the SRO, its advisers and the government.
There is still no official indication of when an announcement will be made, but sources close to the project anticipate an award before the end of the year.
In the meantime, a huge amount of work is under way to prepare the project for a smooth transition into construction once an award is made. “We are working on acquiring the land corridor for the Landbridge, which is progressing very well,” says Abdulaziz al-Hokail, president of the SRO.
“We have committees carrying out the transfer of the land and are in discussions with municipalities and landowners along the route. We do not know exactly when this will be complete - negotiations vary depending on the owners of the land - but we already have the majority of the land needed.”
Linking Saudi Arabia’s Gulf and Red Sea coasts, from Jeddah to Dammam via Riyadh, the Landbridge will revolutionise the kingdom’s passenger transport and cargo routes. Once complete, cargo will be able to be transported between the ports of east and west in 24 hours, rather than the six days it takes to travel by ship.
A spur to King Abdullah Economic City is also planned, and a study is to be carried out into a further line south from Jeddah to Abha. In July, the SRO invited passenger rail operators to submit expressions of interest in the 10-15-year passenger concession on the project.
The prospect of a rail link between Jeddah and the vast industrial facilities under development further up the east coast at King Abdullah Economic City, and another between Jeddah and Jubail Industrial City and its petrochemicals port in the west, is hugely exciting for those who hope to see Saudi Arabia overtake Dubai as the region’s pre-eminent trading hub. Some 65 per cent of the kingdom’s imports enter through Jeddah Islamic Port.
Injecting finance
The financing of the Landbridge was met with a great deal of nervousness in the banking community, and bidders confided to MEED ahead of the bidding process that they were not clear how or when they would recoup the money they planned to invest. But, they said, the project was just too prestigious to ignore.
These are the risks that Saudi Arabia and its international partners are prepared to take in return for tackling such huge infrastructure projects on long-term concessions.
Meanwhile, the SRO is preparing to issue tenders for the first of three main contracts to build a $6bn high-speed rail link between the holy cities of Mecca and Medina. Previously dubbed the Mecca-Medina rail link, the project has now been renamed the Haramain high-speed rail project.
Tenders were originally intended to be issued in mid-July, but the bidding process has been set back because of an administrative delay in certifying the six bidding consortiums at the Municipalities Ministry.
However, the documentation is prepared and everything is ready to go ahead in the coming month.
The first package to be issued is the main construction contract for civil works on the 444-kilometre-long route. This will be followed by the contract to build stations along the line.
A third package will be issued to build rolling stock, tracks, communications and signalling systems, and to carry out operations and maintenance work.
The SRO hopes to issue requests for proposals for all three contracts within the next six months, and to move the process along as quickly as possible, given that the rolling stock alone is likely to take three years to build.
The SRO and the Saudi government decided earlier this year to issue the contracts on a public procurement basis, with the government providing the financing rather than the bidders, as opposed to the original build-operate-transfer approach.
Moreover, rather than one single contract covering all the work, the project has been divided into three. Al-Hokail says the changes should accelerate the process.
Having gained experience from the bidding process for the Landbridge, the SRO is keen to cut through the notoriously slow Saudi bureaucracy to drive the Haramain project forward.
Following the banks’ nervousness over the financing of the Landbridge project, however, it would be a surprise if their caution did not play its part in the SRO’s decision to divide up the Mecca-Medina project into three packages, and to inject public money.
Connecting industry
The North-South minerals railway is the most developed of the kingdom’s three rail projects, and as such has been subject to the greatest scrutiny.
Three of the four main construction packages on the 2,400km, multi-billion-dollar project were awarded early last year, and earthworks are already well under way.
The line will transform Saudi Arabia’s industrial capacity, connecting planned aluminium and fertiliser complexes at Ras al-Zour on the Gulf coast with the Al-Jalamid phosphate mine and Al-Zabirah bauxite mine in the north.
A consortium led by Saudi Binladin Group won the SR2.3bn ($613m) first package, CTW 100.
The package covers a 576km section from Ras al-Zour to Al-Zabirah. The second, CTW 200, has gone to the local Al-Suwaiket Group, with China Railway 18th Bureau Company.
Worth SR1.9bn, it covers 440km of track from Al-Zabirah to the mid-point of the Al-Nafud region. Japan’s Mitsui & Company, with Australia’s Barclay Mowlem, has won the SR2.9bn third package, CTW 300, for a 782km section from Al-Nafud to the Al-Jalamid mine and Qurayyat.
In November, MEED reported that the client on the project, the Finance Ministry’s Public Investment Fund (PIF), had noted slow progress on two of these three packages.
Mitsui and Barclay Mowlem in particular were criticised for “poor performance” in the PIF report, which said “strong steps need to be taken” to bring the work up to speed.
The PIF insisted this slow start had simply been due to the logistical difficulties for foreign companies of moving the necessary staff and equipment out to the remote sections of desert on which they are to work.
Speaking to MEED, Arash Aghdam, project manager on the railway, says work on these three packages has picked up and is now progressing steadily. Moreover, the PIF is preparing to issue new tenders for three ancillary contracts, covering the signalling and telecoms systems on the railway, rolling stock, and operations and maintenance.
Bids will be submitted by prequalified companies in the weeks following Ramadan in early October.
“Progress has been slow on these contracts, but we are getting there, and we expect delivery of the advance construction work on time,” says Aghdam.
However, new controversy has arisen around the bidding for the fourth and final construction package, CTW 400, a 480km passenger line between Al-Zabirah junction and Riyadh’s King Khaled International airport.
Russian Railways won the contract with a bid of about $800m in January. Since then, however, things have gone quiet around the project and no formal contract award has been made.
In recent weeks, it has emerged that the contract is to be retendered.
The decision has caused outrage in Moscow, with the state-owned rail operator accusing Riyadh of pol-itical bias, and halting its participation in all other projects in Saudi Arabia until it receives an explanation.
For its part, the PIF and its advisers seem unconcerned by the upheaval. Sources close to the bidding process say the decision was taken at a ministerial level in Riyadh, and that the government was simply not convinced by the Russian bid and the ability of the company to align its work with the other three packages.
As CTW 400 is a passenger line and does not affect the main line from the mines to the coast, the PIF has apparently decided that the delay, which has put the contract a year behind schedule, is acceptable.
Meanwhile, expressions of interest have been received from 18 international rail groups keen to take on the unexpected opportunity of the re-tendered contract, and the PIF hopes to make a new award on CTW 400 by the end of the year.
Getting these three projects under way has been far from easy, but the overall ambition of the kingdom’s rail strategy is staggering.
“These three projects serve three different purposes, and part of our remit is to bring the culture of rail to the kingdom,” says Aghdam.
“In the past, people in Saudi Arabia have chosen aviation because the railways were not there.”
The rail projects under way in Saudi Arabia will change industry in the kingdom and the way people travel, according to Aghdam, who says other rail projects are also under consideration, including a possible overnight service to the Jordanian border.
“We are confident that in a few years, when the benefits of rail will become clear, it will become more attractive and people may begin to choose rail over air travel,” says Aghdam.
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