Saudi rail strategy builds up steam

The signing of the three contracts on April 3 is the most significant move so far in the Kingdom's ambitious railway expansion strategy. The north-south track will be a vital component for developing major industrial undertakings including a fertiliser complex and aluminium smelter project.

Apart from carrying some 4 million tons-a-year of phosphate ores and bauxite from mines in the north to the Gulf the line will also carry general cargo and up to 2 million passengers each year greatly facilitating economic development of Saudi Arabia's eastern, northern and central regions.

The awards have gone to a consortium of Saudi Binladen Group and Mohammed Al-Swailem company, in partnership with undisclosed German partners, which will provide a 576 kilometre section of the line between Ras al-Zour and Al-Zubaira in a $613 million contract.

The local Al-Suwaikat Group also has a $510 million award to provide a 410 kilometre section from Zubaira through the Al-Nafoud desert.

$763m contract

The largest of the three contracts, valued at $763 million, has gone to a grouping of Japan's Mitsui & Company, Australia's Barclay Mowlem and the Kingdom's Al-RashidTrading & Company. The consortium will build 818 kilometres of the railway stretching from Al-Nafoud to Al-Haditha, Hazm Al-Jalamid and Al-Basita

Other big contracts are also pending for a high-speed link between Jeddah-Makkah and Medina and for the Kingdom's planned Red Sea-Gulf "Landbridge" railway project.

A monorail transit system is being considered for Makkah, Mina, Muzdalifah and Arafat to transport up to 20,000 pilgrims an hour between the holy sites during the busiest times of the Haj. A similar system is planned for Madina. Implementation of the estimated $4 billion projects are expected to be on a design, build, operate and transfer contract basis.

Biggest since Suez

The landbridge was authorised by the government in 2002 and represents one the most important regional transport developments since the opening of the Suez Canal. The project will radically alter the pattern and economics of container traffic in the Middle East and serve to enhance Jeddah Islamic Port's position as a trade hub.

Once completed, the new railway will connect with existing track linking Dammam and Riyadh. Shippers will then be able to take containers overland within 18-24 hours avoiding a 4-5 day sea voyage around the Arabian Peninsula

The private sector features prominently in all the new developments with the landbridge development to be awarded as a build, operate transfer concession. State-owned Saudi Railways Organisation, which operates the present track linking Dammam to Riyadh's inland container terminal, is also to be privatised.

For the north-south railway a holding company has been set up by the PIF called Saudi Company for Railways (Saar). The latter will carry out the project based on a 65 to 35 debt-to-equity funding basis. Part of the equity issue is due to be the subject of an initial public offering possibly later this year.