Saudi Arabia reckons with its costly megaprojects as $500 billion 'The Line' is reviewed

DUBAI, United Arab Emirates — Saudi Arabia's sovereign wealthiness money is reassessing its flagship $500 cardinal futuristic metropolis called The Line.

The nationalist concern money has tapped consulting firms to behaviour a strategical reappraisal into the feasibility of the 105-mile linear city, located astatine Neom — itself a immense caller improvement successful Saudi Arabia.  

Neom confirmed the news, archetypal reported by Bloomberg, saying that strategical checks are "common practice" connected semipermanent megaprojects.

But the determination comes amid planetary scrutiny of Saudi Arabia's ambitious infrastructure agenda, arsenic good arsenic increasing unit connected nationalist finances.

Neom did not item what the reappraisal would beryllium focused on, but "it's apt that it's going to look astatine method feasibility, financing and besides economical impact," according to Tim Callen, a visiting chap astatine the Arab Gulf States Institute. 

"I deliberation these are each areas wherever radical person had questions successful the past; is the exertion determination to really execute what Neom wants to do? Is the outgo of improvement excessively high? That's intelligibly go an adjacent much pressing contented arsenic lipid prices person headed down the past mates of years," Callen told CNBC's Access Middle East connected Friday. 

The tract of The Line, successful Saudi Arabia's northwestern desert, is presently a sprawling operation tract replete with cranes and heap drivers, and a precocious built road. Long parallel tracks chopped done the sand, comprising the spine of what planners accidental volition beryllium a high-speed obstruction system.

It's designed to beryllium a high-tech metropolis sandwiched betwixt 2 solid skyscrapers — each much than 1,600 feet precocious — which the Saudi authorities says volition yet location 9 cardinal people.

The task is conscionable 1 of the hyper-futuristic venues planned successful Neom, the brainchild of Saudi Crown Prince Mohammed bin Salman and a portion that the kingdom hopes volition bring millions of caller residents to Saudi Arabia and revolutionize surviving and exertion successful the country.

It's a halfway pillar of Vision 2030, which aims to diversify the Saudi system distant from lipid revenues and make caller jobs and industries for its burgeoning young population.

The outgo of Neom arsenic a full has been estimated to beryllium arsenic precocious arsenic $1.5 trillion. After galore years of seemingly unlimited spending, 2024 began to spot an abrupt displacement arsenic the Saudi fund shortage grew and the terms of a tube of lipid fell good beneath what the kingdom needs to equilibrium its budget.

"It's wide that if lipid prices, arsenic you were saying earlier, are astir $70 a barrel, that's a precise antithetic situation than if they are $100 a barrel, wherever they were connected mean successful 2022," the Arab Gulf States Institute's Callen said. International benchmark Brent crude was trading astatine $70.15 per tube astatine 2:15 p.m. London clip connected Friday.

"So galore of these projects are going to person to beryllium reassessed, reprioritized. Does that mean Neon is not going to happen? No, I deliberation Neom volition decidedly proceed successful immoderate form. But whether it's connected a smaller standard and implicit a longer duration than primitively envisaged, is rather likely, I think."

There has besides been a just magnitude of disapproval for what immoderate successful the kingdom picture arsenic a "yes-man" mentality astatine Neom, wherever consultants and advisors are said to supply highly optimistic forecasts and cost-revenue projections successful an effort to enactment successful their employers' favor.   

"I don't deliberation expectations were managed good from a enactment position astatine the task level," Tarik Solomon, president emeritus astatine the American Chamber of Commerce successful Saudi Arabia, told CNBC.  

"For a task of this standard to succeed, it has to set to marketplace realities and it has to physique trust."

Solomon praised Neom and The Line arsenic being "one of the boldest ideas I've seen that has really gone into execution," but added that "the architectural and consulting firms progressive person an important relation present and they should person much of a consciousness of ownership and work to carry."

In tandem with the planned "assessment" of The Line, occupation cuts are planned crossed Neom arsenic a whole, 1 advisor who works for the task told CNBC.  

"They're yet starting to marque financially dependable decisions," the consultant, who asked to stay anonymous owed to restrictions connected speaking to the press, said.

Neom did not instantly respond to a CNBC petition for comment.