NEOM has officially cancelled the $1 billion The Line tunnels contract in northwest Saudi Arabia following retraction claims. In a stock exchange announcement filed on 13 March, South Korean contractor Hyundai E&C said that Neom cancelled its contract on 29 December last year. The company was responsible for executing the drill-and-blast section of The Line’s tunnels.

This was done in a joint venture with Greece’s Archirodon and South Korean counterpart Samsung C&T. However, the firm said its share of the joint venture was about 35%, amounting to $483m. Neom awarded contracts for constructing the mountain tunnel sections of The Line in June 2022.

Furthermore, the drill-and-blast works were split into four packages, with two contracting teams winning two packages each. The other joint-venture team comprised Spain’s FCC and the local Shibh Al-Jazira Contracting Company (Sajco). It also entailed Beijing-based China State Construction Engineering Corporation. Other projects that NEOM is progressing include Sindalah, a project it deems the gateway to the Red Sea.

Outlook on The Line Tunnels Contract

The contracts entailing The Line tunnels formed part of the infrastructure backbone of Neom’s 170-kilometre The Line development. Saudi Arabia’s plan was to bore a tunnel beneath the linear city “The Line” to run a highway, a subway and a freight railway. The Line project was launched in January 2021. However, what began as Crown Prince Mohammed Bin Salman’s grand dream was swayed with numerous setbacks.

By April 2024, planners were reportedly being forced to cut the initial phase to just 2.4km by 2030. Last year in July, the sovereign wealth fund faced tightening liquidity. The kingdom was reported to have conducted a “strategic review” to determine whether The Line was feasible.

In its review on the contract cancellation. Hyundai Engineering & Construction said, “Settlement for the inputs has been completed, so no financial loss has occurred to the company so far, but disclosure of details such as the termination amount has been withheld under the contract’s confidentiality clause.”

Project Overview

• Project: The Line Linear City Development
• Developer: NEOM
• Launch Year: 2021
• Planned Length: 170 km
• Location: Northwest Saudi Arabia.

Cancelled Contract

• Type of Contract: Drill-and-blast mountain tunnel works.
• Contract Value: $1 billion
• Project Component: Tunnel infrastructure under The Line.

Key Developers / Contractors

• Lead Contractor (member of the JV): Hyundai Engineering and Construction.

JV Partners:

• Archirodon
• Samsung C&T
• Hyundai E&C JV Share: 35% ($483 million)

Other Contracting Teams

• FCC Construccion
• Shibh Al-Jazira Contracting Company.
• Also China State Construction Engineering Corporation.

Tunnel Purpose

• Highway corridor
• Subway transit line
• Freight railway

Project Adjustments

• Initial Phase Target: ~2.4 km by 2030

Strategic Review Conducted: 2024

• Review Trigger: Project feasibility assessment and funding pressures.

Contractor Statement

• Work inputs settlements.
• Also no loss of money recorded by Hyundai Engineering and Construction.
• Termination payment information not disclosed because of confidentiality provision.