Saudi Spends $22 Billion on Riyadh Metro Line Construction

Photographer: Waseem Obaidi/Bloomberg

Vehicle light trails pass the Kingdom Tower on King Fahad Road in Riyadh, Saudi Arabia. Close

Vehicle light trails pass the Kingdom Tower on King Fahad Road in Riyadh, Saudi Arabia.

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Photographer: Waseem Obaidi/Bloomberg

Vehicle light trails pass the Kingdom Tower on King Fahad Road in Riyadh, Saudi Arabia.

Saudi Arabia awarded more than $22 billion in contracts to develop a metro line in Riyadh as the world’s biggest oil exporter joins Dubai and Qatar in expanding transport networks.

The kingdom gave Bechtel Group Inc. a $9.4 billion contract, Fomento de Construcciones y Contratas one valued at $7.8 billion, and awarded Ansaldo STS SpA (STS) a $5.2 billion deal. Shares of FCC jumped to the highest level in six months.

Six lines will serve the capital city’s center, government facilities, universities, commercial areas, the airport and the financial district, according to the project’s website.

Construction of the 175-kilometer (109-mile) network will start in the first quarter, Prince Khalid bin Bandar, president of the High Commission for the Development of Riyadh, said yesterday. It will take about five years, according to Tarek al-Fares, vice president of the development authority.

Saudi Arabia’s budget for transportation and telecoms expanded 84 percent this year to $17.3 billion, the fastest pace since at least 2004, according to the Finance Ministry.

“This is the biggest infrastructure project to be undertaken in the Kingdom of Saudi Arabia and is a cornerstone of the bold future we envision for our city,” said Ibrahim Bin Muhammad Al Sultan, president of Arriyadh Development Authority, the government body overseeing the project. The construction is expected to be a “major driver of employment and economic development.”

Longest Metro

The 85-station network will be the longest metro in the world under construction and will create 15,000 jobs over five years, according to an e-mailed statement from FCC, which led a consortium that won a contract for three lines.

Persian Gulf nations are spending billions to build airports, ports and rail networks. Qatar, the world’s largest exporter of liquefied natural gas, awarded four contracts valued at about 30 billion riyals ($8.2 billion) for the first phase of the Doha Metro in June as it prepares to host the 2022 soccer World Cup. Dubai, the second-biggest sheikhdom in the United Arab Emirates, built the first metro network in the Gulf Cooperation Council in 2009.

Riyadh’s population is projected to grow to 8.5 million people in the next decade from six million currently, according to the Saudi Press Agency. The biggest Arab economy is spending more than $500 billion to upgrade infrastructure and create jobs as it seeks to reduce reliance on hydrocarbons.

Approvals Bureaucracy

Projects in Saudi Arabia may suffer delays in contract awards and bureaucracy in approvals, leading to cost overruns, said Alia El Mehelmy, sector head of construction and industrials at CI Capital Holding.

“Generally speaking, Saudi is among the slower governments to award projects and it is renowned for award delays,” she said. “The project looks huge, but the bidders have been waiting for this award since before the financial crisis. The gulf region is ‘‘full of opportunities’’ but contractors ‘‘need to adjust for this risk’’ she said.

Gulf Cooperation Council member states are spending heavily on infrastructure projects aimed at improving living standards and smoothing the social discontent that swept the Arab world since the popular uprisings of 2011. The Riyadh metro also marks a shift in thinking about public transport as a means to save on gasoline rather than a mode of transport traditionally used by workers.

The Jeddah metro tender is also due for award this year.

FCC shares traded 4.9 percent higher at 10.79 euros at 2:30 p.m. in Madrid. A closing price at that level would be the highest since Jan. 25.

To contact the reporters on this story: Deema Almashabi in Riyadh at dalmashabi@bloomberg.net; Alaa Shahine in Dubai at asalha@bloomberg.net

To contact the editors responsible for this story: Andrew J. Barden at barden@bloomberg.net; Shaji Mathew at shajimathew@bloomberg.net

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