NEOM project in the spotlight as crown prince visits Korea

Industry

Published: 16 Nov. 2022, 16:28 Updated: 16 Nov. 2022, 18:02

NEOM project in the spotlight as crown prince visits Korea

An image of The Line, a residential area of the NEOM city [SCREEN CAPTURE]

With Saudi Arabia's crown prince in Seoul from Thursday, NEOM, the kingdom's $500 billion futuristic city, is a hot topic in town.

Korean companies have already signed contracts related to the project, which involves the building of a 170-kilometer-long linear city, and others could also win business related to the eyebrow-raising urban development.

Crown Prince Mohammed bin Salman's schedule is not yet known, but local press reports suggest that he will be meeting with President Yoon Suk-yeol and business leaders.

So far, two construction deals with Korean companies valued at $1.15 billion have been signed, and one $6.5 billion energy deal is waiting to be signed. More are hoping to get business from the project.

NEOM is one element of Saudi Arabia's move away from its dependence on oil and for a greener future.

The country aims to build a new city, from scratch, on a 26,500-square-kilometer desert area in northwestern Tabuk Province, which will be 100 percent run on renewable energy.

Prince Mohammed first proposed the idea in 2017, with the goal of opening tourist attractions there in 2026. The residential area will open in the future, without a set date, but the target is for 1 million residents by end of 2030, and 9 million ultimately. NEOM, a joint-stock company fully owned by the Public Investment Fund (PIF) of Saudi Arabia, is leading the project.

Saudi Arabian Crown Prince Mohammed bin Salman at the Blue House during his visit to Seoul in June 2019 [YONHAP]

Seeing it as a land of opportunity, Korea is pushing hard to win contracts for the massive project, with Minister of Land, Infrastructure and Transport Won Hee-ryong leading. Transport Ministry formed a team, called One Team Korea, with 22 companies including 11 construction companies to make a sales pitch.

Won and his team visited Saudi Arabia on Nov. 4 for a four-day trip to have meetings with top government officials at Saudi Arabia's energy minister, the head of the country’s sovereign wealth fund and investment, tourism and housing ministers.

“Our construction and smart city-related companies have various experience in building various modern cities, such as our New Towns and Sejong city, along with experience in building high-rise buildings, bridges and subways that require extensive skill and technology,” said Kim Kab-sung, an urban engineering and planning professor at Yonsei University. “In terms of price competitiveness, Korea has an upper hand over western countries, such as the United States, and it is highly likely that it will win a lot of deals.”

”China is a country that may bid with low prices, but Saudi Arabia will make careful decisions considering the country’s technical skills aren’t as credible.”

A map of NEOM city on a 26,500-square-kilometer desert area in northwestern Tabuk Province [SCREEN CAPTURE]

Construction

Hyundai Engineering & Construction and Samsung C&T consortium has already won a deal to build part of a railway tunnel at The Line, a residential area of the NEOM city, in June. Each company will receive 723 billion won ($545.8 million) for carrying out construction.

Construction started on Nov. 8, with the companies aiming to finish by end of 2025.

Tunnels running in The Line are 28 kilometers (17.4 miles) long, with the Hyundai-Samsung C&T consortium only responsible for building 12.5 kilometers of tunnels. The rest is being built by a consortium between Spain’s FCC Construcción and China’s China State Construction Engineering Corporation.

A total of 130 kilometers of tunnels are being built for the NEOM City project, and whether the companies successfully carry out ongoing construction is expected to have a big impact on further deals.

NEOM city released a design for 500-meter-tall skyscraper to be built in The Line, with two parallel wall-like structures enclosing an open area with parks and rivers.

Samsung C&T has years of related experience, it was the main contractor for Burj Khalifa in Dubai, the tallest tower in the world. The company is also currently building Merdeka 118 in Malaysia, which will be the second tallest building, at 678.9 meters.

The construction company is also known for building one of the towers in Kuala Lumpur's Petronas Twin Towers, which is 452 meters tall, and for technical assistance in the building of St. Petersburg’s Lakhta Center, which is 462 meters tall.

“Samsung C&T participated in the construction of United Arab Emirates Burj Khalifa, and there is a high possibility that it can win deals for various high-rise buildings that will be part of the NEOM city project,” said Lee Sang-hun, an analyst at HI Investment & Securities.

The relationship between the two countries in the construction sector started in 1973. Saudi Arabia is the No. 1 country in terms of the size of orders for Korean construction companies.

Korean firms won some $155.1 billion worth of construction deals from Saudi Arabia so far, and $83.2 billion from the United Arab Emirates.

Hyundai Engineering & Construction is also actively joining the race to ink more deals.

Minister of Land, Infrastructure and Transport Won Hee-ryong gives a speech in Saudi Arabia on Nov. 6 during his visit to the country to make a sales pitch for Korean companies seeking to participate in the $500 billion NEOM city development. [YONHAP]

“Hyundai Engineering & Construction is currently bidding for a project to build a port in Oxagon, and another known as the Spine, which will build a high-speed rail link across the city,” said Bae Se-ho, an analyst at HI Investment & Securities, referring to a floating city part of the NEOM City project. “The company is also preparing to bid for various projects to build transmission lines and other infrastructure facilities, and we can expect the company to sign various long-term contracts.”

The company has a long history with port construction deals, building Saudi’s Jubail Commercial Port in 1975. The port is one of the largest ports made on reclaimed land, similar to the environment of Oxagon.

Big port construction contracts are still being won, with the company winning a $160-million contract to build a port in Kuwait in September.

Another contender is HanmiGlobal, a company that inked a $1.98-million deal with NEOM to manage the construction of The Line area until May 2023. HanmiGlobal doesn’t actually engage in construction, but serves as a construction project management company to oversee construction schedule, cost, quality and maintain safety standards, which is key in big projects like NEOM.

Although the deal will come to an end soon, there are various more management contracts that will be up for grabs considering construction will run until 2030.

Since tapping into the Saudi Arabian market in 2008, the company has signed management deals for 37 construction projects in the country. One of its recent deals includes project management for the construction of an entertainment complex in Diriyah, led by Diriyah Gate Development Authority, which has Mohammed bin Salman on the board.

An image of Trojena. a unique travel destination in the mountains of NEOM [SCREEN CAPTURE]

Mobility

In the utopian city, cars will be entirely powered by either electricity or hydrogen.

Flying taxis and autonomous shuttle buses will provide transportation for the residents. Hyundai Motor has focused on these projects.

Hyundai Motor earlier in the year announced that it will invest 16.2 trillion won in strengthening its EV offering by the end of 2025. Another 8.9 trillion won will go into state-of-art technologies, such as robotics, advanced air mobility (AAM) and autonomous vehicles.

The automaker aims to come up with an electric air mobility product for cargo transport by 2026 and for passengers by 2028. For that, it established Supernal, a Washington-based urban air mobility company, in 2020.

Hyundai Motor on Monday signed a memorandum of understanding with the Nusantara Capital City Authority to run demonstration projects of its air vehicles in Nusantara, Indonesia. Nusantara Capital Authority Agency was formed in March as Indonesia is currently working on moving its capital from Jakarta to a new city named Nusantara on the island of Borneo.

Hyundai Motor Group Executive Chair Euisun Chung said 30 percent of the company’s yearly revenues will come from the flying vehicle business in 2030.

“From EVs and air vehicles, Hyundai is nearly the only company in the world that has all the technologies to realize the eco-friendly mobility system that Saudi Arabia wants in NEOM city,” said Kim Pil-soo, an automotive engineering professor at Daelim University, who also serves as chairperson of the Korea Electric Vehicle Association.

“In terms of hydrogen-powered vehicles, Hyundai Motor is even the world’s No. 1.”

A total of 14,400 hydrogen vehicles were sold globally this year to September, and of them, 8,499 were Hyundai Nexo SUVs, 58.7 percent of the market. Toyota’s Mirai sedan was No. 2 with 18.2 percent, according to data from SNE Research.

“The prince doesn’t come to Korea for no reason, he is very interested in Hyundai’s mobility technologies,” Kim added. “Some meaningful discussions will be made during the prince’s meeting with Chung.”

Hyundai Motor is also currently testing Level 4 self-driving taxis — meaning the vehicle can operate on its own but may need human intervention — in Gangnam District, southern Seoul, and Pangyo, Gyeonggi. The company is one of the few that has started testing Level 4 cars on roads, along with General Motors.

Transport Minister Won’s One Korea Team also includes three start-ups that own technologies in the self-driving sector – ThorDrive, Morai, and Potenit – to persuade the Saudi officials.

An image of Oxagon, a floating city in the NEOM project [SCREEN CAPTURE]

Renewable Energy

A consortium led by Samsung C&T is building a $6.5 billion green hydrogen plant in Neom city. The members are Samsung C&T, Posco, Korea Electric Power Corporation, Korea Southern Power and Korea National Oil Corporation. It is scheduled to sign an MOU with the PIF on Thursday.

Under the agreement, the five companies will build a 396,694-square-meter green hydrogen plant. The location of the plant is reported to be in Yanbu port city on the Red sea, though specific details have not been confirmed.

President Yoon Suk-yeol and the crown prince are expected to participate in the signing ceremony, according to local reports, although the Transport Ministry said their participation has not been confirmed yet.

Green hydrogen, which uses renewable energy, such as solar and wind for its production, is considered to be the ultimate eco-friendly option, while the world moves toward carbon neutrality.

The deal comes as NEOM city is envisioned to be powered solely by renewable energy, such as solar power and green hydrogen.

Saudi Arabia aims to become the world’s largest hydrogen exporter, with an annual production capacity of 4 million tons by 2030.

Posco Holdings in July signed a memorandum of understanding with ACWA Power, agreeing to jointly develop green hydrogen and green ammonia. ACWA Power is a company that has half of Enowa, a joint venture that oversees decisions in selecting companies to make NEOM city’s green hydrogen plants. ACWA Power is 44 percent owned by PIF, the parent of NEOM.

SK E&S, SK Innovation’s natural gas supplier, is also one of the key players in Korea’s hydrogen business. The company is building liquid hydrogen production plants in Korea with a combined capacity of 280,000 tons.

SK Innovation already has a history with a Saudi company. SK geo centric, its chemical subsidiary, formed a 50:50 joint venture with Aramco’s Sabic in 2015. The venture is called Sabic SK Nexlene Company.

HD Hyundai, which owns 74 percent of Hyundai Oilbank, is also working closely with Saudi’s state-run Aramco for energy, construction and shipbuilding projects. A 17-percent stake in Hyundai Oilbank is held by Aramco.

On Nov. 11, HD Hyundai CEO Chung Ki-sun met with Saudi Arabian Minister of Investment Khalid A. Al-Falih during the minister’s visit to Korea to discuss the company’s joint projects with Saudi Arabia.

In solar power, Hanwha Solutions is named as a viable candidate. Hanwha Solution is Korea's largest solar panel supplier, with 12.4 gigawatts of annual solar module production capacity.

An image of The Line, a residential area of the NEOM city [SCREEN CAPTURE]

Smart city

Saudi Arabia wants NEOM city to be the smartest city in the world, powered by a 5G network infrastructure with cutting-edge technologies including the Internet of Things (IoT), cloud computing, robotics and big data-based machine learning.

Naver and KT say they are second to none in the sector, and are part of the One Team Korea that visited Saudi with Transport Minister Won.

Naver and its business-to-business technology subsidiaries, Naver Labs and Naver Cloud, joined Won’s Saudi trip to make sales pitch on its smart building technologies adopted at the company’s newly-built headquarters building in Seongnam, Gyeonggi.

Naver 1784 building, which was completed early this year, was certified as Korea’s first “robot-friendly building” by the Smart City Association, with about 60 autonomous delivery robots deployed in the building.

Samsung Electronics supplied network equipment for the 5G system, so the electronics maker.

Naver CEO Choi Soo-yeon said the trip to Saudi Arabia was a “great opportunity for Naver to showcase our cutting-edge ICT technological capabilities related to smart city development, such as robotics, cloud computing, artificial intelligence and digital twin,” adding that she can’t predict any details of the deals at the moment.

KT said that it hopes to join the projects in Saudi Arabia “by utilizing its ICT capabilities and experiences related to digital transformation and smart city development.”

KT participated in seven smart city projects since 2018, including the 3.2-trillion-won Guri project and a 1.7-trillion-won project in Cheongna, Incheon. Smart city projects involve technologies such as autonomous public transportation systems or smart office buildings.

In 2019, the telecom company signed a memorandum of understanding with Saudi Telecom, the country’s state-run telecommunications company, to jointly develop future ICT technologies related to communication network infrastructure, smart city and media.

BY SARAH CHEA,LEE TAE-HEE AND SHIN HA-NEE [chea.sarah@joongang.co.kr]