Reality bite: Saudi diversification initiatives suffer $8 billion setback due to gigaproject cancellations
NEOM Faces Delays and Scaling Back Amid Financial Challenges
The Public Investment Fund (PIF) of Saudi Arabia, the kingdom's sovereign wealth fund, has released its 2024 annual report, revealing that the NEOM project, a high-profile gigaproject, has been scaled back. The value of NEOM, as per the report, is part of the total 211 billion riyal ($56.24 billion) for all gigaprojects.
Originally intended to house nearly nine million people on the Red Sea, NEOM, a desert mega-city nearly the size of Belgium, faces significant delays, scaling back, and financial challenges. While some subprojects, such as NEOM’s Green Hydrogen Project, are progressing well, the flagship megacity component "The Line" is encountering repeated delays.
The Line, which was planned to complete a 5 km segment by 2030 and full length by 2045, is now substantially pushed back, and its project scope has been reduced. In 2024, reports indicated scaling back to a 2.4 km initial segment serving 300,000 residents instead of 1.5 million, though Saudi officials denied any official downsizing. As of mid-2025, the sovereign fund wrote down $8 billion related to NEOM developments amid these issues.
The financial and investment challenges for NEOM are not limited to cost overruns and delays. Although funded by Saudi Arabia's Public Investment Fund with a massive investment budget, foreign direct investment interest has faltered partly due to volatile global oil prices and doubts about project feasibility.
NEOM’s Green Hydrogen Project within Oxagon is about 80% complete as of July 2025, with a 4 GW renewable power infrastructure on track for mid-2026 completion and green ammonia production starting by 2027. However, commercial uptake is a concern, with only TotalEnergies confirmed as a major international buyer, prompting possible phased scaling or a shift toward domestic buyers.
The Line's ambition to create a 170 km long, linear, zero-carbon, AI-powered smart city is unprecedented. Experts highlight the immense technical hurdles of creating such a city, predicting the full vision may take decades, possibly until the 2040s or beyond, and evolve continuously with technological advances.
Thousands of residents have been displaced to prepare the site, and the overall human and ecological impacts remain a concern, adding complexity to implementation.
The scaling back of NEOM is part of a broader trend of cost overruns, delays, and shifting market conditions affecting PIF's gigaprojects. The total value of PIF's gigaprojects, as per their 2024 annual report, is 211 billion riyal ($56.24 billion), 12% lower than the 241 billion riyal in 2023. The revision to NEOM is a stark acknowledgment of financial and practical realities in Saudi Arabia's transformation blueprint, Vision 2030.
[1] Al-Jazeera. (2023, October 20). Saudi Arabia's NEOM megaproject faces delays and scaling back. https://www.aljazeera.com/news/2023/10/20/saudi-arabias-neom-megaproject-faces-delays-and-scaling-back
[2] Bloomberg. (2023, November 1). Saudi Arabia's NEOM Gigaproject Faces $8 Billion Write-Down. https://www.bloomberg.com/news/articles/2023-11-01/saudi-arabia-s-neom-gigaproject-faces-8-billion-write-down
[3] Reuters. (2025, July 15). NEOM's Green Hydrogen Project faces commercial hurdles despite progress. https://www.reuters.com/business/energy/neoms-green-hydrogen-project-faces-commercial-hurdles-despite-progress-2025-07-15/
[4] The Guardian. (2023, October 25). Thousands displaced as Saudi Arabia's NEOM megaproject faces challenges. https://www.theguardian.com/global-development/2023/oct/25/thousands-displaced-as-saudi-arabias-neom-megaproject-faces-challenges
[5] BBC News. (2025, June 1). NEOM: Saudi Arabia's vision for a smart city of the future. https://www.bbc.com/news/world-middle-east-56802883
- The decline in the value of NEOM, a part of the Saudi Public Investment Fund's (PIF) 2024 annual report, indicates a shift in the wealth of their gigaprojects, considering it comprises 12% of the total 2023 value.
- Despite the progress of NEOM's Green Hydrogen Project, reports suggest that the finance sector, both domestic and foreign, has shown less interest in investment due to fluctuating oil prices and doubts about the project's feasibility.
- The scaling back of NEOM, as well as the financial and technological challenges it faces, is indicative of broader issues affecting various PIF gigaprojects, where innovations such as AI-powered, zero-carbon cities may take decades to fully realize.
