7 September 2004
The Times
(c) 2004 Times Newspapers Limited. All rights reserved
Saudi Arabia's decision to proceed with plans to link its east and west coasts
with a railway is likely to have far-reaching economic benefits for the global
shipping industry, Robert Bailey writes.
The proposed development seems long overdue. Even though Saudi Arabia occupies
an area the size of Western Europe, it has just one railway line running from
the Gulf coast port of Dammam to Riyadh, the capital.
The Arabian American Oil Company (Aramco) built the original 556km (345 miles)
standard-gauge connection in 1952. A second 449km line constructed along the
same route opened in 1985 to accommodate passenger traffic, leaving the original
line for freight. Not much has happened since even though the rail link with
Dammam port stimulated development of an inland "dry port" in Riyadh that opened
in 1981. This proved popular allowing Customs clearance of goods in Riyadh
rather than Dammam.
About 220,000 containers a year are transported between the two cities. Shippers
will again be the main beneficiaries of the rail expansion.
Two new lines will link up with the existing railway network, one connecting
Riyadh to Jedda to form the east-west railway. This will complete a land bridge
between the Red Sea and the Gulf for container traffic, says Khalid Hamad al-Yahya,
president of the Saudi Railways Organisation (SRO). The railway will require
about 950km of new track between Riyadh and Jedda. The second line will cover a
further 115km between Dammam and Jubail.
The new links are seen as handling mainly container traffic from Europe and
North America destined for Saudi Arabia's central and eastern regions and other
Gulf states. For shippers, the new railway will offer an opportunity for a more
efficient realignment of network service strategies, says al-Yahya.
Ships from the US or Europe currently have to travel all the way around the
Arabian peninsula to reach Gulf destinations such as Kuwait, Bahrain and Dubai.
With a freight railway between Jedda and Dammam, transit times of a container
discharged on the west coast onward bound to the east coast could be reduced by
four to eight days.
"The east-west project is of strategic importance for the region. It could have
a Panama Canal effect. There would be considerable savings in time and shipping
costs if vessels could drop their cargoes bound for the Gulf in Jedda," al-Yahya
says. The SRO believes that the project offers carriers a big advantage over
their competitors for cargoes destined for Central Asia, the Gulf and the Red
Sea.
The SRO president recognises that capturing Gulf states traffic will depend on
maintaining a world-class standard of port operation. The projects will be
private sector driven on a build-operatetransfer basis within a good regulatory
framework, he says. The overall cost of the various planned developments has yet
to be finalised though a figure of $2.9 billion (Pounds 1.6 billion) has been
estimated for the east-west and Mecca- Medina sections and $1.5 billion for the
north-south axis.
A consortium comprising the London-based UBS Investment Bank, the French railway
consultants SNCF and The National Commercial Bank is already in place to provide
advice for the rail expansion project. Legal advisers are to be appointed soon.
Al-Yahya says: "We will be offering exciting and lucrative investment
opportunities supported by World Bank studies."
(c) Times Newspapers Ltd, 2004
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