International Railway Journal
David Briginshaw, Editor-in-Chief
March 2005

SAUDI Arabia has long had an ambition to expand its rather modest railway, which currently links the capital Riyadh via two routes to the Gulf port of Dammam. Now that dream finally looks set to become a reality.

The first of three major projects to build new lines in Saudi Arabia was explained to an audience of potential backers and contractors at the UBS conference centre in London on January 31. "The time is right to bring the many advantages of rail transport to Saudi Arabia," said Dr Jobarah Al-Suraisry, Saudi Arabia's minister of transport and chairman of SRO. "This can only be achieved by extending the rail network to the main centres of population and industry. The landbridge project represents the cornerstone of our expansion plan. It will be one the largest BOT [build, operate, transfer] projects ever undertaken in the Middle East and is a key initiative in the railway expansion programme approved by the Kingdom's Supreme Economic Council."

Al-Suraisry said there have been two recent developments that are important for the development of the landbridge. Significant restructuring of government ministries was undertaken in 2003. This brought SRO and the Ports Authority under the same ministry for the first time. Secondly, the government has adopted a privatisation programme which identified strategic sectors targeted for privatisation and it set up a privatisation committee to implement it.

The three railway projects are:

"We want to start work on both the landbridge and the Western Railway in 2006 and complete them within about three years; they have equal priority," Al-Suraisry told IRJ. "The Western Railway will be a separate BOT concession. We will start the process for the Western Railway in the next couple of months." Saudi Arabia's ambitious expansion plans.

As far as the Saudi Landbridge project is concerned, SRO has already retained a team of international advisers and a lot of the preliminary work has been completed. SRO's financial advisers are UBS Investment Bank, Britain, and National Commercial Bank, Saudi Arabia. SNCF International is the technical adviser and expects to complete traffic forecasts shortly. Linklaters, Britain, and the law office of Abdulaisiz Al-Fahd, Saudi Arabia, are helping to structure the concession and draw up tender documents.

Invitations will be invited shortly to pre-qualify for a BOT contract to design, fund, build, and operate the new lines. Tender documents will be issued in the third quarter of this year. Bids will be received and evaluated in early 2006 and a concession will be awarded in mid-2006. The new lines should open in 2010. The length of the concession has not yet been decided.

SRO will be incorporated into the concession. Most of SRO's assets and its entire workforce are expected to transfer to the new concession. "We had about 2000 staff, but we are now down to 1600, and in the next year another 100 will have retired," the president of SRO, HE Khalid Alyahya, explained.

As SRO is currently a government department, it does not have any debts. On the other hand, SRO does not make a profit. Alyahya says this is because SRO does not have the critical mass to do so, whereas the expanded railway will and will therefore be profitable. Nevertheless, revenue has nearly doubled during the last five years to reach Riyals 235 million ($US 62.6 million) in 2004. This is mainly due to a steady increase in freight traffic, which is now around 1 billion tonne-km a year. Container traffic is SRO's core business generating 65% of SRO's total revenue. Currently, 50% of containers arriving at Dammam port are destined for Riyadh, and 85% of these go by rail. The new lines will primarily carry freight traffic. Container traffic is expected to dominate. The port of Jeddah currently handles 2.4 million TEUs a year, compared with 750,000 TEUs passing through Dammam a year. Riyadh Dry Port handles 250,000 TEUs a year. It is estimated that the landbridge could capture between 70 and 75% of container traffic. Mr Jean-Pierre Loubinoux, CEO of SNCF International, said that from estimates so far, freight traffic on the landbridge could be 15 million tonnes a year initially. "It could then jump to 45 million tonnes in 20 to 30 years time," he told delegates.

The landbridge will make it possible for freight trains to travel from Jeddah to Riyadh in 12 hours, with a further 6 hours to reach Dammam. While the bulk of the traffic is expected to be destined for or originate in Saudi Arabia, the promoters also see potential for the new line to become a landbridge as an 18-hour transit time across Saudi Arabia could be very attractive to shippers compared with the five to seven days need to sail around the Arabian peninsula.

When the new lines open, a separate concession will be offered to operate passenger services between Jeddah, Riyadh, Dammam, and Jubail. The concession will incorporate the Riyadh--Dammam service currently operated by SRO and which generates about 300 million passenger-km a year. The existing journey time is expected to be cut from 4 hours today to 2h 45min. The journey time by rail from Riyadh to Jeddah is expected to take 6 hours, which is about half the time it currently takes by bus.