Saudi Arabia said to shelve, restructure incomplete projects

Saudi Arabia is directing its ministries and government agencies to review unfinished infrastructure and development projects worth billions of dollars to consider cancelling or restructuring them, Reuters reported, citing unnamed government sources.

The Bureau of Capital and Operational Spending Rationalization, which was set up last year, is preparing a list of projects that are under 25 percent complete, the sources said.

Government officials are studying the feasibility of these projects to decide whether to suspend them or revise implementation.

"Some projects could be retendered so they can be executed in partnership with the private sector, possibly through build-operate-transfer (BOT) contracts," a source was quoted as saying.

"Other projects could be suspended if they do not meet the current economic objectives," the source said. Recommendations for some projects may be made within days, he added.

Some of the projects under scrutiny were proposed when oil prices were above $100 a barrel. But with the tumble in oil prices starting mid-2014, funding has become tighter, making it difficult to secure financing to complete the construction.

Saudi finance minister Mohammed al-Jadaan said in February that the bureau had so far helped save SAR 80 billion for the kingdom.

A report by consultants Faithful+Gould in January estimated that at least $13.3 billion of government projects are at risk of being canceled in Saudi Arabia this year because of fiscal pressures and changing government priorities.

The government is likely to prioritize projects with strong social welfare and business justifications such as power and water generation, while less essential projects – such as sports infrastructure, some transport systems and perhaps nuclear energy – could be cut back, the consultancy said.