Neom axed a $1.5B project to make water for the city, report says — another blow to its grand ambition

• Neom canceled a desalination project worth $1.5 billion, according to a report.
• It comes as Saudi Arabia reportedly plans on scaling back part of the project. 
• Enowa, a Neom subsidiary, told Meed it's water requirements had evolved. 

A project to build a $1.5 billion water desalination plant in the Saudi Arabian desert city of Neom appears to have been scrapped.

A consortium made up of Neom subsidiary Enowa, Japan's Itochu, and France's Veolia had agreed to develop the plant in December 2022. 

The plan was to create a desalination plant that ran on 100% renewable energy and delivered two million cubic meters of water a day to Neom, or about 30% of the city's projected needs.

The plant was to be based in Oxagon, Neom's industrial zone and the first phase was scheduled for completion next year.

However, sources familiar with the project told Middle East business-trade publication MEED that the joint development agreement for the project had expired and not been renewed.

Detailed reasons for the cancellation are unclear. BI contacted Enowa, Itochu and Veolia for comment.

In a statement sent to MEED, Enowa said Neom's water requirements have evolved over the last year, "leading us to adopt a stepwise approach to expanding capacity."

Under the plans, the desalination plant would have diverted brine, the main waste product in desalination, toward industrial projects instead of discharging it into the sea.

Brine is one of the main pollutants caused by desalination plants.

Earlier in May, Malcolm Aw, a UK energy entrepreneur, said he canceled a $100 million contract to develop renewable energy desalination plants in Neom over human rights concerns.

It's a blow for the desert city. Neom is being built in deserts in the northwest of Saudi Arabia, one of the dryest and hottest parts of the world, meaning that desalination is key to the success of the project.

Planners have said Neom will be an eco-city, running without cars or roads and powered with 100% sustainable energy. It's part of Saudi ruler Mohammed bin Salman's Vision 2030 plan to reorient the country's economy away from the fossil fuels that are the source of its wealth and toward innovation, technology, and tourism.

But In April Bloomberg reported that Saudi Arabia had been forced to scale back plans for the project, which could cost as much as $1.5 trillion. According to the report, The Line, a planned mirrored "vertical skyscraper," may be reduced in size from more than 100 miles to just over one mile.

In an apparent effort to refute the report, the Saudi economy minister, Faisal Al Ibrahim, told CNBC last month that all Neom projects were continuing at the planned scale.

"There is no change in scale. It is a long-term project that's modular in design," he said.