The firm will later offer 50 percent of the new project to the public through an initial public offering, SPA said.

"The Saudi Ministry of Petroleum and Mineral Resources agreed lately to allocate 70 million cubic feet a day of dry gas to Rajhi Steel to build a heavy steel complex in King Abdullah Economic City," the statement said.

Emaar Economic City, an affiliate to UAE-based Emaar Properties, is spearheading the development of King Abdullah Economic City, one of the Kingdom's most ambitious projects aimed at diversifying its oil-based economy.

The project, aimed at building a new high-tech city on the Red Sea coast with businesses, industrial, leisure and residential estates as well as a giant port, has been dogged by delays and lower-than-expected interest from local and foreign investors.

The new Rajhi Steel complex will cover 4 million square meters in the industrial area at KAEC and will contain a number of plants including a direct reduction iron plant with a capacity of 1.8 million tons a year.

It will also include a hot briquetted iron plant with a capacity of 650 thousand tons a year and a melt shop with a capacity of 2 million tons a year, the statement said.