A controversial taxpayer-funded farm project in the Middle East remains stalled with the Saudi Government yet to sign-off an abattoir.

Getting the green light to run the abattoir on the farm owned by businessman Hmood Al Khalaf has been unexpectedly difficult.

In response to Herald questions, New Zealand Trade and Enterprise (NZTE) has confirmed that the Saudi Government has still not signed-off a needed permit.

"The permit application is with the Saudi government. We would expect construction to start once the permit is signed, and a construction contract is signed," an NZTE spokeswoman told the Herald.

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"The ultimate ownership arrangements for the abattoir have not been finalised. That is a matter for the Al Khalaf Group to discuss with the Saudi government."

A key motivation in spending $11.5 million of taxpayer money on Al Khalaf's farm was to help progress a free trade deal with the Gulf States.

The businessman's unhappiness with New Zealand's ban on live sheep exports for slaughter has been previously cited by Foreign Minister Murray McCully as a reason why Saudi Arabia cooled on a trade agreement.

The spending was signed-off by Cabinet in February 2013 and 900 pregnant ewes were flown from New Zealand to Saudi Arabia in October 2014.

One possibility is that the abattoir be gifted to the Saudi Government.

A briefing paper among hundreds of pages of redacted documents released by the Government notes that all 2000 slaughterhouses in Saudi Arabia are Government-owned.

"In this case, the Saudi Government appears prepared to allow Al Khalaf Group to build an abattoir that would then be gifted to the Saudi Government and leased back to the group," the document notes.

Treasury documents released under the Official Information Act last month reveal McCully met up with Al Khalaf in April.

Ahead of a trip to Saudi Arabia McCully's office said the minister had no scheduled meetings with Al Khalaf.

However, the papers show the Saudi businessman travelled to Riyadh to attend a function hosted by McCully and aimed at furthering business links between the countries.

They had a discussion that was "regarded as being very beneficial to the ongoing partnership," according to minutes from the agri-hub's governance group, which includes a Ministry of Foreign Affairs and Trade official.

A spokesman for McCully said the meeting was not scheduled and the two men bumped into each other at the event and had a brief discussion.

Al Khalaf spoke with the help of an interpreter. McCully had not known Al Khalaf was attending when asked by media of any planned meetings.

The controversial agri-hub has been examined by the Auditor-General Lyn Provost, with a report expected this year.

Her inquiry will look at procurement and contract management practices, whether spending was within appropriations of Vote Foreign Affairs and Trade, and whether the services received were in keeping with the business case and contract specifications.

STORY SO FAR
• In 2003, publicity around the treatment of live-sheep exports led to a voluntary moratorium.
• In 2007, the Labour Government banned the export of live animals for slaughter.
• In 2009, Agriculture Minister David Carter began negotiations with Saudi Arabia for a resumption of live-sheep exports.
• In 2010, the National Government extended the ban.
• In February 2013, the Cabinet approved a proposal by Foreign Minister Murray McCully to pay $4 million to Hmood Al Khalaf's business to secure it to run an agri-hub to promote New Zealand agriculture in Saudi Arabia.
• A further $7.5 million was spent on kitting out the farm and flying over 900 pregnant sheep.
• Questions over the deal emerges after the Prime Minister's visit to Saudi Arabia and other countries in an effort to get a free trade deal over the line.
• Foreign Minister Murray McCully said the farm deal was in part to placate Al Khalaf and remove Saudi opposition to the trade deal.
• He also said Mr Al Khalaf could have sued for up to $30 million, and blames the previous Labour Government for angering him to that extent.
• In August 2015, Auditor-General Lyn Provost announces an inquiry into the farm deal. Her report is expected shortly.
• In April this year, McCully meets Al Khalaf during a trip to Saudi Arabia, amidst significant delays to the project.