The amusement park will take up over 150,000 square metres with rides, 11 restaurants and three hotels.
In a statement from PIF, the project was "expected to attract tourists from around the world, while being especially popular with citizens and residents of the GCC countries in the region."
The announcement closely follows news that Qiddya Investment Company has partnered with Intamin Amusement Rides to design the world's longest, fastest and tallest coaster.
According to The Rig's website, the 'epic' offshore destination is not just a theme park but an 'extreme park'.
"Test your limits at bungee, board and base jumping. Top your best on wing and water. Then catch your breath – you've barely begun. Explore our state-of-the-sport platform, enriched with our world-famous Saudi hospitality."
Historically dependent on oil production, Saudi Arabia's crown prince Mohammed bin Salman has made economic diversification a priority.
In 2016 he launched a strategic framework 'Vision 2030', with the overarching objectives being an ambitious nation, thriving economy and vibrant society.