Official media said on Tuesday that the new city, to be called Yanbu Two, is the twin of the existing Yanbu industrial city and will cover an area of 66sqkm.
Prince Saud bin Abd Allah bin Thanayan, chairman of the government's Royal Commission of Jubail and Yanbu, said $3.2 billion would be spent on infrastructure for the new centre.
Thanayan added that the investment in basic, secondary and light industries would pay off when the city is completed in 2019. "[It] is expected to attract investments worth $30.6 billion", he told the state SPA news agency.
Oil-rich Saudi Arabia has earned huge windfall revenues on the back of record highs on world oil markets.
It has since announced a series of mega-projects worth tens of billions of dollars, including three massive refinery modernisations worth nearly $17 billion.
Prince Abd Allah also inaugurated a host of projects handled by the Royal Commission, petrochemical giant Saudi Basic Industries Corp (SABIC) and other companies.
Bin Thanayan, who also heads SABIC, said these projects were worth more than $13.3 billion.
Abd Allah has been running Saudi Arabia's day-to-day affairs since King Fahd suffered a stroke a decade ago. The ailing monarch has been in a Riyadh hospital since 27 May.