There has been no damage to New Zealand's relationship with Saudi Arabia after the government canned an abattoir destined for a Saudi businessman, Foreign Affairs Minister Winston Peters says.

Photo: RNZ / Rebekah Parsons-King

The government has pulled the pin on the final stage of the controversial Saudi sheep deal - which hit the headlines in 2015 - saving taxpayers $1 million but losing $10m in the process that began under the former National-led government.

Mr Peters said he was confident New Zealand would suffer no repercussions as a result of the coalition government axing the deal by not sending the kitset abattoir intended for Saudi businessman Hmood Al Khalaf.

Mr Peters said he was certain New Zealand was in the clear.

"And the fact is that the government over there understands precisely what we're talking about, I don't think there's any problem at all.

"What we had was a stupid investment, a silly idea where we got heavied by people involved. I think we invested something like $11 million and got $1m back, which is a $10m loss,'' Mr Peters said.

Photo: RNZ / Richard Tindiller

The $2.5m abattoir is understood to be sitting in a shipping container in Hawke's Bay after Trade Minister David Parker put a stop to any more delivery or money being spent on the agrihub in the Saudi desert.

"This was always a nonsense, it always smelt because it wasn't what it pretended to be and that's what the Auditor-General found,'' Mr Parker said.

"It never made sense for New Zealand to spend millions of dollars on a farm in the desert so there will be no more of that under my watch.''

In 2003, the-then Labour government put a stop to live sheep exports after an animal welfare incident on board a vessel owned by Mr Al Khalaf.

Mr Al Khalaf had invested heavily in New Zealand and believed the ban had left him misled and out of pocket. A deal was later struck between Mr Al Khalaf and the-then National government, which argued an agribhub saved New Zealand from the risk of being sued for a much larger amount.

The Auditor-General ended up investigating the deal and while no corruption was found, it heavily criticised government processes and found "significant shortcomings" in the paper put to Cabinet in support of the deal.

Photo: NZ Parliament

The National Party's trade spokesperson Todd McClay said the issue was a lot more complicated than Mr Peters was suggesting.

"Of course this is an issue that was dealt with by the previous National government and we were dealing with a range of difficult diplomatic issues created by the previous Labour government.

"I think what New Zealand exporters who rely on access to the Gulf market will be looking for is an absolute assurance and the government's got to do everything possible to make sure those Gulf countries understand we want to go ahead with a Free Trade Agreement with them,'' Mr McClay said.

Animal welfare organisation SAFE supports the government's decision to can the Saudi deal but wants to see a current loophole in live exports fixed up.

Chief executive Debra Ashton said she has written to Agriculture Minister Damien O'Connor about the ongoing serious welfare issues for stock being exported overseas for breeding purposes - the ban only applied to stock being shipped for slaughter.

"We're really pleased at the government's decision to cancel that particular deal, but in addition we'd really like to see the government put a complete ban on the export of live animals for breeding purposes because this is still being carried out.''

Mr Peters isn't convinced animals are still being mistreated and wants to see evidence to the contrary.

"SAFE needs to show us an example of that rather than just say we're doing it because I don't think we are at the moment, it's stopped,'' Mr Peters said.

"But you've got racehorses, stallions and mares travelling for various reasons and I've never heard any legitimate reason to stop that.''

Mr Peters is scheduled to visit the Persian Gulf in the next six months.