Infrastructure development to increase scope and capabilities of three major Omani ports

Ongoing infrastructural and industrial developments at the ports of Duqm, Sohar and Salalah are augmenting investor appeal and increasing competitiveness at each of the three locations. The majority of this is concentrated at Duqm, which is one of the country’s biggest construction projects, with the port still in early development stages. Moreover, thanks to ample private sector financing and state-owned transport company Asyad’s desire to build a complementary suite of ports, Sohar and Salalah are simultaneously undergoing major upgrade and expansion projects.

Port of Duqm

The trade and maritime heart of a 2000-sq-km city and special economic zone, Port of Duqm is currently operating in a semi-finished state, receiving limited traffic from oil and gas importers, dry bulk and metals exporters, and international navies.

The first phase of development will see the construction of a commercial quay, a liquid bulk berth and a government berth, which are all expected to be completed and fully operational by 2020. The commercial quay, which can accommodate eight vessels at a time, is 2250 metres long and 350 metres wide, with an annual capacity of 7m twenty-foot equivalent units (TEUs). The completion of a second phase will result in a larger basin of 6.5 sq km and an additional 13,500 metres of commercial quays, providing room for more than 36 additional berths.

Four packages – namely the second, third, fourth and seventh packages – are currently under construction at a total cost of OR439m ($1.1bn). The second package includes the construction of four terminals on the commercial dock at a cost of OR107.3m ($478.7m); two 1600-metre-long container terminals with an annual capacity of 3.5m TEUs; a dry bulk terminal with capacity for 5m tonnes per year; and a mixed-use terminal of 800,000 metric tonnes.

The third package, priced at OR77.1m ($200.2m), includes essential commercial port infrastructure such as buildings for truck registration and Customs and inspection, among others. Meanwhile, the OR55.4m ($143.9m) fourth package will implement the government port berth, port security buildings and a fast ferry passenger terminal.

The most expensive of these packages is the seventh package, which involves the construction of the liquid and bulk dock at a cost of OR199.1m ($517.1m). The project scope includes deepening the port basin and passage channel leading to the dock by drilling some 26m standard cu metres (scm) to reach a depth of 18 metres. About 5m scm of this material will be used to fill the site of the dock.

The liquid and bulk dock will serve one of the biggest projects located at Duqm, a refinery operated by Duqm Refinery and Petrochemical Industries Company with capacity of 230,000 barrels per day. Construction on the joint venture between Oman Oil Company (OOC) and Kuwait Petroleum International began in April 2018, with a project estimate of $5.8bn. It is set to become operational by the third quarter of 2021.

According to Erwin Mortelmans, commercial director at Port of Duqm, the raw potential of Duqm suits entrepreneurial investors. “Being at an early stage, the companies coming in need to be entrepreneurial. There are definite first-mover advantages though, as presently land is amply available and the multi-purpose nature of the site means that we can offer an appealing package,” Mortelmans told OBG.

Sohar Port

In 2017 Sohar Industrial Port Company established Oman’s first terminal dedicated to the handling of agriculture products in bulk. The terminal is a 40-ha food cluster that will include a major flour mill, sugar refinery and silo grain complex. The facilities have the capacity to process up to 500 tonnes of commodities per day, while the sugar refinery alone, managed and owned by the Oman Sugar Refinery Company, is set to have an annual production capacity of 1m tonnes. Sohar Port and Free Zone are managed by Sohar Industrial Port Company, a 50:50 joint venture between the Port of Rotterdam in the Netherlands and the sultanate.

Dredging works are also under way on Sohar Port South, a project that will add 200 ha to the port’s current 2000 ha. The first phase, which is expected to be finished by the end of 2018, includes the engineering, land reclamation, stabilisation and construction of approximately 50 ha of usable land within the port area. Speaking to local media in May 2018, Mark Geilenkirchen, CEO of Sohar Port and Free Zone, said that they were seeing strong investor interest in the new 2000-ha area. Among the first investors announced was Trescorp, a Singapore-based oil and petroleum products trading firm that plans to develop a 45-ha terminal for the handling, storage and blending of crude oil, fuel oil and diesel at the port.

Expanded port capacity will be used to transport materials to and from Sohar’s growing portfolio of industrial projects. Oman Oil Refineries and Petroleum Industries Company is set to grow its refinery capacity from 120,000 barrels per day (bpd) to 180,000 bpd, while Gulf Mining is pushing ahead with an expansion project at its ferrochrome smelter in the Sohar Free Zone. The two-phase expansion is projected to bring the smelter’s annual capacity from 50,000 tonnes to 100,000 tonnes by the second half of 2019, and up to 150,000 tonnes by mid-2020.

Other industry projects under construction at Sohar include Oman’s first bitumen refinery, slated to start operations in the first quarter of 2020, and a $300m cotton yarn project set to come on-line in two phases in April 2019 and 2021, respectively.

Port of Salalah

Dhofar Governorate’s major port and trans-shipment hub has also been undergoing development. The works will expand and improve on the existing infrastructure at the port, and are intended to ease bottlenecks in the efficient handling of cargo, according to Tanfeedh. The project is the latest phase in a $15bn multi-phase expansion plan that has been ongoing since 2012 in order to service the growing capacity within the domestic mining, quarrying and cement industries.

The port plan includes the development of three berths, which will add a combined additional capacity of 2.5m TEUs to the terminal, as well as proposals to rehabilitate government berths, redevelop the general cargo docks and establish a central service corridor for the movement of dry and liquid cargo.

According to the Ministry of Transport and Communications’ 2017 annual report, consultancy services for the rehabilitation and development of the general cargo terminal had reached 56% completion by the end of 2017 and were expected to be finished by September 2018. The completion rate of the construction of the central service corridor had reached 30% and the project is set to be finalised by the middle of 2019.

Upgrades such as the central service corridor are likely to be developed in time to increase export efficiency for two major projects by midstream and downstream subsidiaries of OOC. The larger of the two, Salalah Liquefied Petroleum Gas, is an $826m project developed by OOC subsidiary Oman Gas Company, which will see a liquefied petroleum gas (LPG) extraction plant built on approximately 20 ha of land within the Salalah Free Zone. The plant will have a processing capacity of 8.8m standard cu metres per day and will be complemented by 8 ha of LPG and condensate storage facilities at Port of Salalah.

The second of the two projects is a $463m ammonia plant developed by Salalah Methanol Company. The plant will have a daily output of 1000 tonnes and stand alongside the company’s existing methanol facility within the free zone. The facilities are projected to begin operations in 2020 and are expected to be able to export the majority of their products through Port of Salalah. Road connections are also envisaged to enable the transport of a portion of the LPG product for commercial and industrial use throughout the surrounding Dhofar region.

Transport Connectivity

Stakeholders at Oman’s three major ports will be hoping these continued infrastructural developments will augment its competitive edge, which is supported by its location outside the Strait of Hormuz and stands to increase further as intra-GCC land connectivity improves.

Research commissioned by the Ministry of Transport and Communications estimated that, on a benchmark voyage from Singapore to the Suez Canal – a distance of 5365 nautical miles – if an ultra-large container ship conducts weekly calls at the ports of Salalah, Duqm or Sohar rather than at one of the Gulf ports, it could save up to $20m over the course of one year. Proposed road and rail lines connecting Oman with Saudi Arabia and the rest of the GCC also have the potential to produce sizeable cost efficiencies. With more efficient rail and road connectivity in place, freight landing at Salalah, Duqm or Sohar could be passed on to GCC markets at a lower cost and up to 36 hours more quickly than on the current routes that go via the Strait of Hormuz to other GCC ports.