Abu Dhabi's ports central to broader economic goals

Ports play a central role in the economic development of Abu Dhabi, contributing 3.6% of the emirate’s non-oil GDP in 2017, a value-added contribution of Dh19.6bn ($5.3bn). Closer ties with a number of international partners coupled with the growing needs of a diversifying domestic economy are driving the expansion of the emirate’s seaports, with a significant flow of investment in the pipeline geared towards boosting capacity.

Abu Dhabi Ports

The emirate’s commercial and community ports, as well as their associated industrial zones, are developed, managed and operated by Abu Dhabi Ports. The company was established by a royal decree in 2006, that also replaced Abu Dhabi Seaports Authority with Abu Dhabi Terminals (ADT), the emirate’s sole terminal operator. In mid-2018 the operation of the emirate’s ports and terminals was amalgamated when Abu Dhabi Ports expanded its 50% stake in ADT to 100%.

Abu Dhabi Ports owns and operates 11 ports and terminals, nine of which are in Abu Dhabi. Outside the emirate, the firm is responsible for Fujairah Terminals at the Port of Fujairah in the Northern Emirates and the Kamsar Container Terminal in the Republic of Guinea. Abu Dhabi Ports also manages the Khalifa Industrial Zone Abu Dhabi (KIZAD), a 410-sq-km industrial, logistics and trade complex adjacent to Khalifa Port. The company also owns Maqta Gateway, a digital platform that connects all stakeholders in Abu Dhabi Ports and facilitates integrated logistics solutions.

In addition, SAFEEN, a subsidiary of Abu Dhabi Ports, provides a range of maritime and quayside support services, including navigational support, maintenance and inspections. Port activities overseen by Abu Dhabi Ports contribute some Dh24.2bn ($6.6bn), or 2.2%, to the UAE’s non-oil GDP, supporting 90,000 jobs nationwide, with two-thirds of those in Abu Dhabi.

Total capacity across its 11 ports reached 19.7m tonnes of general and bulk cargo in 2018, with plans under way to add a further 7.4m tonnes by 2022. The company has a mandate to support the growth of value in the Abu Dhabi economy by enabling infrastructure development. Its strategy focuses on bringing in international partners to build capacity, and diversify and enhance services. Areas of growth include logistics provision and marine and shipping.

“To achieve the goals set out in the Abu Dhabi Economic Vision 2030 plan, the emirate must grow its local manufacturing and tourism sectors. Ports and airports are two key factors to success in this regard,” Ross Thompson, chief commercial and strategy officer at Abu Dhabi Ports, told OBG. “Partnerships are linked to our core business, and we will look at any potential firms who can add to the transport industry value chain.”

Heavy Traffic

In 2017 sea ports handled 71.5% of Abu Dhabi’s non-oil exports, representing Dh22.3bn ($6.1bn) worth of goods, according to the “Statistical Yearbook of Abu Dhabi 2018” published by Statistics Centre - Abu Dhabi (SCAD). While this represented a drop in value from Dh17.1bn ($4.7bn) in 2016, it also represented an increase in the share of total non-oil exports from 61%. Furthermore, this drop in value in 2017 was mostly due to an economic slowdown and higher fuel costs, which led shipping companies to boost load factors and remove less profitable routes.

Following this period of consolidation the sector rebounded in 2018, with container cargo rising 24% to 1.74m twenty-foot equivalent units (TEUs), from 1.4m in 2017. Furthermore, general cargo volumes rose in 2018, from 18.6m to 19.7m tonnes. This is on top of strong growth witnessed for the segment in recent years, rising from 12.8m tonnes in 2014 to 17.8m in 2016. The number of vehicles transported through Abu Dhabi’s ports also rose from 135,000 in 2017 to 143,000 in 2018. Khalifa Port now handles 95% of vehicle imports for the local market, according to Thompson.

Cargo demand from Abu Dhabi and beyond will likely continue to drive medium-term growth. Supplies needed for a range of major infrastructure projects, as well as cargoes for the Abu Dhabi National Oil Company, which itself is undertaking a multibillion-dollar investment programme, are major drivers of traffic through local ports. In particular, Abu Dhabi Ports expects its expertise in break-bulk cargoes to provide a competitive edge. “We have a lot of customers from the oil and gas sector,” Thompson told OBG. “They are expected to implement another wave of investment over the next five years.” In addition, further growth is likely to come from Abu Dhabi’s continued increases in non-oil goods exports, including petrochemicals and steel, as well as aluminium from the Emirates Global Aluminium (EGA) plant at KIZAD. As the sixth-largest global producer of aluminium in 2017, EGA has its own dedicated and fully integrated jetty at Khalifa Port.

Khalifa Port

Opened in 2012 and operated by ADT, Khalifa Port is strategically situated halfway between Abu Dhabi and Dubai. As the first semi-automated container port in the GCC region, the deepwater port is capable of handling container, general cargo, roll-on/ roll-off and break-bulk traffic. The port serves more than 25 shipping lines, with direct links to 70 international destinations, and will be the first in the UAE to be connected to the 1200-km Etihad Rail network currently under development, further strengthening the port’s regional connectivity and capacity to handle large cargoes. The port’s 8-km breakwater is the longest in the Middle East, and it operates 12 of the world’s largest ship-to-shore quay cranes, 42 automated stacking cranes and 20 straddle carriers.

The port is designed to be scalable, and is set to expand in coming phases. As part of this ongoing expansion project Abu Dhabi Ports opened a new deepwater, semi-automated terminal at Khalifa Port in December 2018. Following the opening of the new terminal, which was developed in partnership with Chinese state-owned China Ocean Shipping Company (COSCO), overall capacity is expected to reach 15m TEUs and 35m tonnes of general cargo per annum. Its current capacity is 2.5m TEUs and 12m tonnes of general cargo.

Expansion

One such expansion is under way with more than Dh10bn ($2.7bn) of committed capital investment from a consortium led by Abu Dhabi Ports. The development was announced in August 2016, with the company launching a plan to add a 1-km quay wall, and deepen the port’s channel and basin from 16 to 18.5 metres. Upon completion, this will allow the port to accommodate the largest size of cargo and container ships, while the added quay will create an extra 600,000 sq metres of space for cargo handling.

Upon completion, total annual capacity at the port will reach 5.6m TEUs. In October 2018 the Dh985m ($268.1m) quay wall and dredging contract was awarded to the National Marine Dredging Company, an Abu Dhabi Securities Exchange-listed firm in which the government of Abu Dhabi has a 32% stake.

Global Investors

Abu Dhabi Ports will invest Dh4bn ($1.1bn) over the next five years, with Switzerland’s Mediterranean Shipping Company (MSC) to give Dh4bn ($1.1bn) over 30 years and COSCO planning to finance Dh2.7bn ($734.9m) over the lifetime of the project. COSCO has also selected Khalifa Port as its hub for Middle East operations. As the world’s largest container operator, the deal will help lift Khalifa Port’s annual container capacity from 2.5m TEUs to 8.5m TEUs.

Additionally, the Chinese state-owned shipping company and Abu Dhabi Ports are developing the largest container freight station in the region, providing the emirate with bonded full-container-load and a lessthan-container-load consolidation and deconsolidation services, cargo load reduction services and short-term warehousing for deconsolidated cargo.

As well as raising capacity, the deal is expected to help attract more investors and business partners from China and East Asia. “The partnership with COSCO will help Abu Dhabi Ports increase its Far East focus, but also opens up the west coast of the US,” Thompson told OBG. “It will drive more traffic and help the port become a top-tier player.” Meanwhile, MSC is tasked with establishing another new container terminal at Khalifa Port and increasing the number of ship-to-shore cranes from 11 to 25, according to joint-venture and 30-year concession agreements signed in May 2018. The logistics company will also shift some of its operations from Port Zayed to Khalifa Port.

Sea Cruise

Abu Dhabi has also seen a sizeable increase in cruise traffic over the past decade, from 6000 passengers in 2006 to around 350,000 in 2017. Officials have worked to improve the emirate’s tourism offering, including through new museums, such as the Louvre Abu Dhabi and the Guggenheim Abu Dhabi, as well as by building high-end resorts, including those at Sir Bani Yas Island and the Jumeirah Saadiyat Island Resort, the former of which has its own cruise terminal. The segment is one of potential value, with each cruise passenger an average $100-150 per day in 2017, according to Abu Dhabi Ports. In addition, the Gulf cruising season is during the northern hemisphere’s winter season, meaning that the region can accommodate passengers and cruise ships during the low season for popular Mediterranean and Caribbean destinations.