Oman's seaports expand to take advantage of commercial edge

Expanding its seaports is a core part of Oman’s plans for diversification and economic growth. Strategically located on global trade routes between the vast markets of Europe and Asia – and positioned just outside the Strait of Hormuz, a bottleneck for shipping traffic headed into the oil-rich GCC – the country has a strong commercial case to further develop its maritime transport business.

Half of the goods entering the sultanate come through its seaports, according to the National Centre for Statistics and Information (NCSI). Understanding this, authorities continue to invest in boosting connectivity, particularly at its three main seaports of Sohar, Salalah and Duqm. As a result, goods entering by sea have more than quadrupled over the past decade: from just 4700 tonnes in 2007, it surpassed 10,000 tonnes by 2011 and reached nearly 21,000 tonnes in 2016, according to NCSI data. “Congestion in the Strait of Hormuz and the capacity of the existing and planned infrastructure in the Gulf will be taxed with the forecast increases in traffic moving into the region,” Philip Marquis, operations manager at Oman Rail, told OBG. “The planned transportation infrastructure enhancements in Oman gives us vast potential to become a logistics hub for the region: the efficiency gains of offloading goods in Oman then transporting them over land are substantial.”

SOHAR: A case in point is the Port of Sohar on the country’s northern coast. Just 150 km from the UAE border, it offers near-direct access to the rest of the Gulf region, which is one reason why it accounted for some 85% of goods coming into the country by sea in 2016, according to the NCSI. With 22 berths and a free zone industrial area covering 4500 ha, it saw a further spike in traffic in 2017, with the number of vessels received rising by 26% in the first three quarters, to 2224, according to the Ministry of Transport and Communications. On December 26 the port tweeted it had passed the 3000 mark for the year.

Such growth is unsurprising given the size of both demand and continuing investment. Sohar’s industrial area, with three main clusters dedicated to logistics, petrochemicals and metals, have seen investments of more than $25bn, driving throughput of more than 1m tonnes a week. This is split between terminals dedicated to general cargo (operated by US-based firm C Steinweg), liquids (run by a joint venture of US operators Oiltanking and Odfjell) and containers (managed by Hong Kong’s Hutchison Whampoa). To this will soon be added the country’s first terminal designated for handling bulk agricultural goods. Being built by Atyah Investment and Oman Flour Mills since early 2015, the $170m terminal will be able to handle 600,000 tonnes of grain each year, though as of late 2017 no update on its progress was available.

FOOD PROCESSING: The burgeoning food processing cluster of which the terminal is a part is expected to drive further demand for packaging facilities. In response, Oman International Petrochemical Industry Company plans to build a packing materials plant with a capacity of 1.5m tonnes a year; Liwa Plastics has expressed interest in setting up Sohar operations; and Oman Oil Refineries and Petroleum Industries is developing a $3.6bn steam cracker project to be integrated with existing plants for oil refining, polypropylene and aromatics, according to Edwin Lammers, the port’s commercial manager.

More recently, Singapore’s Trescorp announced in September 2017 it will build a 45-ha terminal in Sohar dedicated to receiving, storing and blending oil and gas products to the tune of $600m. Construction of the first phase is to commence in 2018 on a facility with a capacity of 600,000m cu metres, to be finished in 2020 and then expanded to 1.8m cu metres. Other developments ahead include a $60m plant for rare-earth metals to be built by a UK-led consortium, and an auto assembly plant with a capacity of 200,000 units a year catering to mostly Asian vehicle brands. The Sohar oil refinery is expanding capacity by 50% to reach 180,000 barrels per day, and five ferrochrome smelters are currently under construction. All of this should fuel further import-export activity, driving demand for shipping services.

SALALAH: Oman’s second major port, at Salalah on the south-west coast near Yemen, is also seeing major growth and expansion. According to Salalah Port Services, it handled 13.6m tonnes of cargo in 2017, up from 13m tonnes in 2016. Managed by Dutch operator APM Terminals, the port can accommodate draughts up to 16 metres and has two terminals, one for containers with a capacity of 5m twenty-foot equivalent units (TEUs) per year, and one for general cargo, as well as warehousing, a freight station, bunkering and repair facilities. According to APM, the port has tendered the design contract for a second container terminal with a capacity of 3m-4m TEU that, when finished, will extend the port’s quay wall distance from 2205 metres to 3555 metres.

Construction is also under way on two new berths, each 450 metres long with a draught depth up to 18 metres – capable of docking the world’s largest vessels – and served by ultra-large gantry cranes called Super Post Panamax. A further three deepwater berths are being planned. According to Mahmoud Sakhi Al Baloushi, CEO of Al Madina Logistics and Muscat Container Terminal, his company plans to build a Customs warehouse there in the future.

DUQM: The next big frontier for logistics development is the Port of Duqm, being built up largely from scratch on the country’s central coast between Sohar and Salalah. Though it makes up just a fraction of goods imports, at 5000 tonnes in 2016 per NCSI data, for sheer scale it looks on track to rival Sohar. At the heart of expansion plans is a deal signed with a Chinese consortium called Oman Wanfang in May 2016, giving it 50-year rights to develop an area of 11 sq km in the Duqm special economic zone (SEZ) into a $10.7bn Sino-Oman Industrial City.

Divided into three zones dedicated to light manufacturing, heavy manufacturing and mixed-use development, the city comprises 35 planned projects including an oil refinery, petrochemicals facilities, steel smelter, a building materials distribution centre, auto assembly factory, and plants responsible for producing solar panels, glass, aluminium, and oil and gas equipment. “That the government has remained committed to Duqm Port’s timely completion despite the adverse economic conditions, should serve as a very positive signal to investors,” Reggy Vermeulen, CEO of Port of Duqm, told OBG.

The development broke ground in April 2017, and Oman Wanfang has pledged to finish 30% of planned projects by 2022. To support this activity, the consortium has announced plans to build accommodation for up to 25,000 people, as well as schools, offices, a hospital and sports centre. The city’s infrastructure will be financed by Chinese banks, while individual firms will cover the costs of their own facilities within it, according to the consortium’s chairman, Ali Shah.

CONTRACT AWARDS: Many contracts have already been tendered, both inside and outside the industrial city. In February 2017 the zone’s regulator, the Duqm Special Economic Zone Authority (SEZAD), awarded contracts worth OR84.7m ($219.9m) to build roads, storm-water drains and dams, followed by a OR107.3m ($278.6m) deal with a joint venture of Turkey’s Serka and Portugal’s MSF to build an infrastructure package called IP2 – a prerequisite for operation of Duqm’s four planned commercial terminals. In April 2017, 10 agreements worth $3.2bn were signed by Chinese companies alone for construction of the zone’s hotel, as well as plants for water desalination, power generation, synthetic pipes, building materials, bromine, automobiles and energy sector equipment.

More deals may soon be on the way: in September 2017 Oman Wanfang signed an memorandum of understanding (MoU) with the Chinese Petrochemical Industries Federation to tap its network of private firms to build petrochemicals plants, oil storage structures and other facilities.

TOURISM ZONE: Alongside industrial operations are plans for an integrated tourism complex in the Duqm SEZ, called “Little India”. At a cost of OR288m ($747.8m), the mixed-use development will include commercial offices, beachfront villas and apartments, a marina, a five-star hotel, restaurants and theatres. As of late 2017 SEZAD had signed an usufruct agreement allocating 600,000 sq metres to the master developer, also called Little India, whose managing director, Pradeep Nair, said construction of phase one would start in early 2018 on an initial investment of $12m. This will comprise a 25-unit Villa Resort to be run by the Marriott hotel chain, construction of which is set to finish in September 2018, and a 96-unit apartment building to be completed by February 2019. To secure the necessary funds, in December 2017 the company signed an MoU for financing arrangements with Bank Muscat.