Work is under way on a multi-billion-dollar port and industrial project in Abu Dhabi, but shipping lines will only come if it generates the volumes needed to justify a port call
Ports in numbers
530,000 TEUs: Cargo handled by Abu Dhabi’s Mina Zayed port in 2009
11 million TEUs: Cargo handled by Dubai’s Jebel Ali port in 2009
TEUs= 20-foot equivalent units. Source: MEED
Despite its economic strength, Abu Dhabi has been only a minor player in regional port development. The UAE capital established Mina Zayed as its main commercial port in 1972, but its progress was eclipsed by the transformation over the past three decades of Dubai’s Jebel Ali port into the region’s leading trade hub.
The goal is economic diversification. KPIZ is a cornerstone of Abu Dhabi’s 2030 masterplan
In 2009, Mina Zayed handled 530,000 20-foot equivalent units (TEUs), while Jebel Ali was the seventh busiest container port worldwide, handling more than 11 million TEUs. The key reason for this disparity is that Mina Zayed is a destination port for local cargo, while Jebel Ali handles trans-shipments from across the Middle East and Indian Ocean markets and supports the region’s largest free zone.
Economic diversification in the UAE
Abu Dhabi is now looking to emerge from Jebel Ali’s shadow with a multi-billion-dollar port development project that will support one of the most ambitious industrial ventures that the Middle East has ever seen.
|KPIZ Key facts|
|Planned launch date||Fourth quarter 2012|
|Initial container capacity||2 million TEUs|
|Initial general cargo capacity||8 million tonnes|
|Port area||3.2 million square metres|
|Cost of dredging/land reclamation||$1.5bn|
|Cost of port onshore facilities||$380m|
|TEUs=20-foot equivalent units. Source: Abu Dhabi Ports Company|
Khalifa Port and Industrial Zone (KPIZ) is a two-pronged scheme to create a modern trade and industrial hub at Taweelah – near the Dubai border – on a site five times larger than Abu Dhabi island.
Conservative estimates value the project at $4.9bn, although others say the final costs will run billions of dollars higher.
The aim of the project is economic diversification. KPIZ is a cornerstone of Abu Dhabi’s 2030 masterplan to reduce the emirate’s dependence on hydrocarbons. The port will support a new city two-thirds the size of Singapore, made up of integrated industrial clusters that import raw materials and export finished products. On completion in 2030, the industrial zone will cover a 420-square-kilometre site, while its port will be able to handle up to 15 million TEUs and 35 million tonnes of general cargo. The target industries for Taweelah include petrochemicals, paper and glass manufacturers, transport and logistics companies and downstream aluminium firms.
From the final quarter of 2012, Mina Khalifa will become a destination port … but that will change
Tony Douglas, Abu Dhabi Ports Company
Phase one will see Abu Dhabi invest nearly $2.2bn in port infrastructure. When Mina Khalifa opens in the fourth quarter of 2012, it will have capacity for 2 million TEUs of containerised cargo and 9 million tonnes of general cargo. In 2009, Mina Zayed handled 4.3 million tonnes of general cargo.
|KPIZ economic impact by 2030|
|Expected contribution to GDP||$22bn|
|Percentage of output exported||60-80%|
|Source: Abu Dhabi Ports Company|
Later expansion will create a dedicated rail line connecting Mina Khalifa to the planned nation-wide Union Railway, which will link up with the proposed GCC rail network. The port will offer additional multimodal links via Abu Dhabi International airport and Dubai’s new Al-Maktoum International airport.
State-owned Emirates Aluminium (Emal) is the anchor tenant for phase one. Its smelter started production in January, with a first phase capacity of 750,000 tonnes a year. Emal opened a dedicated berth at Mina Khalifa. It has the capacity to handle 4 million tonnes of bulk and general cargo.
KPIZ comprises zone A, covering a 50 sq km site on the ocean side of the highway that connects Dubai and Abu Dhabi, and zone B, which will be developed later over 370 sq km on the other side of the motorway. Zone B will host assembly and manufacturing companies, while Zone A will focus on the heavy industries that need access to port and sea water intakes for cooling.
Phase one of the scheme is focused on building the infrastructure around the port, Taweelah Power Station and Emal’s smelter. It includes power, water and sewage treatment, and a network of cooling systems that will pump seawater through a 17km network of pipes 2.6 metre in diameter to Emal and other heavy industries.
Shifting port operations in Abu Dhabi
Under phase one, Abu Dhabi Ports Company (ADPC) will transfer all commercial shipping activity from Mina Zayed to the new port. This will free up prime inner city land for commercial and residential development.
ADPC was created by emiri decree in 2006 to restructure Abu Dhabi’s commercial ports, replacing Abu Dhabi Seaports Authority. Its remit is to develop Mina Khalifa, the industrial zone and a string of nine smaller coastal and inland terminals to increase the contribution of non-oil industries to Abu Dhabi’s gross domestic product (GDP).
Its planned schemes include investment in new infrastructure for fishing vessels at Al-Sila, Marfa and Delma Island, as well as passenger and harbour monitoring equipment at Mugharraq Port; it will also oversee dredging at Mussafah Channel, the site of a $409m drive to build a new access channel for ships serving Mussafah Industrial Zone.
In June, ADPC named construction industry veteran Tony Douglas as its new chief executive officer. The former chief operating officer of the UK’s Laing O’Rourke and managing director for London Heathrow Airport, supervised the construction of Heathrow Terminal Five.
Douglas has been given a 1 September 2012 deadline to deliver the port.
“From the final quarter of 2012, Mina Khalifa will become a destination port to start with, just like Mina Zayed,” says Douglas. “But that will change as we develop the industrial zone over five phases. Ultimately, the port will serve the needs of a much larger economic base.”
Future port expansion will take place in three additional phases beyond 2012.
Much is to be done if Mina Khalifa is to meet the September 2012 launch date. Dredging has been completed, raising a reclaimed island from the sea bed.
The first of two bridges is in place, connecting the port with Emal’s smelter. ADPC has awarded AED9.2bn ($2.5bn) in contracts, covering port special systems; onshore and offshore power; building and civil engineering; mass earthworks; and upgrades to Taweelah road.
Abu Dhabi Ports Company contract awards
ADPC expects to award a further $3.5bn-worth of port development contracts by the end of 2012, out of a total $7.2bn spend on phase one of KPIZ. In July, ADPC named National Bank of Abu Dhabi as its financial adviser for the next stage of the project.
Contracts due to be signed in the coming months include those for the 3.2km quay wall, the terminal area and primary infrastructure for industrial zone A.
KPIZ will launch a marketing drive targeting the metals industry in November. Plans for the site include construction of a dedicated hot metal road – a sealed corridor – which trucks will use to deliver molten aluminium from the smelter to local foundries and metals manufacturers. So far, KPIZ says it has received more than 360 expressions of interest from the industry.
Phase two will focus on bringing new industries to Taweelah, in particular manufacturing and assembly plants.
One project that will not now move to KPIZ is Abu Dhabi National Chemicals Company (Chemaweyaat), a state-owned venture backed by International Petroleum Investment Company, Abu Dhabi Investment Council and Abu Dhabi National Oil Company. Initially, Chemaweyaat was to have been KPIZ’s second anchor tenant. In April, Chemaweyaat announced plans to build the first phase of the world’s largest petrochemical complex at KPIZ, with a capacity of more than 6 million tonnes of chemical products a year. But in July, Chemaweyaat said it had decided to concentrate the entire $20bn venture at Ruwais, near its main source of feedstock.
While Abu Dhabi’s commitment to diversification is beyond doubt, questions remain over whether Mina Khalifa will deliver too much capacity too soon.
DP World has delayed its plans to start work on a third terminal at Jebel Ali, after the slump in global trade caused group profits to plummet 46 per cent to $333m in 2009. Last year, it completed construction of terminal 2, which raised Jebel Ali’s capacity to 14 million TEUs and as a result it now has capacity to spare.
Ports from Morocco to Muscat in Oman have also slowed down or cancelled their expansion plans. In today’s depressed markets, critics argue that there is already more than enough container capacity in the Gulf region. But those behind the project say that as Mina Khalifa is being built to meet the goals set out in Abu Dhabi’s 2030 masterplan, its long-term prospects override short-term market conditions – and that KPIZ cannot succeed without the modern infrastructure to support a 20-year plan for growth.
“Despite the unprecedented economic downturn, we remain extremely confident,” Douglas says. “This is part of a national strategy to raise the non-hydrocarbon contribution to GDP to more than 50 per cent … it’s not about competition at UAE level: it’s about joining the dots.
“When we consider the prospects for container traffic, for example, zone B will target manufacturing and assembly operations that will generate more containerised volume than zone A. Future volumes could justify direct calls into Mina Khalifa. That’s why we’ve built in post-Panamax capability from the outset.”
Conflict of interest for UAE
There are also some concerns over the port’s management. In 2006, DP World snapped up port management concessions for Abu Dhabi and Fujairah. It now manages Mina Zayed and the container terminal at Fujairah, whose long-planned expansion is now postponed.
Some see a conflict of interest between Abu Dhabi’s ambitions for Mina Khalifa and Dubai’s need to maximise Jebel Ali’s cargo throughput. Negotiations are taking place at government level to agree a so-called One Port Strategy. One idea that has been mooted is for Abu Dhabi and Dubai to form a joint venture, Emirates Ports Company, to manage Mina Khalifa.
DP World will say only that “discussions over this project are ongoing”.
However, Abu Dhabi is in a stronger position now, having rescued Dubai from its debt crisis, to call the shots than it was at the height of DP World’s global expansion.
Douglas confirms that discussions with DP World are continuing, regarding terms of engagement, but declines to discuss how the One Port Strategy would work. “We have 25 months to resolve these issues with DP World,” he says.
Regardless of how the port will be operated, Mina Khalifa will only prove successful if KPIZ is able to attract industries to set up in the zone and create a diversified import/export base.
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