Key fact

Of the $11bn annual direct foreign investment into Oman, about $2.5-3bn is funding developments at Salalah

Source: MEED

Developing logistics and transport infrastructure is an essential part of Oman’s diversification plans. Almost half the budget, or OR5.7bn ($14.8bn), of the country’s eighth Five-year Development Plan for 2011-15 is committed to overhauling roads, ports and airports.

Plans include the upgrade of the sultanate’s airports, the expansion of its ports and the construction of new logistics cities, industrial zones and the country’s first railway network.

Oman is spending about $2.5bn on the development of six airports. The two biggest projects are the expansions of Muscat and Salalah International airports. The other four projects at Ras al-Hadd, Adam, Duqm and Sohar are smaller airports aimed at moving tourists around the sultanate more easily.

Oman projected spending, 2011-2015*
Project Value (Omani Rials) Value (US$)
Roads, airports, ports OR5,760m $15bn
Regional municipalities, environment, wastewater OR2,279m $6bn
Health, education, vocational training OR1,381m $3.6bn
Housing, including 12,000 low-cost units OR875m $2.3bn
Electricity, water, recharging dams OR910m $2.4bn
Information, culture and youth centres OR453m $1.2bn
Agriculture and fisheries OR227m $590m
Tourism OR105m $273m
Other production and service sectors OR52m $135m
*=Five-year Development Plan. Source: Finance Ministry

Construction is well under way at Muscat and Salalah airports. A consortium of the US’ Bechtel, Turkey’s Enka and the local Bahwan Engineering won the $1.8bn contract to build the new terminal at Muscat International in October 2010.

Destination mentality

The aim is to create an airport that brings people to the sultanate. While other Gulf cities talk of creating transit hubs, Oman is thinking more along the lines of a destination mentality.

“We want to do it in the right way. Quality is a big part of what we focus on,” says Joseph Collins, project director at Bechtel. “They [the government] talk to us in good terms. We are finding them very interactive about how the airport meets their vision.”

Due to open in April 2014, the new 360,000- square-metre terminal at Muscat International will have a capacity of 12 million people a year.

Oman’s Transport & Communications Ministry is expected to award one of the remaining construction packages for Muscat and Salalah airports by September. The package covers the passenger boarding bridges.

Two further packages are currently in the prequalification stage and are expected to be awarded by the end of the year. These cover the cargo and maintenance hangars and catering facilities. Civil works are ongoing at Muscat airport with foundations for the control tower nearing completion. Piling work for the terminal is also scheduled to begin in the summer.

The railway project has been stalled by the cabinet reshuffle that Sultan Qaboos organised following the protests

The Transport and Communications Ministry is also expected to award the third package for the four smaller airport developments by the end of the year. This package covers the buildings, including the terminals and control towers. The two packages covering landside and airside work have already been completed at Adam and will be finished at Sohar in September, and at Ras al-Hadd and Duqm in 2012.

The railway project has been stalled by the cabinet reshuffle that Sultan Qaboos organised following the protests

The Omani government wants to turn Duqm into an industrial centre and is spending OR1.6bn on transforming the town. When complete, Duqm will have a new airport, a commercial port, a drydock for ship repair, a fishing port and industrial facilities. It is hoped that the domestic and foreign capital attracted by the development of Duqm will lead to the expansion of the national economy’s production base, as well as creating jobs for nationals, a key concern of the protesters who demonstrated earlier this year.

Plans for Duqm also incorporate an oil refinery and petrochemical complex, a construction plant for ships and sea-towing vessels, facilities for bunkering and fuel storage, and two new hotels. The expansion of Duqm port is in its final stages. The drydocks will open fully later this year, while the port itself will open in 2013 and mainly target petrochemical shipments.

Sohar freezone

Another key port and freezone development is under way at Sohar, 220 kilometres northwest of Muscat and the focus of much of Oman’s political unrest this year. The freezone project includes the construction of a highway, earthworks, lined wadi channels and reinforced concrete culverts. The freezone will cover a total area of 4,500 hectares and is being developed in phases. The 500-hectare first phase is expected to contain several downstream industrial and petrochemical ventures, warehousing and logistics services and medical and other service-related facilities. Expressions of interest for the freezone were invited in the first quarter of 2011.

The biggest projects, however, are taking place at Salalah. These include the $620m expansion of Salalah port and the development of an industrial freezone. With its strategic geographical location, Salalah has huge potential to become an export centre.

Of the $11bn annual direct foreign investment into Oman, about $2.5-3bn is directed to Salalah. The 18-square-kilometre freezone is targeting three major areas: materials processing, such as minerals, metals and petrochemicals; assembly and distribution; and trade.

The freezone has attracted $4bn so far in investment from companies such as the local Octal and India’s Oswal Group, which is building a $400m caustic soda plant. In the next five years, it is hoped a further $6bn will be invested in the freezone.

Eventually, the freezone, airport and business parks could generate as much as $15-20bn. Long-term plans will also see the construction of a logistics city to tie all the new developments together and land has been set aside for this. Some $130m of lease agreements have already been signed for the freezone, with full occupancy expected to be reached by 2020.

There is also potential for investment in light-to-medium manufacturing. “It [Oman] will never get the vertically-integrated oil and gas industry [such as in Saudi Arabia]. But it can transport oil and gas between Duqm and Salalah and convert it into products, not energy-intensive industries. The main challenge is getting the place known to the international community and filling the freezone,” says Ali Tabouk, chief executive of Salalah Freezone.

Oman’s railway delayed

Oman’s plans to develop a national railway network are not moving ahead as quickly. France’s Systra and the local National Engineering Office have carried out the feasibility study for the proposed railway, but the project appears to have been stalled by the cabinet reshuffle that Sultan Qaboos organised in March following the protests. One of the changes he made was to dissolve the National Economy Ministry and dismiss its minister, Ahmed Macki, who also acted as chairman of the railway executive board in the absence of a formal rail authority. His departure means there is no one currently leading the railway project. As a result, tentative plans to announce the prequalified companies for two contracts covering the railway’s design and project management have been pushed back indefinitely.

The Supreme Committee of Town Planning, the client on the railway project, first invited companies to submit prequalification bids by 31 May 2010.

Experience questioned

There is a possibility that the ownership of the railway project might be transferred to the Transport Ministry, but some in the industry fear it lacks the necessary experience.

If the railway project goes ahead, it will be developed in three phases. The first phase will comprise a 230km-line running from Sohar to Muscat. The second phase will be a 560km-line from Muscat to Duqm. Oman may then choose to extend the line to Salalah, which would involve building 580km of track.

The protests that broke out again in Sohar in July were a reminder of the urgency of developing transport and infrastructure projects. Lack of jobs was a key complaint of the demonstrators. Executing these projects will make a major contribution to tackling the problem.