Oman ports underpin industrial growth

13 March 2013

Oman is upgrading its ports to take advantage of its strategic position outisde the Strait of Hormuz and is determined to offer stiff competition to other regional facilities

Oman’s major ports of Sohar, Salalah and the planned Port of Duqm are all positioned outside the Strait of Hormuz on the Indian Ocean. This not only has political advantages, but more importantly brings economic benefits. Calling at the sultanate’s ports can potentially save shipping companies billions of dollars a year by not sailing into the congested Gulf. A wave of port projects is currently under way to capitalise on the sultanate’s strategic position.

As well as being natural trans-shipment hubs, Oman’s ports are playing a central role in supporting the country’s growing industrial base and providing more jobs; two key government priorities. “[The investment in Oman’s ports] is focused on creating employment and developing the regions surrounding the ports,” says Arjan Weerstand, general manager of project development and implementation at the Port of Salalah. “It is the biggest driver for a lot of the investment made by the Omani government.”

Increased investment into ports

Oman’s five-year plan for 2011-15 budgeted a total of RO500m ($1.3bn) to be spent on the country’s seaports, representing almost 10 per cent of the total planned spending. Such is the importance of building new infrastructure that the 2013 Oman budget raised total spending to RO12.9bn, an increase of 30 per cent on the previous year’s budget. Spending on infrastructure also increased by 30 per cent.

With plans to build a national railway network that will link all the country’s major ports finally taking shape, Oman’s ambitions to build a strong interconnected industrial sector are beginning to be realised.

The Port of Salalah on Oman’s southern coast is seeing increasing volumes of business, partly fuelled by growing trade volumes between Africa and Asia, but also due to demand from local industries, such as mining or chemical firms, setting up in the Salalah Freezone. 

“We are predominantly a hub port; we are utilised by shipping lines to reduce their costs and improve their connectivity,” says Peter Ford, chief executive officer of the Port of Salalah. “A number of companies have been taking advantage of the connectivity we provide by investing in the Salalah hub.”

In 2012, Salalah port handled 3.6 million 20-foot equivalent units (TEUs) of container shipping, as well as 7 million tonnes of bulk cargo, compared with 3.2 million TEUs in 2011. The volume of business is forecast to continue to grow. “Local mining firms are growing significantly and want to grow further,” says Ford.

To meet this rising demand, the port is being expanded and a general cargo terminal and liquid jetty is currently under construction. Local construction firm Hani Archirodon Construction is overseeing the scheme, which will see the terminal’s cargo-handling capacity raised from 6.5 million tonnes a year (t/y) to 20 million t/y of dry bulk commodities and 6 million tonnes of liquid products.

The facility is due to be completed by the end of 2013, but it is already attracting interest from companies looking to use the port to export their goods. Local chemicals producer Saltic intends to use the terminal and jetty once its new caustic soda and ethylene dichloride complex has come onstream in the Salalah freezone at the end of 2014. Saltic will use the expanded facilities to handle its ethylene and salt feedstock imports and its caustic soda exports.

Several other petrochemicals projects in the freezone will also use the new port facilities, including Salalah Methanol Company’s $1bn methanol plant and a facility planned by the local polyethylene terephthalate producer Octal. Oman Gas is also understood to be considering exporting its liquefied petroleum gas (LPG) via Salalah’s new terminal, with a feasibility study into this believed to be under way.

A further expansion plan includes the construction of a new northern breakwater. This breakwater will not only protect the port from harsh weather conditions, but will also allow a dedicated cruise terminal to be built at the port. Currently, cruise ships have to use allocated spaces in the general cargo area of the port. Once the 3.5-kilometre breakwater is completed, they will have their own terminal, freeing up space in the general cargo area for non-cruise traffic. 

The government intends to tender the contract for the detailed design of the breakwater this year, potentially within the second quarter, with construction to start in 2014.

There will also be several contracts floated during 2013 related to the rehabilitation of Salalah’s old port. There are also plans to look at building new container terminal berths in 12-18 months’ time, which once completed could add 3.5 million TEUs of capacity. 

Sohar port

Further up the coast, 220 kilometres northwest of Muscat, is the Port of Sohar. Managed via a joint venture between the Omani government and the Netherlands’ Port of Rotterdam, the port began shipping operations in 2004.

Since then, there have been several expansions of the port and its surrounding freezone, which houses logistics, petrochemicals and metals companies. As with Salalah, the port is playing a key role supporting the growth of these businesses, importing raw materials and handling their exports.

This year, Sohar port will announce a string of contracts to further expand its capacity, as it looks to draw shipping lines away from other GCC ports. 

“Due to its location, Sohar has so much potential to attract cargo from the UAE; from Jebel Ali, for example, from Fujairah and other ports in the region,” says Edwin Lammers, executive commercial manager at Sohar Industrial Port Company, the port authority. “You will also see much of the cargo for Oman that was going through Jebel Ali shifting back to Oman.”

The port has already announced one major contract in 2013, with Hong Kong-based Hutchison Whampoa winning a $130m deal to build and operate a new terminal at the port. The new terminal will double the port’s capacity to 1.5 million TEUs, from the existing 800,000 TEUs. Hutchinson is looking for a contractor to carry out the civil works for the new terminal and to commence construction. The company aims to begin some operations at the port by the end of the third quarter of this year, or the beginning of the fourth quarter.

The new terminal will provide additional capacity for the cargo and container traffic being transferred from Port Sultan Qaboos in Muscat. The Muscat port is being turned into a tourism and maritime heritage facility and the transfer of traffic is due to be completed by the end of this year.

Increasing capacity in Oman

A new liquid jetty will also be built at Sohar in 2013 to support the predicted rise in liquid cargo at the port. Contractors were invited to prequalify for the project in January and will be issued tenders in mid-May. 

A reclamation scheme to create new land to be used for industrial purposes will be launched this year, with the tendering process starting in mid-2013. In addition, the port is looking to build a bulk terminal dedicated to agro-commodities and food stuffs, with construction set to be completed by mid-2014.

Further adding to Oman’s total port capacity is the new Port of Duqm in the Al-Wusta area of the sultanate. The port is due to be completed by 2015, but is set to partially open some of its quay wall in March this year. The berths are to be used for break-bulk and project cargo. Duqm port is part of a special economic zone authority, which includes an industrial zone, a fishing harbour, and tourist and logistic areas. It will support the surrounding mining industry, but in the broader term, it is hoped the port can capitalise on its geographic position and obtain a share of the Gulf’s trans-shipment business.

“It will play a major role in the export of refined and non-refined Omani minerals,” says Reggy Vermeulen, commercial director at Port of Duqm Company. “In the mid-term, it has the potential to be a trans-shipment hub serving Africa, Middle East and India trade flows. With the port superstructure, industrial zone, and road construction works still needing to be tendered, 2013 will definitely be a tender year in order to have everything ready by 2015.”

Consultants will be invited this year to conduct a study for the development of a major liquid terminal at the port, which will be followed by the design-and-build contract tender. The terminal is set to be completed by 2017.

It will handle the exports and imports of a proposed new refinery to be built in the economic zone and which will have a capacity of 230,000 barrels a day. The port will comprise a multi-purpose terminal with a capacity of 0.8 million tonnes, a container terminal with a capacity of 3.5 million tonnes and a dry bulk terminal with a capacity of 5 million tonnes.

Railway support

A further essential component supporting the growth of Oman’s industrial base is the planned national railway network, which will connect with the sultanate’s ports.

In January, the government identified the rail network as a priority investment in its 2013 budget and revealed it would use some of the billions of dollars of aid pledged by GCC governments to fund it. It also confirmed that the route would definitely include a connection to the Port of Salalah under phase 1 of the scheme.

The tender for the preliminary design of the network was released in February and port authorities are now looking how to integrate their ports with the railway line. “We’ve allocated a space on our concession [at the Salalah port] for a dock rail terminal as we see significant value in the connectivity,” says Ford.

In the longer term, once the railway connects with the planned wider GCC railway, Oman’s ports could find themselves in a position where they are not only playing a key role in boosting the country’s industrial sector, but also supporting industries across the GCC. Goods could be transported in and out of different GCC countries by rail and then shipped on to other markets through Oman’s ports. “It will move us into even more of a competitive position,” says Weerstand.

Key fact

Duqm port will play a major role in the export of refined and non-refined Omani minerals

Source: Port of Duqm Company

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