The GCC states will invest more than $15bn in the next five years adding more capacity to the region’s already robust ports infrastructure, according to regional projects tracker MEED Projects.

With inadequate road links and few rail networks in the region, the seaborne vessels have long been the favoured option for transporting goods. The future will see the region’s ports connected to planned freight railway lines to provide an onward overland trade route.

Currently, the UAE ports have the highest share of cargo volume in the GCC at 59 per cent. The UAE reported 12 per cent growth in volumes in 2011, handling 13 million 20-foot equivalent units (TEUs).

Saudi Arabia’s share of Gulf cargo volumes is 21 per cent. The kingdom’s Jeddah Islamic port reported an annual throughput of 3.8 million TEUs in 2010. Oman’s performance in recent years has also been strong. Salalah port handled 3.5 million TEUs in 2010. Cargo traffic at the port of Sohar increased 139 per cent between 2007 and 2011. In 2007, total freight entering Sohar stood at 4.2 million tonnes compared with 29.1 million tonnes in 2011.

Port investments under way

The biggest port investments under way in the GCC include the $7.2bn first phase of the Khalifa Industrial Zone Abu Dhabi (Kizad), which comprises Khalifa port. Other major schemes include Duqm port in Oman and the $5bn New Doha port in Qatar. Duqm port is due to start operating in mid-2012.

In addition to the new ports being built, many of the existing facilities in the GCC are undergoing expansion in order to handle larger cargo volumes. Plans to expand terminal two and build a new terminal three at Jebel Ali port are now moving ahead having been on hold since 2008. Salalah port is also undergoing a $645m expansion that will see annual capacity increase to 20 million TEUs.

Over the past six years, existing total capacity at the region’s ports has increased 8 per cent to nearly 25 million TEUs in 2010. This is set to increase by more than 12 million TEUs once the new capacity under construction comes onstream. Total capacity is forecast to increase by 60 million TEUs if all the expansion projects under discussion are executed.

But as the region looks to become a centre for world trade and trans-shipment, it faces the challenge of overcapacity, particularly in the short term with the global economy still depressed.

“In the region, it is ideal for both the shipping line and terminal operator [to have] a minimum number of hub ports, which are served by mother vessels and connected to neighbouring local gateway ports by feeders,” says Jang Kwan Young, head of business development at the Red Sea Gateway Terminal at Jeddah Islamic Port.

“Considering the shipping lines’ trend for mega-size vessel operation, the number of calling ports for [them] is minimised,” says Young. “However … huge investment is in progress [for] some ports to become hubs in the same region … which is, economically, a waste of capital and resources.”

The southern Gulf is already well-established as a trade hub. This position will be reinforced as additional capacity comes onstream at Khalifa port, which opens in September and at Jebel Ali.

Other GCC states are also harbouring ambitions to become trans-shipment hubs, taking advantage of their position halfway between Europe and Asia. But taking on established ports such as Jebel Ali will be not be easy. Furthermore, establishing trans-shipment hubs in the northern Gulf would be less competitive as the extra time taken to get there would add to transit times and costs.

In Qatar, however, it is anticipated local demand for imported construction materials that is driving investment in ports capacity. The gas-rich state is embarking on a major construction programme that will see more than $60bn-worth of infrastructure schemes executed. The New Doha port will handle huge volumes of materials needed.

Interconnection issues from ports

The important trend in the transport sector in the years ahead will be connecting the new ports to other modes of transport. This will not only enable cargo to be transported faster, but will also reduce the heavy congestion that causes severe bottlenecks at regional ports.

“Proper connection from the port to inland transportation is important to avoid bottlenecks and achieve efficiency of the whole supply chain. Good road and rail connection is also closely related to the handling capacity of the whole port,” Young says.

Expansion plans at Khalifa port and Saudi Arabia’s Dammam and Jubail ports include the construction of freight rail lines and other schemes will follow suit.

In the wake of the global financial crisis, many planned port expansion projects were put on hold. Even though the world economy has yet to recover, schemes are now starting to move forward again.

With regional container volumes forecast to grow sharply in the years ahead, ports authorities will be keen to avoid the congestion of the past decade.