PROJECTS: Juggling with a long list of priorities

22 November 1996

AS the liquefied natural gas (LNG) project goes full steam ahead, momentum is gathering behind some of Oman's other major projects. The Raysut port scheme has made rapid progress, but questions still hang over private infrastructure projects.

Oman LNG: The company that will liquefy and market the gas destined for export expects to sign all major agreements before the end of the year. A sales and purchase agreement (SPA) was signed with Korea Gas Corporation on 23 October and an SPA with Petroleum Authority of Thailand should be finalised by the end of the year.

Lead arrangers NatWest Markets and ABN AMRO have given Oman LNG an unconditional underwriting commitment for a $2,000 million syndicated loan facility for the liquefaction plant. Export credit agencies from the US, the Netherlands, Italy and the UK will provide substantial cover. Syndication is to start early next year, aiming to close before mid-year. Oman LNG signed the engineering, procurement and construction (EPC) contract with Japan's Chiyoda Corporation and the UK's Foster Wheeler on 14 November.

LNG upstream development: The upstream element of the LNG project is being handled by Petroleum Development Oman (PDO). A consortium comprising Saipem and Snamprogetti, both of Italy, and Athens-based Consolidated Contractors International Company (CCC) has been awarded an estimated $80 million contract for the construction and installation of the LNG supply pipeline. The pipeline will run from the gas fields at Saih Rawl to the liquefaction plant. India's Dodsal is expected to get the contract for the upstream gathering system and interfield pipelines. Snamprogetti and the US' Bechtel are understood to be the low bidders for the upstream facilities.

Under an agreement signed in October, the Royal Dutch/Shell Group, Total and Partex (Oman) Corporation, all shareholders in PDO, will raise $1,400 million to finance the upstream development.

Petrochemicals: The government announced in early November that it has appointed The British Petroleum Company (BP) as its partner in a $900 million petrochemical complex using local natural gas as feedstock. The complex, likely to be located in Sohar, will produce ethylene and polyethylene. Commerce & Industry Minister Maqbool Sultan has said that the plant will start production in 2000.

Aluminium: The New York-based Charus Enterprises says that it has received formal government approval for a $3,000 million aluminium smelter. The project will be phased, with capacity reaching 480,000 tonnes a year by 2003. The smelter, to be built at Sohar, has already been allocated a supply of natural gas for a captive power and desalination plant, with a capacity of 1,800 MW and 30 million gallons a day. A power and water surplus will be available to local industry.

The lead investors will be Charus and the para-statal China National Non-Ferrous Metals Industry Corporation (CNNC). The UK's National Power and Kaiser Aluminium & Chemical Corporation of the US may also make substantial equity investments.

Finance for the plant will come from export credits, commercial bank borrowings, deferred equipment purchase arrangements and equity participation. An equity stake in the project is expected to be floated on the Muscat Securities Market within two years.

Fertiliser: Progress on the project to establish a $1,127 million fertiliser plant has been slow. London-based Lazard Brothers & Company and Kuwait- based Gulf Investment Corporation are financial advisers, after Morgan Stanley of the US stood down. The scheme is being developed by Oman Oil Company (OOC) and two Indian companies - Rashtriya Chemicals & Fertilisers and Krishak Bharati Co-operative. The three companies have yet to finalise a joint venture agreement and award an EPC contract. Two bidding groups - Germany's Uhde with Wimpey Engineering & Construction of the UK and Italy's Snamprogetti with France's Technip and Athens-based Consolidated Contractors International Company (CCC) are frontrunners for the award.

Salalah port: The Communications Ministry has signed a formal agreement with the founding shareholders of Salalah Port Services Company (SPSC) for a 30-year concession to develop a container port and free trade zone. The company will develop four container transhipment berths, terminal facilities and a 1.2-kilometre quay wall. The berths will have a handling capacity of 1.7 million 20-foot equivalent units (TEUs).

The consultant, New York-based Han Padron Associates, has issued tenders for dredging and land reclamation work. The company expects to issue tender documents for construction of two berths and terminal facilities in December.

The official estimate of the cost of the project is RO 96 million ($249 million). The government will invest about $140 million and a 20 per cent equity stake in SPSC will be offered for public subscription. SPSC has been formed to implement the project by the government, a consortium of local companies, local investors and Sealand of the US.

Salalah power: Delays have hit the release of tenders for this project which were prepared by Ernst & Young and expected in May. The Development Ministry says they will now be issued in November. The project is expected to be a fully integrated power system, with a private developer building a new power station, of about 200 MW, expanding the existing transmission and distribution system and assuming responsibility for billing.

Power expansion in the north: Original plans for a 388-MW power station at Barqa have been postponed, project sources say. The government is now considering privatising the entire power sector for the Muscat and Barqa region, leaving the implementation of a new project to the discretion of the private investor, the sources say. This means it is unlikely that the additional power capacity required by mid-1998 can be brought on stream in time.

Salalah and Muscat wastewater systems: The Salalah Environmental Treatment Company, which includes the local/UK Yayha Costain, Shanfari Trading & Contracting, Tawoos and North West Water International is expected to be awarded a concession to manage Salalah's wastewater system for 30 years. A consortium led by the local Galfar Engineering & Contracting Company has been selected to provide a wastewater treatment plant, associated network, operation and maintenance of the Muscat system.

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