Sohar Port and Freezone handled close to 15.6 million freight tonnes (FRT) in the first quarter of 2018, some 30 per cent higher than the corresponding period of the previous year. Some 857 vessels also called at the port in the first quarter of this year, up 66 per cent over the same period last year.
Mark Geilenkirchen, Sohar Port and Freezone CEO, attributes the port’s remarkable performance to the rapid growth of industries located at the port and the free zone attached to it. “A lot of industries in the port and free zone are coming online now, following the construction phase that began two to three years ago,” the CEO tells MEED.
Notably the expansion of the port and free zone to their respective next phases is also gathering pace. Works on the first and second phases of Sohar Port South have been facilitated by the contract signed last year with Singapore-based oil trader Trescorp, which plans to build a $600m, six-berth bunkering terminal in the southern section of the port.
Final negotiations are also under way with French firm Total for a terminal to support its regional liquefied natural gas (LNG) bunkering business, and Geilenkirchen’s team is understood to be holding talks with other potential investors who would require the 25-metre draft being planned for Sohar Port South.
Negotiations are under way with two major potential investors, whose decision to build a facility in Sohar will lead to the opening of the 500 square-kilometre second phase of the free zone, potentially in 2019. “Our plans are ready, we will connect the roads and start [building the infrastructure] as soon as investors come in,” Geilenkirchen states.
While Sohar doesn’t monopolise the advantage of being located outside the Strait of Hormuz, with UAE’s Fujairah Port and other Omani ports sharing the same strategic location, the executive cites the rapid development of businesses around Sohar’s various clusters – logistics, petrochemicals, metals and agriculture – as a major deciding factor for investors locating to the port or free zone.
“In addition to considering the price of labour, electricity, gas and lease, investors look at the ease of doing business and the developing business around a potential new location,” he explains.
The fact that only one company owns the port and free zone in Sohar is also considered an additional advantage. “We don’t have a competing port and free zone… if one company in the free zone wants access to the port, I can easily make the arrangements because one entity owns both,” Geilenkirchen says. “It is one less hurdle, but a very large one [for investors].”
The imminent completion of a new road linking Oman to Saudi Arabia soon is expected to further increase Sohar’s attractiveness. The new route, which essentially halves the current 1,600km land route between the two countries, will benefit logistics and distribution companies by reducing the time and cost of transporting cargo coming from Oman to Riyadh.
As things stand, Sohar is expected to play an important role in Oman’s overall food security strategy. A flour mill and grain storage silos at the ports owned by the Sohar Four Mills are expected to become operational by the third and four quarter of 2018, respectively. The construction of a sugar refinery is also expected to start this quarter, according to Geilenkirchen.
In addition, the Oman Oil Refineries and Petroleum Industries Company (Orpic) is expected to complete the construction of its $6.5bn Liwa Plastics Industries Complex in Sohar by mid-2019. It will be producing polymers like polypropylene and polyethylene, which will mostly be consumed within Oman, but will also be exported to countries like Japan and South Korea from Sohar port.
Essentially the long-term plan is to foster a thriving downstream sector in the free zone, whether in food or industrial manufacturing like plastics, utilising feedstock generated from industries operating out of the port, points out Geilenkirchen.
A minerals aggregate terminal catering to the export of crushed rock, gravel and sand is also expected to be completed at the port by 2020. The bulk terminal will be able to accommodate a 200,000 square-metre stockpile yard upon completion. Given the urgent demand for these materials, a temporary terminal is already being set up with the first exports expected to leave Sohar port in September.
Unlike the region’s leading transshipment ports such as Jebel Ali Port, containers account for only a small but growing segment of Sohar port’s overall business, which sits comfortably with its overall business model as a cargo gateway, with dry, liquid and break bulk accounting for the majority of its traffic.
In addition, the presence of industrial companies at the port such as Brazil’s Vale that imports feedstock like iron ore and exports finished products such as iron pellets to the rest of the world balances the risk arising from firms that utilise local feedstock and produce goods for local and international consumers. “Technically half of my tenants are impacted by Oman’s economy and oil price, and the other half are not,” says Geilenkirchen.
This model, alongside the ownership structure of Sohar Port and Free Zone – with the Port of Rotterdam and the Omani government each holding a 50 per cent stake – makes for what Geilenkirchen describes minimum commercial risks as far as its revenues and profits are concerned.
“As a commercial, profitable company owned by government entities, we do have commercial risks but they are less [compared to businesses affected by oil or steel prices],” the CEO says, citing long-term contracts with tenants that typically last up to 25 years.