BECHTEL SNAGS BILLION DOLLAR PROJECT IN OMAN

UNCLAS E F T O SECTION 01 OF 02 MUSCAT 000298

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STATE FOR EB/CBA, NEA/ARPI
STATE PLEASE PASS USTR/JBUNTIN AND JFENNERTY
USDOC FOR 4520/ITA/MAC/AMESA/OME/MTALAAT
USDOC ALSO FOR ADVOCACY CENTER/CJAMES

E.O. 12958: DECL: 02/20/2010
TAGS: BEXP EINV EIND EMIN ELAB MU
SUBJECT: BECHTEL SNAGS BILLION DOLLAR PROJECT IN OMAN

REF: A. MUSCAT 242

B. 04 MUSCAT 555

Classified By: Ambassador Richard L. Baltimore III.
Reasons: 1.4 (b) and (d).

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1. (SBU) Summary: Bechtel's Regional Manager has informed the
Ambassador that Bechtel won the construction contract for a
large aluminum smelter in the city of Sohar. This $1.3
billion project, scheduled to be completed by 2008, will
eventually employ around 2000 people and marks another
milestone in new American investment in the Sultanate. End
Summary.

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Advocacy and Success
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2. (SBU) Bechtel Regional Manager for Saudi Arabia and the
Gulf David Robinson called on the Ambassador on February 16
to deliver a copy of Sohar Aluminum Company's letter of
intent naming Bechtel as its preferred EPCM (Engineering,
Procurement, Construction, and Management) contractor. This
success marks the culmination of a tendering process that
began nearly a year ago (ref B). By 2008, Bechtel will
construct a state-of-the-art aluminum smelter in the port
city of Sohar in northern Oman, which is quickly becoming a
hub of industrialization. The project is valued at roughly
$1.3 billion. Sohar Aluminum Company is a joint venture
between Oman Oil Company (40 percent shareholding),the Abu
Dhabi Water and Electricity Authority (ADWEA, 40 percent),
and Alcan (20 percent). Robinson repeatedly expressed his
appreciation to the Embassy and the Department of Commerce
for sustained advocacy support (ref A). Given that Bechtel's
competition (SNC Lavalin) was Canadian along with one of the
major shareholders in the project (Alcan),advocacy played an
important role in Bechtel's ultimate success. (Note:
Bechtel's award has not been made public to date, and the
company is waiting for the local partners to make the
announcement before releasing any information. End Note.)

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Jobs and Omanization
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3. (SBU) Bechtel will construct the Sohar facility along the
same lines as its ALBA facility in Bahrain, which is in the
final stages of completion. Many of the managerial and
technical personnel who worked on ALBA are likely to transfer
to Oman in the coming weeks and months. As many as 6000
workers were on-site in Bahrain at the height of
construction; Robinson claims that a similar number will be
employed during construction in Sohar. Once operational, the
plant will employ close to 2000 workers. Bechtel has
developed an aggressive Omanization program to ensure that a
vast majority of these jobs are held by Omanis. In
conjunction with local partner Bahwan Engineering Company,
Bechtel is designing an extensive training course for its
workforce. Moreover, worldwide studies of aluminum smelters
show that the secondary employment effects are substantial,
with 10 indirect or "downstream" jobs created for every
direct hire. Given Oman's need for employment, this
development would be welcomed by the Sultanate, although it
is unclear whether these downstream jobs will remain in Oman
or be exported elsewhere.

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Expanding the American Community
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4. (SBU) While Robinson does not foresee a massive influx of
Americans, he does anticipate that as many as 100-150
Americans from Bechtel will come to Oman during the
construction of the smelter. The Ambassador made a strong
pitch for The American International School of Muscat, and
Econoff urged Robinson to become a member of the Muscat
American Business Council. Other expatriate workers for
Bechtel will come from India, the Philippines, Australia, and
Britain.

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Comment
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5. (SBU) With Dow Chemical already establishing a major
presence in Oman, the victory by Bechtel is evidence of
increasing momentum for U.S. companies in the Sultanate. As
we open free trade agreement talks in March, Oman's welcoming
attitude toward American investment should provide fertile
ground for concluding a strong accord. We also hope that the
positive experiences of Dow and Bechtel will encourage other
American firms to enter or expand into Oman in support of our
MPP goal of increased trade and investment.
BALTIMORE