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05MUSCAT900 2005-06-05 03:50:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Muscat
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					  UNCLAS SECTION 01 OF 02 MUSCAT 000900 




E.O. 12958: N/A




1. (SBU) A major fire destroyed roughly half of a
polypropylene factory in the rapidly industrializing port
city of Sohar on May 29. Authorities needed more than eight
hours to contain the blaze, drawing on fire-fighting
resources from over 240 km away. The incident has raised a
crescendo of criticism that the massive industrial growth in
Sohar has not been matched with a corresponding increase in
the safety infrastructure. American and other local
manufacturers are taking careful note, with many of them
already relying largely on their own means, rather than on
the local authorities, in the event of future emergencies.
While the fire is not expected to dampen investor enthusiasm
for Sohar, both foreigners and local citizens alike will
doubtless demand government action to improve emergency
response capabilities. End summary.


Up In Smoke


2. (SBU) A raging fire broke out in the waste recycling
portion of the Khaleej Polypropylene factory complex in the
early morning hours of May 29 in the industrial estate of
Oman's booming coastal city of Sohar. Starting at 0200, the
fire was largely contained only by 1000, though hot spots
continued to burn until the following day, delaying the start
of the fire investigation. The firm's expatriate general
manager, Prem Chandran, told us that none of the plant's 217
workers were harmed in the conflagration, despite the fact it
was fully staffed at the time of the fire's outbreak. While
the factory's new production line (visited by Econoff and
Econ FSN in April, ref B) was spared, all three metalizers
and the production line for cast card polypropylene were
destroyed. The firm has suspended production on all items
requiring metalization, accounting for roughly half of the
total output. A major Omani exporter, Khaleej Polypropylene
produces nearly 40 thousand tons per year. The Muscat
Securities Market likewise suspended trading of the firm's


Emergency Response Not Up To The Task?


3. (U) As reported in ref A, the Omani authorities had
considerable difficulty extinguishing the blaze, leading to
extensive criticism on Internet message boards. Despite the
flood of over $10 billion in industrial investments to the
Sohar region in the past year (split primarily between the
industrial port and the industrial estate), there are loud
charges that the government has failed to keep pace in terms
of safety infrastructure. The local fire department
reportedly had to await reinforcements from as far away as
Buraymi (120 km) and Muscat (250 km), and even those units
that showed up had to fight the blaze with water instead of
the chemical foams more appropriately deployed on such types
of fire. The authorities were able, however, to bring a
fire-fighting helicopter into action against the blaze. GM
Chandran also credited an earlier evacuation drill conducted
with civil defense authorities as contributing to the safe
removal of all plant personnel.


Local Firms React


4. (SBU) The American managers of Bechtel's Sohar aluminum
smelter project were out of the country at the time of the
blaze. Dow Chemical CEO of Sohar's Oman Petrochemical
Industries Company (OPIC), Bill Ray (protect), was likewise
abroad during this period, but told us by e-mail from Zurich
that OPIC's project scope includes an indigenous
fire-fighting capability because they cannot assume the local
authorities' would always be available. Nevertheless, fire
and security matters are the subject of active negotiations
with Sohar officials. Upon his return, Ray will study the
conclusions to be drawn from the Khaleej Polypropylene
experience. Oman's top exporter, Al Jazeera Tube Mills, is
immediately next door to the Khaleej factory. A Jazeera
company official told us that he believes much of the damage
at Khaleej could have "been contained if adequate fire
fighting measures were available." Al Jazeera reviewed its
own fire protection systems in the wake of the incident,
however, and remains confident that it has adequate
protections in place.

5. (SBU) As reported previously, Sohar is currently one of
the most rapidly developing industrial areas in the entire
Gulf region. The city's landscape is literally changing
overnight, faster than local officials can comprehend. Dow
executives were unhappy during their initial negotiations
with the Sohar Industrial Port regarding their multi-billion
dollar petrochemical investment when told by local officials
that they were expected to finance the creation of new police
and fire stations to service their part of the port. Given
the magnitude of their investment, Dow and OPIC are opting
instead to make their plant as self-sufficient as possible,
eschewing even the city's power network.


Silver Lining


6. (SBU) While the fire may have a devastating impact on the
Khaleej Polypropylene plant, which was only starting to
recover from significant losses before its second production
line opened, it is unlikely to significantly dampen the
torrent of foreign direct investment in the Sohar region.
Indeed, a $300 million deal to construct an ethylene
dichloride plant at the Sohar Industrial Estate was inked on
May 31. By exposing the apparently inadequate local safety
infrastructure without the tragic loss of life, the
authorities may now be spurred to make necessary investments
that will further burnish the region's attractiveness to
investors. The situation, however, will likely remain under
some scrutiny.