SOHAR PORT OFFICIALS THINKING BIG

UNCLAS SECTION 01 OF 02 MUSCAT 000171 SIPDIS SIPDIS STATE FOR NEA/ARP, EEB/CBA, EEB/TRA/OTP COMMERCE FOR ITA COBERG STATE PASS TO DEPT OF TRANSPORTATION E.O. 12958: N/A TAGS: ECON EINV EWWT PREL MU SUBJECT: SOHAR PORT OFFICIALS THINKING BIG -------------- Summary -------------- ¶1. Port of Sohar officials continue to think big in terms of port expansion as industrial projects for the complex continue to come on-line. The Port is positioning itself as a convenient economic alternative to ports within the Arabian Gulf, with its dry, liquid, and container terminals already up and running. Port officials do not believe that looming gas shortages in Oman will crimp the complex's development, and recently expanded land available for development of a free zone. End Summary. -------------- Location, Location, Location -------------- ¶2. On February 12, the Ambassador toured the Port of Sohar with Sohar Industrial Port Corporation's (SIPC) chief executive officer Jan Meijer. The Port, a 50-50 joint venture between the Sultanate and the Port of Rotterdam, serves as the anchor the $12 billion industrial development planned for the region. The Port is managed and promoted by SIPC, which has entered into a 25 year concession agreement with the Omani government. Meijer is confident that the Port's advantageous location outside the Strait of Hormuz and within 300km of three large gas reserves will lend to its success, as well its relatively short distances from Abu Dhabi and Dubai. -------------- Of Petrochemicals, Metals, and Utilities -------------- ¶3. The Port area, which encompasses 2,000 hectares, runs seven kilometers long by three kilometers wide. The construction phase of the project has already generated at least 10,000 construction jobs, while 7,000 direct and 28,000 indirect jobs are expected once all projects are completed. ¶4. The Port complex is divided into sectors encompassing petrochemicals, metals, and utilities. Included in the petrochemicals division are a 5.4 million-ton per annum (tpa) refinery valued at $1.24 billion, a 1.2 million-tpa urea plant valued at $600 million, a 1 million-tpa methanol plant valued at $500 million, a 0.85 million-tpa polyethylene plant valued at $5.5 billion (Dow is a 50% investor in the project),and a 0.34 million-tpa polypropylene plant valued at $313 million. The metals section will consist of a 1.2 million-tpa steel plant valued at $1 billion, a 0.35 
million-tpa scrap metal plant valued at $40 million, and 0.325 million-tpa aluminum smelter, to be constructed by Bechtel, valued at $2.1 billion. Indian firm Larsen and Toubro will open a steel fabrication facility and, most recently, SIPC entered into a $1 billion agreement with Brazilian iron ore producer CVRD. The utility section will feature a private 1000MW power plant for the smelter project and a 600MW power and 30 million-gallon per day water desalination plant operated by Suez Tractabel. -------------- Open for Business -------------- ¶5. The port itself opened for business in 2004 when C. Steinweg commenced operations at the port's dry goods terminal. This terminal has facilitated the inflow of materials for the port complex's development. In addition to its berths for industrial liquids, Sohar is positioning itself as Oman's largest container port with over 7 square kilometers of land and a projected 10 dedicated shipping berths. The Oman International Terminal Company, a partnership of Hutchinson Port Holdings and Maersk Sealand, recently opened for business and currently receives one ship per week. The port overall is already doing brisk business, with operations handling volumes that were not expected until ¶2008. Once all berths are fully operational, the Port will be able to handle 6.8 million twenty-foot equivalent units (TEUs) of cargo per year. -------------- What Gas Concerns? -------------- ¶6. Meijer brushed aside the question of the scarcity of gas affecting the Port's development. He noted that at the present time, Oman had sufficient gas supplies to continue MUSCAT 00000171 002 OF 002 fueling Sohar's development, and that the government, which is offering low-cost gas to tenants of the complex, would be able to obtain sufficient reserves either from continued exploration within the country or from its neighbors. Meijer stated that "At the end of the day, Sohar lies within several hundred kilometers of the world's biggest oil and gas reserves." -------------- Comment -------------- ¶7. The Port is off to a flying start, though the refinery and polypropylene plants were closed for several weeks to address production hiccups. The aluminum smelter under construction by Bechtel is on-track, as the framework and roofing for the plant's main production center have been completed. Port officials continue to think big, and have recently relocated and expanded the proposed free zone, which will now encompass 3,000 hectare of land adjacent to a planned three-lane highway connecting Muscat with Dubai. Of particular interest are the plans to construct the polyethylene plant; the government and Dow are reportedly updating the plans for the facility, whose estimated construction costs have increased since the project's inception. With the upcoming implementation of the U.S-Oman Free Trade Agreement, Post expects to see continued interest from U.S. investors in this region of Oman. GRAPPO