CHAIRMAN EXPRESSES CONCERN OVER LARGE-SCALE

C O N F I D E N T I A L MUSCAT 000843

SIPDIS

SIPDIS

STATE FOR NEA/ARP, EEB/CBA
COMMERCE FOR ITA/COBERG

E.O. 12958: DECL: 09/02/2017
TAGS: EIND ECON BEXP MU
SUBJECT: CHAIRMAN EXPRESSES CONCERN OVER LARGE-SCALE
INDUSTRIAL PROJECT

REF: MUSCAT 804

Classified By: Ambassador Gary A. Grappo, reasons 1.4 b and d


1. (C) On August 30, the Ambassador met with Oman Oil Company
(OOC) Chairman Maqbool bin Ali Sultan (who also serves as
Oman's Minister of Commerce and Industry) to discuss the
company's joint venture with Dow Chemical in constructing a
polyethylene plant in the Port of Sohar industrial complex.
As reported reftel, Maqbool acknowledged that construction
costs were becoming a serious concern, noting that current
estimates for construction were now hovering around the $7
billion mark, and could easily escalate to around $8 billion.
For this reason, Maqbool stated that OOC and Dow have
established a joint committee to recommend cost saving
measures by the end of September. The chairman cautioned
that while capital wasn't a problem, higher investment costs
were, as they reduced the economic feasibility of the
project. As a result, Maqbool raised the possibility of the
committee recommending a scaled-back design.


2. (C) Comment: A recommendation to shelve the project would
represent a serious setback to government efforts to develop
its primary industrial port complex and spur employment
through the creation of numerous downstream industrial
opportunities. While off to a solid start with the recent
opening of a refinery and polypropylene plant, the Sohar port
is beginning to face growing concerns over underutilized
container capacity and availability of cheap natural gas to
fuel future industrial ambitions. Nevertheless, the
complex's $2 billion aluminum smelter project remains on
track, as does its plans to construct steel, iron ore,
aromatics, and methanol plants. End Comment.
GRAPPO