Manufacturing insight 2019
The new refinery, which will have a production capacity of 230,000 barrels per day. It is expected that $8bn-9bn will be invested in this second phase, with seven to eight petrochemical plants on the site.
Duqm will also be the location of a major new acetic acid plant, a project led by BP. Acetic acid can be used in the production of paints, adhesives and solvents, and is the main ingredient in polyester manufacture. In addition, Shell is planning to construct a gas-to-liquids plant at the DSEZ, with this also likely to produce petrochemicals that are useful for industry, such as naphtha and paraffins. Duqm is also surging ahead in the paints sector, with Al Shomookh Mining Industries Company announcing to build an integrated mining complex in the DSEZ, which will include a paint factory in its OR95m ($246.7m) second phase. This will use the company’s clinker and lime production plants, built in the first phase, and work alongside glass and aluminium factories and a waste container manufacturing plant.
Oman currently imports more than 93% of its medicines, laboratory and surgical equipment, making the sector a major target for the development, A crucial development in 2018 was the laying of a foundation stone for an OR140m ($363.6m) pharmaceutical plant at the Salalah Free Zone. Due for completion in 2020, the Felix Pharmaceutical plant will produce more than 100 types of drugs and feature a research and development establishment.
Oman is home to a wide range of light-manufacturing companies, aside from the chemicals, petrochemical and metals sectors,. Some 35,596 SMEs were registered as of August 2018. Involved in marble and granite mining and processing, as well as glass, tile, block, cement and limestone production. Chinese investors are planning to develop a $98m carpet and blanket factory in the eastern port city of Duqm. The company will use synthetic materials sourced from petrochemical processing. The proposed plant is part of a wider China-Oman industrial park, for which the authorities are targeting investment of $3.2bn for the first stage. It will include facilities for the manufacture of solar panels, pipes and building materials, as well as petrochemicals and other products.
Non-ferrous metals also is a major industry in Oman. The leading player is Sohar Aluminium Company, which is a $2.5bn joint venture between OOC, the Abu Dhabi National Energy Company and Anglo-Australian multinational Rio Tinto. Its smelter currently has a 375,000-tonne-per-year capacity, and 60% of its production has been earmarked specifically for local consumption. The company is going into partnership with Synergies Castings, an Indian alloy wheel manufacturer, to build a production facility next to the smelter on the Sohar Industrial Estate, a project forecast to cost $100m.
Another major player in the aluminium sector is Oman Aluminium Processing Industries, which produces aluminium rods and overhead line conductors. This is a joint venture between Oman Cables Industries and Takamul Investments, and is also located at Sohar. Oman Aluminium Rolling Company (OARC) is on that estate as well, and operates a $385m plant with a multi-purpose aluminium capacity of 140,000 tonnes per year. OARC has a long-term contract with SAC for the provision of smelted aluminium, illustrating the continuing benefit and synergies provided by the industrial estate system.
Oman is on the cusp of unlocking its mineral export potential, The country has some of the richest and most diverse mineral deposits in the world, which are largely concentrated in the country’s mountain ranges. Copper, chromite, manganese, zinc and gold are distributed in an ophiolite sequence that is 1-6 km thick. Oman’s total gypsum ore reserves are estimated at 170m tonnes, while there is approximately 40m tonnes of copper ore and 30m tonnes of chromite, according to a 2017 white paper on the industry. Duqm, in central Oman, holds reserves of industrial minerals and salt, while fertilisers such as potash are found some 500km north. Thamrait in the south is known for gypsum and Salalah for limestone. Shuwaymiyah in Dhofar Governorate has large deposits of limestone, gypsum and dolomite, while Sohar in the far north of the country is rich in copper, gold, gabbro and limestone.
The importance of mining and quarrying to Oman’s economy has increased significantly since 2000. According to the “2018 Statistical Year Book” published by the National Centre for Statistics and Information (NCSI), in 2017 such activities contributed OR147.4m ($382.8m), or 0.54%, to GDP at current prices. This is up on the OR128.1m ($332.6m, 0.51%) and OR122.2m ($317.6m, 0.46%) seen in 2016 and 2015, respectively. The contribution of mining and quarrying to GDP is now over 10 times more than it was in 2003, when it stood at OR14.2m ($36.9m).
Oman’s mineral wealth remains largely uncovered, with its strategic location along global trade routes, and three ports in the north, centre and south of its territory, with planned infrastructure upgrades and ongoing government reforms to facilitate investment. State initiatives to encourage the development of the mining sector include major infrastructure upgrades and moves to establish companies that promote mineral-based industrial activities.
Expanding infrastructure capacity, meanwhile, is evidenced by a new container terminal at Duqm Port, which will have the capacity to handle 2m twenty-foot equivalent units annually and is set to be operational by the end of 2019. A plan is also considered to lay a 375-km railway to connect the mineral-rich Dhofar Governorate with Duqm Port.The government is quite optimistic about growth prospects in the coming years. The development initiatives will boost the sector’s contribution to GDP to OR378m ($981.6m) by 2023.
Oman is seeing surging growth in small urban manufacturing (SUM) activities, from hand-made chocolate, jewelry and toiletries, high-fashion abyas to precision engineering, where innovation in design is creating products that are capturing the Omani consumers’ attention. SUMs are also leveraging opportunities around the Circular Economy and green manufacturing where consumers prefer Omanmade products that use recycled materials and whose workers live locally and maintain a small carbon footprint. To capitalize on the interest and growth of SUM, government has introduced a range of programs to facilitate SUM workspace as well as provide finance and startup mentoring through the National Business Centre, Riyada and the SME Development Fund.
Oman’s manufacturing sector scenario as compared to other GCC countries is very different. It is known for its micro-manufacturing industrial units. Oman has continued decreasing imports by encouraging these light industries locally. These industries consist mostly of chemicals, plastics, furniture, paper products, vegetables etc. As Omanmade products and manufacturing processes become more complex and productive, they create a host of skilled para-professional and professionals in non-manufacturing jobs such as logistics and transportation, construction, finance, retail, insurance, design, marketing and customer service. And as factories get ‘smarter’ and more advanced the multiplier increases.
A strong manufacturing industry is fundamental to Oman’s continued prosperity and vital to boosting the Sultanate’s non-oil exports.
Dr Anchan C K , International Expert on Trade & Investments.