OMAN PINS HOPE ON FISHING PORT
Fishing town of Duqm will be transformed from sleepy dockland into major port and industrial centre in economic diversification
Country looks to turn sleepy Duqm town into port and centre of industry,
MUSCAT // Oman is pinning hopes for its economic diversification on the formerly sleepy fishing town of Duqm, transforming it – with the help of foreign investment – into a port and industrial centre that will be the engine of the country’s post-oil economy.
Like all GCC countries, Oman is grappling with the likelihood of a protracted era of low oil prices, but is especially vulnerable as its reserves will, by some estimates, run out in as little as 15 years.
Like its Gulf neighbours, Oman has sold bonds to wipe out its budget deficit in the short term.
But energy revenues still make up 83 per cent of its budget and 62 per cent of the workforce is employed by the state.
Accelerating plans to expand the non-oil and gas private sector and make it attractive to Oman’s young and growing population is an imperative for Muscat.
At 5.3 billion Omani rials (Dh52.1bn), the budget deficit was proportionally the largest in the GCC last year. Oman has already announced it would borrow Dh22.1bn from domestic and international markets.
Unemployment is likely to hit 50,000 by the second half of this year, and the World Bank said one in five youths are jobless in a country where half the population is under 25.
Oman is revamping its ports infrastructure in Muscat, Duqm, Sohar and Salalah to adapt them for tourism, but more importantly to increase industrial production and exports, and create a centre for international shipping. Regional powers including China and India are interested in establishing footholds in the free ports, and Oman aims to capitalise on Iran’s potential economic integration into world markets.
Duqm, 550 kilometres south of Muscat, is the epicentre of these plans.
It was initially envisioned as a trade centre that would be connected to new rail networks and pipelines traversing the GCC.
More importantly, it would allow companies and states reliant on energy exports to bypass the Strait of Hormuz, especially in the event of a crisis between Iran and the GCC.
The new port at Fujairah and Riyadh’s plans to increase the capacity of its pipeline to the Red Sea made a land route across Saudi Arabia and the UAE to Duqm less of a necessity. But the economic landscape has changed.
Increasing capacity for the Dammam- to- Red Sea pipeline from 5 to 7 million barrels a day will take until the end of next year and GCC-wide budget deficits have stalled plans for a regional rail network.
Despite these setbacks, Duqm has attracted significant interest from beyond the GCC.
It is becoming a port of call for US naval ships that would once dock exclusively at Jebel Ali, and Chinese and Indian government companies have pledged hundreds of millions of dollars in projects. Iran and Oman are in the process of establishing a joint car-making plant. The development of Duqm is well under way.
Its port is expanding capacity from 250,000 containers a year to 3.5 million.
It has a new airport, a ship repair yard, a logistics centre, hotels and property in development for thousands of local and foreign workers.
Future plans include a railway terminal and a pipeline linking Oman’s Saih Nihayda gasfield to Duqm – circumventing the Strait of Hormuz.
When first envisioned in 2001, the project was expected to generate thousands of jobs for Omanis by the year 2020.
But back then, Oman’s economy was cushioned by years of the oil windfall.
There was no urgency to press forward with the ambitious plans – until 2014, when oil prices plummeted from Dh440 per barrel to a low of Dh42. Oman has allocated Dh37bn and, according to Yahya Al Jabri, chairman of the Duqm Economic Free Zone, the country is seeking another Dh37bn in foreign investment by 2022.
The Chinese state-run company Oman Wanfang has pledged Dh1.35bn for roads, utilities and infrastructure.
“Almost all the projects will be financed by Chinese banks,” said Mr Al Jabri.
In a separate joint venture, Chinese investors would also develop a motor assembly plant and a 1-gigawatt solar power generation facility.
Oman is also reviving its flagship project for the free trade zone – the 230,000- barrel- perday refinery that was put on hold when negotiations with Abu Dhabi’s state-owned International Petroleum Investment Company (Ipic) failed in 2015.
An agreement is now being fi- nalised for Kuwait Petroleum International to develop the refinery jointly with Oman’s state oil company.
That and the proposed pipeline could become highly sought after should Iran ever close the Strait of Hormuz, according to a Middle East Institute report last August.
The Duqm project indicates it is all systems go for Oman.
As a finance ministry spokesman put it, “Duqm fits very well with our diversification plans now that we are in the era of cheap oil. For the first time in 15 years, we are really putting Duqm in the fast lane.”