private partnerships are helping Oman’s industrialisation efforts
The government of Oman has employed a strategy of encouraging industrial estates as enablers of manufacturing in Oman. These industrial estates are led by The Public Establishment of Industrial Estates (PEIE). The new brand identity of the PEIE - Madayn was unveiled at its silver jubilee celebration on November 12, 2018. The launch of the new brand identity coincides with the 25th anniversary since the establishment of the PEIE. Madayn operates nine industrial estates with a total area exceeding 100 million sqm. With the existence of around 2000 projects, the volume of investments has touched nearly RO6.5 billion. In addition, the number of workforce in all the industrial estates has reached around 55,000 by the end of 2017, of which around 20,000 are Omanis. Hilal bin Hamad Al Hasani, CEO, PEIE stated that the Public Establishment for Industrial Estates was established in 1993 to complement the march of Rusayl Industrial Estate Authority with the objective of planning, establishing, managing and developing the
industrial estates across Oman. “For the tenth year in a row, the indicators show growth at various levels witnessed by the Public Establishment for Industrial Estates, which is seen in the number of localised projects, volume of investments, and direct and indirect job opportunities,” Al Hasani stressed.
He added, “Over the last ten years, the Public Establishment for Industrial Estates has introduced several value adding initiatives to the local communities and the companies. In 2010, the Industrial Innovation Centre (IIC) was initiated to support the manufacturing sector and serve the industrialists taking into account the significance of innovation and scientific research in developing and advancing Omani industries. Recently, the IIC has been transformed into a commercial unit with the support of Tanfeedh.”
“PEIE has also given attention to support Omani Small and Medium Enterprises as it has established the National Business Centre (NBC) to act as an incubator for the Sultanate’s SMES by offering them a platform to further their business ideas and develop them into growing ventures.” he said, adding: “In line with its efforts to market and promote locally manufactured products in the country and abroad, the Public Establishment for Industrial Estates is managing ‘Made in Oman’ campaign, which is a national initiative to expand markets of the locally manufactured products and contribute to the advancement of the national economy.”
In line with the national programme to promote economic diversification ‘Tanfeedh’, which is part of the 9th FiveYear Development Plan, the PEIE has adopted a programme to strengthen Public-private Partnership (PPP) to support the private sector to become the leading sector and the main focus of the future plans of Madayn. “The PPP programme aims at increasing Madayn’s contribution to the sustainable economic and social development in the Sultanate and achieving the aspirations of the manufacturing sector being one of the major promising sectors for the economic diversification. Based on this, the private sector in the coming years will have the role of constructing, managing and operating the industrial estates and economic zones pertaining to Madayn,” says Al Hasani.
PEIE has made efforts to restructure its legal system and re-engineer all its operations with the aspiration of enhancing competitiveness and attracting foreign and national investments. The issuance of the Royal Decree no. 32/2015 came to reflect the new role attached to the PEIE as it would be linked to regulating and monitoring, and the role of developing will be through an active partnership with the private sector. Recognised as the first body to offer such long-time notion, developers
are now granted with usufruct contract for up to 99 years. Besides, under the new investment regulations, the managements of the industrial estates in the various governorates have been granted with the authority to approve investment applications of up to 100,000 square meters of industrial lands. New regulations of investment have also been issued, in which environmental related aspects have been taken into consideration.
PEIE has recently established Oman Investment and Development Holding Company, which aims at developing and improving the operational processes, competitiveness, infrastructure and facilities of the various industrial estates. The company shall take over the assets management of the existing industrial estates and work in partnership with local and international developers to develop and manage the industrial estates, raise productivity, enhance income, offer comprehensive services for the investors operating in these estates, and provide job opportunities for the nationals. It is hoped that in 2019 Rusayl Industrial Estate and Knowledge Oasis Muscat will be the first two estates to be managed and operated by Oman Investment and Development Holding Company as their main developer.
Oman’s government has taken several bold steps to strengthen privatisation programmes within industrial estates across the country. As part of the strategy, PEIE has formed a new holding company to manage the establishment’s assets in different industrial estates across the Sultanate. The move is expected to strengthen the role of the private sector in attracting investment in the manufacturing sector in a more flexible and easy manner.
PEIE will own 51 per cent stake in the newly-formed Oman Investment and Development Holding Company, while 49 per cent will be offered to the private sector. The new company will manage PEIE’S 100 million square metre industrial land and other assets in different industrial estates, which will help bring in flexibility and easy implementation of the privatisation strategy.
The holding company, which is expected to start operation in the second half of this year, will promote companies for development, management and operation of the existing industrial estates through partnership.
The country’s industrialisation drive was mostly facilitated by the PEIE, which manages more than six industrial estates spread across the country. PEIE, which acts as a one-stop-shop for new entrepreneurs, manages Rusayl, Raysut, Sohar, Sur, Nizwa and Buraimi. The PEIE is planning to build new industrial estates in several locations, besides expanding existing ones to meet the growing demand for industrial plots. The PEIE plans to build three industrial estates – one each in Thumrait, Shinas and Al Mudhaibi.
There are also ongoing expansion projects for further developing existing
industrial estates, which will help diversify the country’s economy and create employment opportunities for Omani youths. Apart from projects within the industrial estates, several mega ventures are in different stages of planning and implementation. Several industries, including the Salalah Ammonia Plant, Salalah Liquefied Petroleum Gas, an acetic acid project, an automobile bodybuilding unit and several petrochemical ventures are in different stages of planning and implementation.
For instance, the state-owned Oman Oil Company (OOC) started work on two major projects - Salalah Ammonia Plant and Salalah Liquefied Petroleum Gas (SLPG) - in Dhofar. These projects are strategically important for strengthening the industrial sector and enhancing economic diversification plans in the Sultanate. SLPG will have a capital expenditure of $826 million, and will be developed on a 20 hectare-plot within Salalah Free Zone. LPG and Condensate Storage Facilities will be built at Salalah port on an area of around eight hectares.
The project, which has LPG extraction facilities at Salalah Free Zone, is developed by Oman Gas Company – a subsidiary of Oman Oil Company. Petrofac of UK own the engineering, procurement and construction (EPC) contract to build the project. The main LPG Extraction Plant will have a processing capacity of around 8.8 million standard cubic metres per day. The plant will have local LPG truck loading facilities catering to domestic demand in Dhofar region. Together with a dedicated export jetty, Salalah Port will become an international LPG and condensate export hub beginning in 2020 when the project is fully operational.
The estimated cost for the ammonia Project, developed by Salalah Methanol Company, a subsidiary of Oman Oil Company, is $463 million. The project will span over 12 hectares at Salalah Free Zone and will include facilities for manufacturing, storing and exporting ammonia. The construction work of the plant, which will produce 1,000 tonnes of ammonia per day, is expected to be completed by 2020. The plant will enhance the sustainability, increase the profitability and diversify the company’s product portfolio, through targeting its main market in India, Vietnam, Thailand, South Korea and Japan. The two projects are part of Oman Oil Company’s growth strategy aimed at strengthening value addition in oil and gas sector.
In yet another development, energy major BP is in discussion with the Oman government, its energy investment arm Oman Oil Company (OOC) as well as a potential partner, to press ahead with the implementation of its world-scale acetic acid plant in Duqm — a project involving an investment of around $1 billion.
The proposed Duqm Acetic Acid project, first unveiled few years ago, envisions a large-scale petrochemical project based on BP’S proprietary Saabre technology.
Oman Oil Company, which is a 50 per cent equity partner in the $7 billion Duqm Refinery project, is also expected to play a key role in the venture.
Acetic acid is used as a raw material in the production of a wide range of petrochemicals that serve as intermediaries in the manufacture of adhesives, paints and solvents, as well as the production of purified terephthalic acid (PTA), one of the most common polymers at the source of the multiple forms of polyesters.
In addition, in 2015, BP and Oman International Petrochemical Industries Company (Ompet) — part of Oman Oil Company — had signed a licence agreement for supply of BP proprietary technology for a proposed 1.1 million tonnes per annum (tpa) capacity PTA project in Sohar. PTA is a key ingredient in the manufacture of polyesters for textiles and packaging materials. As part of its commitment to the project, BP has agreed to provide a wide range of technical and knowledge transfer services as well as assist Omani staff within the Ompet joint venture. The frontend engineering design (FEED) package for the licence had been completed and delivered to Ompet on schedule, company officials said at the time.
FOCUS ON DUQM
In another major initiative, foundation stone for a bus manufacturing and assembling unit developed by Karwa Motors project was laid in the Special Economic Zone in Duqm (SEZD) recently. Karwa Motors is a joint venture partnership between Mowasalat Qatar – the national transport company of Qatar (with a 70 per cent equity stake) and OIF, a sovereign wealth fund of the Sultanate (with the remaining 30 per cent stake). Together, the partners will invest around $90 million in the initial phase of the project – a venture with the potential to underpin the growth of a bus hub at Duqm over the long-term.
Karwa Motors will leverage Oman’s existing automotive supply chain network to gain a foothold in the Oman and Qatar markets, which is tipped to become the region’s largest by 2022. This plant will enable Karwa Motors to sell buses in the largest market of the Mena region while providing greater flexibility for Oman and Qatar. Demand for buses across the world is growing and this is the first step towards becoming a leading regional bus manufacturer.
The first stage of the project will be on a 220,000 square metre site located not far from a world-scale multipurpose port currently being developed at Duqm. The plant is initially planned for a production capacity of 1,000 buses a year, which can increase up to 3,000 buses per annum in a phased expansion based on market demand.
The first Sebacic acid plant, which has a capacity to manuafactur 30,000 tonnes of sebacic acid per annum, also started production at Duqm. The 100 per cent export-oriented unit of Sebacic Oman was established with a capital expenditure of $62.7 million. This is the first sebacic acid manufacturing project
in the entire Middle East and North Africa (Mena) region. Indian and Omani investors have promoted the state-ofthe-art export-oriented sebacic acid project with a capital expenditure of $62.7 million.
Sebacic acid, which is used to make high performance engine oil and lubricants, adhesives, engine coolants, biodegradable packaging, sub-sea pipe/ cable coatings, aerospace polymers, anti-corrosion applications, and bioplastics, is manufactured from castor oil. The entire production from the Duqm plant would be exported to the United States, Europe, Japan and China. Demand for sebacic acid has been growing due to a ban on plastics for packaging food products for children in several developed countries and due to increasing aerospace applications. The castor oil derivatives market is worth $15 billion per annum and a major demand is coming from the United States, Europe and Japan.
In addition, Sebacic Oman plans to set up a 10,000 tonne per annum-capacity project to produce bio-nylon (nylon 6-10 and nylon 10-10) as a forward integration of the sebacic acid project with a capital expenditure of $250 million. This is going to be the first project to produce bio-based nylon in the entire Middle East region.
Sebacic Oman plans to build a biobased nylon project as forward integration of its soon-to-becommissioned sebacic acid project in the Duqm free zone. Bio-based nylon, which will have applications in aerospace and in engineering polymers, will use sebacic acid from the company and benzene and sulphur from Sohar-based Oman Oil Refineries and Petroleum Industry (Orpic) as raw materials. The project is currently in the design stage, which is being carried out by the company’s technology supplier, Cong Associates. Also, once the Duqm Refinery starts operations, the company will be able to get benzene and sulphur from a nearby refinery. The construction work is likely to start sometime in 2020, while the project is expected to be completed after two years, in 2022. The entire production from the project will be for export to the United States, Japan and Europe. At present, only few a countries in the world, such as China, the United States and Europe, produce bio-nylon.
In another development, several large gas-based industries, including a steel producer and a fertiliser firm, have announced their plans for enhancing capacity few years ago. Now Oman government is in a better position to commit natural gas as feed stock for gas-based industries with BP starting production from its tight gas field in Khazzan in September 2017.
BP started supplying almost 1 billion cubic feet of natural gas per day, which is a 30 per cent growth in production, from the fourth quarter of last year.
Also, the expansion programmes of state-owned Oman Oil Refineries and Petroleum Industries Company (Orpic), the Sultanate’s major petrochemical firm, are expected to further strengthen nonoil sector in the coming years. For instance, Orpic’s $6.4 billion- petrochemical complex called Liwa Plastics Industries Complex (LPIC) will help strengthen the non-oil export revenue of the Sultanate.
With the completion of LPIC, Orpic will be producing a total of 1.4 million tonnes of polyethylene and polypropylene per annum by 2020 – all for export markets. LPIC is the largest petrochemical project undertaken in Oman, which will contribute 2 per cent to the gross domestic product (GDP) of the Sultanate and support creating a wide-ranging downstream industry in the Sultanate. Upon commissioning in 2020, Liwa Plastics Industries Complex will transform Orpic’s product mix and business model, double company profits, create new business opportunities and generate significant employment opportunities. The LPIC project is expected to create about 900 direct, and some 1,200 indirect jobs, during the project lifetime.
The government has also succeeded in marketing Duqm as an attractive investment destination for Chinese investors, who were looking for a manufacturing and transhipment base for exports to South East Asia, West Asia and the entire Middle East and North Africa (Mena) regions. It is a win-win situation for both China and the Sultanate as Oman could strengthen its manufacturing base and thereby create employment opportunities for its young population, while China could easily capture important export markets in the region due to the strategic location of Duqm, which is close to international marine routes that connect East and West.
With the signing of investment deals worth $3.1 billion for building a host of major industries in April 2017, China reiterated its commitment in Duqm where the country is building a large industrial park – the single biggest investment of any country in Oman.
Oman’s government has taken several bold steps to strengthen privatisation programmes within industrial estates across the country.