Sohar Port and Freezone: Gateway to the Gulf

February 12, 2018 in Infrastructure

A 4,500 hectare port and freezone development is taking place in the Sultanate of Oman. The port is one of the fastest growing port and freezone developments in the world, and it is transforming Oman into a lively regional hub for logistic services.

Sohar Industrial Port Company (SIPC) are managing the developments at Sohar Port under a joint venture between the Port of Rotterdam and the Sultanate of Oman.

The deep-sea port is situated in a strategic location near the Strait of Hormuz. Businesses will use the port and freezone to access over 3.5 billion consumers through the Gulf. Trade is made by land, sea, and air.

The port has a large number of deep-water jetties capable of handling the world’s largest vessels: the Valemax class of dry bulk carriers. The site connects with global trade routes between Europe and Asia in a fast-developing region for road-air-rail infrastructure.

The port will specialise in three major clusters – logistics, petrochemicals and metals. Many investors have been interested by the variety of cargo handled at the site; to date, the Sohar development has attracted over US$25 Billion of global investments.

The first phase of the Freezone is almost fully leased out, three years ahead of schedule. 26 companies are already benefitting from the unrivalled access to land, low-cost energy and a skilled workforce.

The next stage of the development involves a US$60 million deal with a UK-led consortium to give Sohar the largest rare earth metal plant of its kind outside of China.

In addition, agreements with two of Oman’s biggest business houses will see final assembly of 200,000 of the world’s biggest auto brands gathering on the yard. This includes the latest models of Toyota, Daihatsu, Lexus, Kia, Ford, Nissan, BMW, and Hyundai.

Oman’s first ever terminal will be dedicated to the handling of agricultural bulk. This new addition will process the nation’s strategic food reserves. It will join independent terminals operated by world-class leading companies like C. Steinweg Oman for general cargo, Oiltanking and Odfjell for liquid cargo, and Hong-Kong based Hutchison Whampoa for containers.

Data from SOHAR shows a solid first-half of 2017, as both the Port and Freezone continue to play a crucial role in the diversification and globalisation of Oman’s economy. Despite issues in the maritime industry and lows in global oil prices, container volumes in Q2 of 2017 grew by 11% from the same quarter last year, as SOHAR emerges as one of the region’s prime logistical hubs.

Dry bulk cargo also grew significantly at SOHAR Port in the first half of 2017, up by 24% in comparison to the first six months of last year. Liquid bulk, general and project cargo figures were down slightly compared to 2016, however SOHAR has exceeded one million tonnes of sea cargo each week, a significant threshold that the Omani logistical hub crossed at the end of 2016 for the first time.

The figures show promising growth, which will be crucial to Oman’s economic prosperity. Speaking on this topic, Mark Geilenkirchen, CEO of Sohar Port, said:

“SOHAR is playing an important role in the diversification of Oman’s economy as we start to take full advantage of our prime strategic location in the region, outside the Strait of Hormuz but close to the main consumer markets of Iran and the Gulf States. We remain fully committed to building a modern and sustainable logistics infrastructure that will support Oman in achieving all our Vision 2020 objectives.”

The Free Zone, which is being constructed under guidance from CEO Jamal T. Aizz, will work in harmony with the port to strengthen these statistics. Mr. Aizz explained:

“The idea of the free zone is to expand our base of investments that started in the port into more downstream activities. This involves smaller sized industries, and is an expansion of our investment area by creating economies of scale in terms of our available port, energy, and other utility infrastructure. And of course increased downstream activity spells value-added logistics attached.”

“The distribution and consolidation of goods is one of the main value propositions of the free zone where commodities come from either our port, from local resources, or from around the world, and then you redistribute them as is, or with added value through some processing or manufacturing, for example assembly, packaging, and so forth.”

Careful planning and steady work has helped Sohar to follow an impressive trajectory of development. Container throughput at the Hutchison-managed terminal has tripled over the past 5 years, in line with significant investments to increase efficiency to the highest international standards. The new ‘Terminal C’ features remote-controlled quayside cranes, ready for next generation 20,000 of Twenty-Foot Equivalent Unit (TEU) vessels. It also features an automated appointment system to reduce truck waiting times, and new Auto-Gates that cut paperwork and delays for drivers entering and leaving the new terminal facilities. Significant government investment in new expanded and uncongested highways, connecting Sohar to the UAE, Saudi Arabia and beyond is also adding to the attraction of the new hub for the region’s 3PL operators.

In order to power the new developments at the port, Shinas Generating Company SAOC are partnering with Mitsui, ACWA Power and Dhofar International Development and Investment Holding to build a combined-cycle gas turbine power plant. The power plant, known as SOHAR III, has a project value of over US$1 billion and is on track to commence commercial operations by January 2019.

The plant has more than enough capacity to fuel the port and free zone expansion, with a power output of over 1,700 Megawatts. Once completed, it will become Oman’s second largest power station. Mr Geilenkirchen explained the importance of the new plant to SOHAR. He said:

We have seen sustained double-digit growth in SOHAR for over twelve years now, and we are 100% on track for continued expansion. Our role is to ensure that world-class infrastructure is in place before our incoming tenants require it, so they do not experience delays when commencing production. In times of budgetary constraints right across the GCC, SOHAR has once again shown it is possible to develop, finance, build, own and operate a large-scale high-performance power plant like this one with a significant share of private investment. Since we started operations here in 2004, public-private partnerships have been at the core of our success story – made in SOHAR.”

SOHAR Freezone CEO, Jamal T. Aziz, added: “The first phase of SOHAR Freezone is practically leased out and our technical teams are now busy planning phase-two. The current levels of international interest from investors, especially in the food and logistics sectors is phenomenal and sufficient network power at reasonable rates is a prerequisite to the continued smooth growth of SOHAR Freezone.

Energy is a significant part of port life. In light of this, Oman Oil Refineries and Petroleum Industries (Orpic) is expanding the capacity of its refinery. It will process 180,000 barrels per day, up from the current figure of 120,000.

Five ferrochrome smelters are under construction on the Freezone. These will be responsible for managing Oman’s national food reserve once the country’s agricultural terminal is built. SOHAR describes this as a ‘tangible endorsement of the trust that the government has placed in our ability to plan for and safeguard the region’s people in times of crisis.’

As well as optimising trading conditions and boosting Omar’s economic potential, expansions at the port have had a positive influence on surrounding communities by creating approximately 8,000 direct jobs. A further 2,000 have been made in the Free Zone. Mr. Aziz spoke positively of this. He said:

 “When considering direct jobs and total job numbers, you can take a multiplier of three or four indirect jobs created in the local economy. These are services that you offer to support industry in Sohar, such as retail, hospitality, and other industries. Therefore, we expect SOHAR to not only be a Port or Free Zone, but an engine of economic growth for the country. It is to date the largest industrial area. Duqm will have to catch up in years to come, and we are about 10 years ahead in terms of development.”

Since 2004, Sohar Port and Freezone has established a 35% year on year growth, with a huge ambition to be a world leader in large deep-water ports. The port now handles over 1 million tonnes of liquid and dry bulk annually, with scope to increase this with upgraded bunker services.

Oman’s logistics strategy 2040 is now in full swing as the Sultanate develops into a formidable hub for regional trade, and an ideal place to invest and do business. The country’s prime location at the crossroads of east and west will help the Sultanate move forward fast with plans to transform itself into a major industrial and logistics centre for the global economy of tomorrow.