US embassy cable - 05MUSCAT1501

UNCLAS SECTION 01 OF 02 MUSCAT 001501 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR NEA/ARPI, EB/TRA/OTP FOR DHAYWOOD AND SMILLER 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, EIND, EWWT, EINV, MU, Economic Affairs 
SUBJECT: OMAN PORT EXPANSIONS 
 
REF: MUSCAT 477 
 
Cable contains sensitive business information.  Please 
protect accordingly. 
 
1. (SBU) Summary:  Two of Oman's principal ports, Sohar and 
Salalah, are aggressively moving forward on expansion of 
their respective operations.  The Sohar Industrial Port 
Company is holding a November conference to introduce itself 
to the region, while Salalah Port Services is pitching 
expansion opportunities to its Omani government partner in 
its bid to grow port business.  End Summary. 
 
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PORT OF SOHAR: ADVERTISING CAMPAIGN IN FULL SWING 
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2. (U) The Ambassador and Econoff recently attended an 
informational briefing on the development of the Port of 
Sohar, a 50-50 joint venture between the Sultanate and the 
Ports of Rotterdam.  The  Port of Sohar, operated by Sohar 
Industrial Port Company (SIPC), will anchor the $10 billion 
industrial development planned for the region, part of Oman's 
vision to diversify its economy in light of limited petroleum 
reserves.  Jan Meijer, CEO of SIPC, expressed optimism that 
the Port's advantageous location would lend to its success. 
He stressed that Sohar is in close proximity to the dynamic 
economies of Dubai and Abu Dhabi, outside the Strait of 
Hormuz, and within 300km of three large gas reserves.  In 
addition to its berths for industrial liquids, Sohar is 
positioning itself as Oman's largest container port with over 
7 square kilometers of land and a projected 10 dedicated 
shipping berths.  The first 600 meters of container terminal 
is scheduled to open in April 2006 and will be managed by 
Hong Kong-based Hutchinson Port Holdings.  Jamal Aziz, Deputy 
CEO of SIPC, also noted that the location will enable 
industrial sites to readily tap a large, young labor pool, as 
two-thirds of Oman's population resides on or in close 
proximity to the coast between Muscat and the UAE border. 
 
3. (U) To promote Sohar, Port officials have teamed with 
Middle East Economic Digest (MEED) conference coordinators to 
sponsor a two-day conference to be held on November 15-16. 
The conference will feature a number of speakers from 
companies investing in the Sohar industrial area, including 
CEOs from the Oman Petrochemicals Industries Company (the Dow 
Chemical venture), Sohar Aluminum Company (for whom Bechtel 
is building the aluminum smelter), Oman Oil Company, and Oman 
Methanol Company.  The program will also include addresses 
from Omani Commerce and Industry Minister Maqbool Sultan and 
Jan Peter Balkenede, Prime Minister of the Netherlands. 
 
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PORT OF SALALAH: PITCHING EXPANSION PLANS 
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4. (SBU) The Port of Salalah has risen quickly to become a 
key transshipment hub for Maersk and its parent company A.P. 
Moller (APM).  Operated by Salalah Port Services (SPS), which 
is 30% owned by APM Terminals and 20% owned by the government 
(with the remaining 50% owned by pension funds, Omani 
corporations, and private investors), the port handled 2.23 
million 20-foot equivalent units (TEUs) in 2004, ranking it 
as the world's 31st busiest port.  As reported reftel, plans 
are underway to expand the capacity of the port by adding two 
berths to the existing four that are in operation.  Once 
completed, the $234 million expansion, shared roughly evenly 
between SPS and the Omani government, will increase capacity 
by 1.8 million TEUs, bringing total capacity to 4.38 million 
TEUs. 
 
5. (SBU) SPS already is looking beyond the completion of this 
project to expand the port to 18 berths.  It will soon 
approach the Omani government with a proposal to build an 
additional three berths (7-9) with a 2.99 million TEU 
capacity.  Of the total three-berth cost of $460 million, SPS 
would pick up $320 million if the Government were to launch 
the final expansion with an outlay of only $140 million.  The 
three additional berths (7-9) would form the hub for an 
eventual 18 berth expansion, with SPS picking up all the 
costs of the remaining nine berths with no further outlays by 
the government. 
 
6. (SBU) Jack Helton (protect), Vice President of the West 
Central Asia Region for APM Terminals (30% stakeholder in 
SPS), and former CEO of Salalah Port Services, expressed 
concern that the Government's recent shift in focus from 
Salalah to Sohar may hinder port expansion plans. 
Notwithstanding some skeptics, SPS is confident that Salalah 
port could have a very bright future, if allowed to do so. 
BALTIMORE