Salalah Embarks On Massive Infrastructure Development Drive

Salalah in history has enjoyed a reputation for being nothing more than a rebellious if quiet backwater in the remote south of Oman. In the late 1960s, as British explorer Ranulph Fiennes’ candid memoirs attest, it became a source of contention in the superpower confrontation between Russia and the West. Oman’s Sultan Qaboos was himself held under house arrest in Salalah for four years before unseating his father in 1970. Back then, the idea that Salalah would become a crucial node on global trade routes between China, Western Europe and the US must have seemed fanciful in the extreme.

Slowly, Salalah has broadened its outlook under Qaboos’ reign. At the turn of the millennium, the obituary writers sharpened their pencils to herald of
the demise of Dubai’s Jebel Ali Port on the opening of the new port in Salalah. Port officials there are explicit over the proposition that if Salalah had been established 20 years before Jebel Ali, instead of 20 years after, the ‘swing role’ played by Dubai in global trade, as the biggest port between Rotterdam and Singapore, would today be held instead by Salalah. Situated only 180 nautical miles from the global shipping lane between Colombo, the Red Sea and the Suez Canal, Salalah is perfectly placed to act as a magnet for global shipping.

Today, several projects, both planned and underway, are helping to take Salalah’s ambitions to new frontiers. Expansion of the port continues, while parallel efforts will ensure that Salalah’s interlocking pieces operate as a seamless whole. Port of Salalah officials stress the importance of developing a logistics hub in the city around the port, but which also includes the free zone and the airport. Given the synergies between these players, there are already signs that the vision is bearing fruit.

Port of Salalah is the focus of today’s development, and officials have been mindful of the need to build up the logistics triangle which has taken a decade to come to fruition. Port capacity is today around five million TEU per annum, and expected to go on growing, as major container lines, such as Maersk, MSC, APL and CMA-CGM build their presence in the region. The growth of East Africa, with a new port being built in Kenya, and the resurrection of container feeders into Mogadishu, the Somali capital, is also spurring optimism that a wave of port development in the war-torn country could be in the offing, with Oman as an investor and skills provider.

Development of berths 7-9, delayed by around five years by the global slowdown, is expected to be complete by around 2016. Further land reclamation will allow for expanded container or general cargo facilities, and if the former option is taken, it is not an outlandish notion that in 20 years, Port of Salalah will have 18 million TEU of capacity, just shy of the figure for the UAE’s Jebel Ali Port. A northern breakwater is to be constructed, providing further shelter for the port, and including a major ocean cruise terminal. As with all Gulf destinations, Salalah has been experiencing a boom in cruise, and is expected to host around 30,000 such tourists in 2014.

Dry and liquid bulk jetties are scheduled for completion in April 2014 on the southern breakwater, which will be extended, in concert with the new northern breakwater, to form a narrow mouth to the port. Sea captains currently complain about the appreciable swell as they enter harbour.

“Liquid bulk is a bright spot for the future. We are advancing our capabilities around methanol, gasoline, diesel, and in the near future, caustic soda, LPG (liquid petroleum gas), ammonia, distillate and storage tanks will add movement,” said Ahmed Akaak, Port of Salalah acting CEO. “On the dry bulk side, the port handles approximately three million tonnes per annum (mtpa), especially limestone and gypsum, and this year we’ve added three mining companies that are expected to contribute an additional one mtpa each next year. That’s elevating our volumes by over 30 per cent.”

Air Routes

Salalah Airport is undergoing a major expansion, with a massive new terminal going in at the hitherto undeveloped north side of the airport. The facility will increase the airport’s capacity to one million passengers in 2014, expandable to six million passengers as needed. Parallel taxi-ways 4,000 metres in length are also planned as well as parking for almost 2,000 vehicles. Qatar Airways launched four times weekly flights to Salalah in May, and has put the rest of the world within easy reach via its hub in Doha. Although Qatar is understood to have an immediate focus on the Salalah tourism industry, business officials are itching to find new synergies to put cargo to work, and hope that it will be only a matter
of time before Emirates starts operating flights from Salalah into Dubai, which will put the world at Salalah’s feet. The city’s upcoming new cargo terminal will have an initial capacity of 100,000 tonnes per annum.

“Sea-air is cyclical and in a bit of a downturn currently, but we still see a major opportunity for customers, especially those going into Western Europe from Asia,” says Akaak. “We worked with Oman Air and through them, between our network connectivity into Asia, and their connectivity into Europe, there’s an opportunity to save at least 48 hours off sea-air transit time and $0.50 per kilo on the air freight compared with the current market-leading sea-air location,” a veiled reference to Jebel Ali, the region’s leading port.

Rail Journey

A key plank in the strategy to put Salalah on the map will be the development of the GCC railway, with plans for a direct link between Kuwait City and Muscat likely to be extended to Salalah at a later stage. The tender for the design phase is to be awarded this year, meaning that the thorny decision about whether to have a spur to Duqm, the new ship-repair and petrochemicals hub on Oman’s eastern coast, approximately half way between Muscat and Salalah, or a direct line, will soon have to be confronted. Port officials are enthusiastic about continuing the line to the Yemeni border, where Oman’s Mazyouna Free Zone is attracting a growing number of business ventures. This is run by Oman’s Public Establishment for Industrial Estates, which already has a thriving presence in Raysut, adjoining Salalah, with Salalah Grain Company and Salalah Macaroni Company forging ahead.

Global Industries

Two SFZ companies stand at the vanguard of Salalah’s efforts to drive forward expansion. Salalah Methanol is a one mtpa methanol production facility in
SFZ located near the Port of Salalah. Established in 2006, the plant is owned by Oman Oil Company (OOC). “Methanol is produced from sweet natural gas supplied to the facility through a 24-inch pipeline provided by the Ministry of Oil And Gas, through Oman Gas Company,” the company’s website says. “The product methanol is exported from the Salalah Port Company facilities (Berth 30) which are in the immediate vicinity of the Facility.” Methanol is a vital intermediate in the manufacture of plastics and several other industrial products.

Octal Petrochemicals claims to be one of the largest PET (poly-ethylene terephthalate) pellet and sheet manufacturers outside the US. “PET is unique in its value as a clear rigid packaging material,” Octal says. “It possesses an attractive combination of mechanical and optical properties that make it the preferred material for liquids, food and consumer product packaging. OCTAL has the production capacity to lead the wholesale conversion of global product lines to PET packaging.”

A third player which is doing well in Salalah is Raysut Cement, which now has an annual capacity of around three mtpa. Mining and quarrying is also a growth area, with Thumrait, 80km to the north of the city, providing gypsum and limestone for cement and other manufacturing. Around 75,000 lorries make the trek from Thumrait to Salalah annually, and there are hopes that a spur on the Muscat to Salalah railway will take in the importing mining down to get traffic up the roads and speed up the logistics process.

All in all, Salalah is well placed to make progress in future, but one fly appeared in the ointment in summer. On July 15, Port of Salalah announced the resignation of Peter Ford, CEO, to the Muscat Securities Market in a statement on Thursday 11 July. “Beyond this statement there is no further comment from the company at this time,” it said. Ford has worked to position the port for the future. It is too early to say who his replacement will be, although Omani Akaak is now acting CEO.

Figures just released by Port of Salalah put the port at number 18 globally in terms of throughput and performance metrics and number six for transhipment ports. Looking back to the run-up to 1970, when Sultan Qaboos took over the running of the country, it’s an astonishing achievement. Akaak is bullish about the current state of affairs. “The fact that Salalah has one of the world’s top ports is testament to the progress Oman is making.”