Duqm Refinery ... remarkable progress.
Diversification drive
Oman is making concerted efforts to diversify its oil-reliant economy through encouraging investment in economic cities and free zones, as well as in urban development destinations and integrated tourism complexes.
01 February 2020
Following the passing of Sultan Qaboos Bin Said on January 10, his successor Haitham Bin Tariq Al Said – chosen by Qaboos himself – is expected to follow the path set by his cousin, the Mideast’s longest-ruling monarch who transformed Oman from a sleepy country into an international force that is economically and socially progressive.
While many had doubts, the succession proceeded quickly and smoothly. Now as the sultanate gears up for the next era, Oman has much to achieve to keep it on target for continued growth. The new sultan, who also led the Oman Vision 2040 committee, faces a number of economic challenges.
“The new leader faces three economic challenges: controlling the increase in public debt, preserving the currency peg and diversifying the economy away from oil,” said Bloomberg’s chief Middle East economist Ziad Daoud. “The first two issues require urgent action; and as head of the Oman Vision 2040 committee, he would understand the difficulties of achieving diversification.”
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Khazaen Economic City ... basic infrastructure work in progress. |
Against this backdrop, Oman’s construction sector is expected to remain under pressure from weak government spending over the near term, as subdued oil prices significantly impact government revenues and hence public capital expenditure into infrastructure projects, according to Fitch Solutions’ infrastructure report for Q4 of 2019.
The sultanate continues to rely on government funding to drive infrastructure growth though it has made commendable strides in attracting investment inflows on a public-private partnership (PPP) basis. Among the sectors that have benefited are industrial, medical, utilities and tourism.
According to Fitch Solutions, the government’s strategy to diversify away from oil is helping to drive infrastructure and tourism development, which in turn is offering opportunities for developers and new business in the country.
Oman’s 2020 state budget projects a modest rise in spending, a two per cent increase over the figure for 2019. According to the Oman Observer, market pundits reacted with optimism to the budget. The newspaper quoted Lo’ai Bataineh, chief executive officer – U Capital, as saying that the “expansionary budget” is a positive signal to the investment community. “Announcements like the higher expenditure compared to last year at RO13.2 billion ($34.19 billion) with additional spending of RO2.7 billion outside the budget to be raised by PPP, loans and other internal measures related to projects in the field of petrochemical, utilities, tourism and hospitality, agriculture and food are delightful announcements which underscore the government intention of reviving investor sentiment across a diverse range of sectors,” the veteran banking sector executive said.
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A number of villa developments are in progress at Al Mouj Muscat. |
“Together with all the new regulations that have been issued and amended last year, notably the new commercial law, investment law, privatisation law and PPP law, these measures will help attract new FDI (foreign direct investment),” he stated.
Key government organisations such as the Orpic Group – the sultanate’s $28-billion integrated energy and petrochemicals powerhouse – and Oman Tourism Development Company (Omran), the sultanate’s executive arm for tourism development, are spearheading much of the development in the energy, industrial and petrochemicals sector, and tourism segment, respectively.
Utilities
Blessed with abundant solar energy and wind resources, Oman has major ambitions for the renewable energy sector.
The sultanate’s 50-MW Dhofar Wind Farm produced its first kilowatt hour of electricity last August, marking a major milestone for the GCC region’s first utility-scale wind farm. The 13 wind turbines of the landmark wind farm were connected to Oman’s electricity transmission grid in sequence by the end of last year. Other wind energy schemes include the 100 MW Jaalan Bani Bu Ali and the 200 MW Duqm projects, both of which are scheduled to be completed by 2024.
Oman Power and Water Procurement Company (OPWP), the sole buyer of electricity in the sultanate, aims to procure 3,050 MW of renewables-based capacity by 2025, representing 16 per cent of the country’s total electricity output by this timeframe.
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Madinat Al Irfan theatre ... newly opened. |
Among the ongoing projects is the 500 MW Ibri II Solar Independent Power Project (IPP), which is targeted for completion next year; and the Manah Solar 1 and Manah Solar II, which will offer 1,000 MW by 2023. Each of the projects at Manah will have a generation capacity between 500 MW and 600 MW. OPWP, which has given the green light to nine consortiums to participate in the tender for the country’s biggest solar power scheme, is expected to award the contracts in Q3 this year.
Plans are also being drawn up for a 600-MW concentrated solar power (CSP) project with thermal storage in Duqm.
Among other developments, Oman Oil and Orpic Group (OQ) has set up a dedicated fund to invest in renewables and technology.
Meanwhile, Shinas Generating Company (SGC) launched commercial operations at its power plant (Sohar-3) in Sohar Industrial Port Area in June last year. The 1,710 MW power plant will serve commercial and industrial establishments in the area.
Other projects in this sector include the 160 MW Barka Waste-to-Energy (WTE IPP) plant, earmarked for completion in 2025.
In the waste water sector, as part of a raft of water-related strategies rolled out by the government in recent years, Oman has pledged investments of around $7 billion to develop its wastewater treatment, recycling and reuse infrastructure system over the next two decades.
Among other developments, Suhar-4 Independent Water Project (IWP) with a production capacity of around 250,000 cu m per day and built with an investment of around $220 million was commissioned last October at Sohar Port.
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Madinat Sultan Qaboos ... an ambitious redevelopment project. |
Economic Cities
Major developments have taken place at Khazaen Economic City (KEC) after the master developer of the new integrated economic city in Barka unveiled the detailed masterplan for Phase One of the project in July last year.
Khazaen, strategically located between Muscat and Sohar, will cover an area of 52 sq km in its first stage. The city will serve as Oman’s northern logistics hub, connecting a number of key development projects across the sultanate via its extensive dry port facilities.
Khazaen is the country’s largest public-private partnership project and is already attracting investors through its combination of unhindered, deep-water access to international maritime routes; preferential market entry under free trade agreements with the GCC, Singapore and the US; as well as the city’s proximity to the Middle East, Indian, Asian and African markets.
The first phase will include one-of-a-kind facilities such as the first dry port in Oman, a free zone, logistics and industrial complexes as well as social infrastructure, residential, commercial and entertainment components.
In November, KEC signed an investment agreement with leading logistics companies – Marafi, Khimji Ramdas and Al Madina Logistics Services – to operate and manage the first integrated land port in the economic city.
In August, KEC awarded the first construction contract to Galfar Engineering & Contracting to develop basic infrastructure including 10 km of asphalt roads, 15 km of stormwater channels, and a 22-km potable water network.
Among the projects that are being developed in KEC is a manufacturing plant for swimming pool products for National Fibre Glass Factory (NFF).
Real Estate
Oman Exhibition and Convention Centre (OCEC), Oman’s key enabler in driving its Mice (meetings, incentives, conferences and exhibitions) ambitions, marked the completion of a key component – Madinat Al Irfan Theatre – last November. It also witnessed the opening of the sultanate’s first JW Marriott hotel.
The Madinat Al Irfan project, being spearheaded by Omran is the sultanate’s largest urban development project that aims to create a new downtown area for the Muscat capital district.
In June 2018, Omran signed a strategic partnership with Majid Al Futtaim, the leading shopping mall, communities, retail and leisure pioneer across the Middle East, to develop the western area of Madinat Al Irfan.
Another joint venture between Omran and Al Futtaim is Al Mouj Muscat, a mixed integrated tourism complex (ITC) that has been hitting the headlines in Oman over the past year. Spread along a stunning 6-km stretch of the Omani coastline, this vibrant district continues into Marsa Plaza – a 5,000-sq-m space for exhibitions, events and performance – and The Promenade overlooking the 132-berth Al Mouj Marina.
Additional dining and entertainment options are available at two hotels: the five-star Kempinski Hotel Muscat and four-star Mysk Al Mouj Hotel. Two other hotels are set to take shape at the development: Upscale property developer Alfardan Group has launched The St Regis Al Mouj Muscat Resort and branded residences, a bespoke luxury destination, in collaboration with Marriott International; while another hotel is under construction as part of the Rotana brand.
Al Mouj Muscat recently announced the sale of marina-facing two- and three-bedroom apartments within its Juman One Marina development.
Earlier in October, Al Mouj Muscat launched the second phase of its Ghadeer Villas development on the back of continued demand for its Phase One project launched in April.
Omran has also tied up with another UAE developer – Damac – for the development of Mina Al Sultan Qaboos, a $2-billion modern waterfront destination.
Damac is expected to break ground shortly on the project, following the completion of several preparatory activities. Work has been completed on the clearing of the site, and rerouting of services and utilities away from the development path. A Discovery Centre for the project has been built at the Al Inshirah plot of the Muttrah corniche.
Omran has also joined hands with Saraya Holdings Oman to develop Muscat Bay, a fully-fledged tourism complex covering 2.2 million sq m facing the waterfront of the Gulf of Oman. Upon completion, the project will include 435 residences and two five-star hotels.
The project recently marked the completion of Phase One of the Signature Parkland residential project at the Zaha property zone within the development.
Another new community taking shape in the capital is Habitat, a 75,000-sq-m mixed-use development by Tasmim, a joint-venture partnership between Omani conglomerate Shanfari Group of Companies and European architecture company Mandressi. Work on the project is progressing well and targeted for completion in the first quarter of 2022, according to Tasmim.
Elsewhere at Quriyat, Al Madina Real Estate Company is set to launch work on the first phase of its $1-billion integrated tourism complex (ITC) project. Phase One comprises a 150-unit luxury hotel and some ancillary units. Spread over a 1.3-million-sq-m area, the Quriyat ITC project comprises a golf course, freehold residential units, a water park, and three-star hotels.
Meanwhile, apart from the several hotels taking shape within Oman’s integrated tourism complexes, Eagle Hills Muscat, a joint venture between Abu Dhabi developer Eagle Hills and Oman-based Izz International, has started work on its new luxury waterfront development, The Mandarin Oriental, Muscat. The company’s pioneering project in Oman, The Mandarin Oriental, Muscat comprises The Mandarin Oriental Hotel Muscat and The Residences at Mandarin Oriental, Muscat.
Among major retail and leisure destinations being developed in the sultanate, work is under way on the Mall of Oman, considered to be the biggest project of its kind in Oman. The project is being developed by Majid Al Futtaim and is set to open in March 2021. The mall will have 145,000 sq m of retail space, a variety of dining outlets and a range of exciting lifestyle experiences. It will also include Oman’s largest VOX cinemas, a Magic Planet family entertainment centre, a 12,200-sq-m Carrefour Hypermarket and the largest indoor snow park in the sultanate.
Industry
Duqm, Suhar and Salalah are major magnets for industrial growth in Oman, thanks to their ports and their surrounding free zones that have seen major investments in the last few years.
Among the most ambitious industrial projects under way in Oman is the $6-billion Duqm refinery, work on which is more than 45 per cent complete. The refinery is expected to be ready in 2022 and is being implemented in three packages. It will offer a variety of products including kerosene, naphtha, liquefied petroleum gas, sulphur, diesel and coke.
A petrochemicals complex is also to be built as the second stage of the integrated refinery and petrochemical complex planned by Duqm Refinery which comes as part of the strategic partnership between Oman Oil Company and Kuwait Petroleum International.
Wood UK has been awarded the front-end engineering design (Feed) work for the Duqm Petrochemical Project (DPP), which also includes a the NGL (natural gas liquids) extraction facility in central Oman and a 230-km pipeline from concession areas to the petrochemicals complex that falls under Oman Oil Company’s and Orpic’s scope.
Other projects that are taking shape in Duqm include Oman’s first factory for manufacturing reinforced thermopolyethylene (RTP) pipes, being set up by Duqm Hongtong Pipes Company; and a new grinding unit for Raysut Cement Company, Oman’s largest cement manufacturer. This apart, $10.7 billion has been pledged for the development of the Sino-Oman Industrial City.
Another refinery project is planned for Salalah at an investment of $2.5 billion. Oman-based Salalah Free Zone (SFZ) signed a usufruct agreement for the construction of a 150,000-barrels-per-day refinery in July last year.
Also being built in Salalah are a steel mill for Raysut Steel Industries and the first polymer manufacturing plant in the sultanate being set up jointly by Chinese group ZL EOR Chemicals and Petroleum Development Oman (PDO).
Meanwhile, a major LNG bunkering project is set to take shape in Suhar, in a bid to establish Oman as a regional LNG bunkering hub.
Sohar Port and Freezone is also set to host four new hydrocarbon and petrochemical projects worth $2.5 billion in investments on a new parcel of land to be reclaimed from the sea as part of its ambitious Sohar South expansion project. The expansion has become necessary because the port has virtually run out of leasable real estate for new petrochemical investors. The cluster is already home to petrochemical projects worth in excess of $10 billion.
Also in Suhar Free Zone, a joint venture of Oman National Investments Development Company (Tanmia), Sanvira Industries and United Business Trading has broken ground on the Sanvira Carbon (SFZ) project, which will boast a capacity of 500,000 tonnes of calcined petroleum coke per year in Phase One. The project is due for commissioning in June 2021.
Other projects being built in Suhar Industrial City are a steel complex by Moon Iron and Steel Company (Misco) and a paper recycling facility by Keryas Paper Industry.
Other projects
Oman’s health ministry has announced plans to build the sultanate’s first medical city over a 5-million-sq-m area in Barka. The project is being developed at a cost of RO479 million in four phases. The project is part of a broader plan to get dedicated private sector-led companies assuming responsibility for the construction and management of new hospital projects under a PPP arrangement.
A key private hospital that is fast nearing completion is Oman International Hospital project – being spearheaded by three partners, Suhail Bahwan Group Holding (SBGH), Oman Brunei Investment Company (OBIC) and Idealmed Global Healthcare Services (IGHS) – which will bring some of the most advanced and innovative medical technologies to Oman.
