Sohar Refinery Company, in many ways, is the biggest symbol of the region's industrial growth saga
Sohar Refinery Company (SRC), the US$1.25-billion-refinery, is poised to act as a catalyst in developing several downstream petrochemical industries in the Sultanate, especially a polypropylene venture and an aromatics project. Both these ventures depend on the refinery for their feedstock. The state of the art refinery not only adds value to the Sultanate's rich oil resources but also stands to enhance the contribution of industries in the gross domestic product (GDP).
Considered as the biggest project in the Sultanate after the successful implementation of Oman LNG, as much as 90 per cent of the project cost was funded by way of term loan; the balance was equity capital brought in by two promoters the Ministry of Finance and Oman Oil Company.
The Japanese Bank for International Cooperation provided US$261.9 million as term loan, while 10 regional and international banks undertook to provide a loan of US$907.8 million. The willingness on the part of international lending institutions to offer such huge funds show the confidence of these institutions on the refinery in particular and the country's robust economy in general.
As the other downstream projects depend a lot on the refinery, its timely implementation is a key factor.
Better coordination among various ministries and departments has ensured that work on the refinery proceeds as per schedule.
Unique Aspects
SRC has a crude unit with a capacity of 116,400 barrels per day (bpd) and a residue fluid catalytic cracking unit with a capacity of 75,260 bpd. Major refined products include gasoline, propylene, LPG, naptha, kerosene and fuel oil. The promoters selected Japan's JGC Corporation as engineering, procurement and construction (EPC) contractor, while LG is the operation and maintenance (O&M) contractor.
LG brings its world-class expertise in oil refining. It is also working to help the company in motivating the workforce, as also to boost Omanisation and training both crucial elements. LG has been sending several Omani engineers of Sohar Refinery to its Korean facility for training programmes, which is in line with a government strategy to create a pool of skilled petrochemical professionals.
The refinery is unique in a sense, for it operates as a toll processing unit in association with the state owned Oman Refinery Company (ORC). It complements Oman Refinery Company's Mina al Fahal plant in the production of petroleum products for both domestic and international markets.
Sohar Refinery feedstock will be delivered by Oman Refinery via a 260-km long 24-inch pipeline from Mina Al Fahal in Muscat. The pipeline was built by a consortium of Saipem/Consolidated Contractors Company (CCC), at a capital expenditure of US$88 million.
Apart from the pipeline, ample crude storage facilities have been created at both the refineries to ensure uninterrupted crude oil supply. The refined products are being exported after meeting domestic demand.
However, there could be a change in the earlier plan to export 90 per cent of the refined products due to the significant growth in domestic demand for petroleum products. The refinery has already started shipment, and as many as 10 consignments of varying products have been exported to different countries during the start-up and commissioning stage.
Downstream Linkages
Last September, a joint venture oil trading firm Oman Trading International (OTI) was floated by Oman Oil Company and Vitol to export SRC's refined products for a five-year period.
On the downstream side, SRC produces about 327,000 metric tonnes of propylene per day, which will be supplied as feedstock to Oman Polypropylene (OPP) coming up near the refinery. Also, the refinery will supply naphtha and gasoline as feedstock to Aromatics Oman, which is also coming up near SRC.
The US$313 million Oman Polypropylene is expected to play a key role in facilitating development of a cluster of plastic industries within Sohar industrial area. The project jointly promoted by Oman Oil Company, Bahrain based Gulf Investment Corporation and LG International is in an advanced stage of completion.
The plant will have an installed capacity of 340,000 tonnes of polypropylene per annum in pellets form, covering various grades for a variety of applications. OPP has an offtake agreement with LG International for exporting its products and the latter is planning to sell it in the regional market, especially Pakistan. Most of the output of OPP will be exported, with the remaining quantity used locally by ancillary industries.
Investment Initiatives
Also, there is a move to develop the local market for polypropylene a product that is used on a daily basis for food packaging, flower wrappings, furnitures and bottles, to name a few. The introduction of polypropylene industry in Oman is a launch pad for companies interested in investing in downstream polypropylene businesses.
Oman Polypropylene will provide all technical support for those interested in getting into the business or those aiming at expanding their existing businesses. Likewise, the US$1.6 billion aromatics company is setting up a project to produce 814,000 tonnes of paraxylene and 210,000 tonnes of benzene per year.
Paraxylene is used predominantly in producing polyester. Benzene is used in a variety of products ranging from plastics to pharmaceuticals. The project, coming up near Sohar Refinery, is jointly owned by Oman Oil Company, ORC and LG International. The government is planning to set up a 'Value Park' to encourage the downstream projects using products of large gas-based industrial ventures like polypropylene and aromatics.
These downstream industries are small to medium in nature with capital investment ranging from half a million dollars to US$10 million.
Another initiative is from Oman Oil Company, which is floating an investment company to encourage downstream industries in Sohar. The proposed firm will promote small downstream units using paraxylene, benzene, polypropylene and aluminium. It will also act as a facilitator in arranging technology and funds for the local entrepreneurs.
As these industries are heavily labour intensive, they could accelerate employment generation. Besides, the entire chain of the industry makes an important contribution in the form of capital formation and technological skill up-gradation.
Sohar Industrial Port profitability roadmap
At the September Board meeting of Sohar Industrial Port Company, Hans Smith, CEO of Rotterdam Port (which owns 50 per cent of the project with the Government of Oman), underlined the physical progress on the ground, the moves being made to bring the port into profit and the jobs the two partners expect to be created.
Media reports quote Smith has having referred to the new 'magnificent' container port with large gantry and small cranes already installed. "I saw a lot of people training with new equipment," Smith was quoted as saying. The container port is expected to be opened by end-2006.
Smith is quoted to have mentioned that the biggest challenge is to make sure that the Port of Sohar develops as an international hub. Over and above the captive cargo related to the industries that are there at Sohar, and those in the pipeline, the challenge is to attract "extra cargo".
"The geographical is right before the Strait of Hormuz and with a thriving hinterland," Smith suggested. "It makes sense to bring the cargo to Sohar, for instance from China, by large container ships. Part of the load will be put in smaller ships to continue its journey elsewhere to the Arabian Peninsula, Asia or East Africa.
And part of the load will travel by road to, for instance, to Muscat or the Emirates," the Rotterdam Port CEO added.
Nissan's biggest warehouse
Nissan has opened the region's biggest warehouse at Al Amerat. Toru Hasegawa, Managing Director, Nissan Middle East, formally inaugurated the warehouse at a grand ceremony last month. This state of the art outlet distinguishes itself as the region's biggest Nissan warehouse and is a manifestation of the extensive expansion plans chalked out by Suhail Bahwan Automobiles. Sprawled across an area of 16,500 sq. mt., the Al Amerat warehouse has the capacity to store a huge stock of genuine parts, guaranteeing 96 per cent parts availability for all models of Nissan, Renault and Infiniti cars.
New meat processign factory
Oman's first of its kind meat processing and packaging factory Premium Food Industries was inaugurated recently under the patronage of HH Sayyid Fatik bin Fahar bin Taimur al Said, Secretary General, Ministry of Heritage and Culture, at the Sohar Industrial Estate. Established as a part of the Sayyid Fatik bin Fahar Group of companies, the Group has always strived to explore new avenues of growth, says a media report published recently.
The company is soon to launch its own brand of a delightful range of halal meat products that are made from top quality beef, chicken and lamb and will be made from the best farms of Oman as well as around the world. The production facility in Sohar comprises the very latest equipment, assuring optimum hygiene standards.
The products will also use state of the art packaging, attractive labelling, great taste, longer shelf life, bar coding on individual products, nutritional facts explained on labels and special cooking instructions.
Dhofar Marble now Al Qula Co.
Dhofar Marble and Granite Company has raised its paid-up and authorised capital to RO3 million and RO10 million respectively. The shareholders also approved a proposal, at a recently held EGM, to change the company's name to Al Oula Company. Saudi Investors hold 48.5 per cent stake in the company, with the remaining shares being held by Omani investors.
Three firms pre quality for Barka project
Three international firms AES Oasis/AES Corp., Suez-Tractabel and Marubeni Corp. have pre-qualified to bid for the US$500 million power and water plants. The government is expected to name the winner by October, according to a media report. The Barka project, expected to go onstream soon, has a capacity to generate 550 megawatts (MW) of power and 20 million gallons per day (MGD) of water. The successful bidder will also acquire a controlling 65 percent stake in the 690 MW Rusayl Power Company its assets have been valued at US$180 million as part of the government's privatisation programme.
Development of Duqm Port set kick off
Construction of a major port and dry dock complex at Duqm on the Wusta coast is set to get under way in earnest, with the government launching the competitive bidding process for a contract covering the first phase development of the ambitious project. In the first phase, a contractor will be appointed to undertake the maritime works package entailing the construction of breakwaters and quay walls as well as carrying out dredging and reclamation works. Landside and infrastructure facilities will be established under a separate contract to be awarded in the second phase, while a ship repair facility the centerpiece of the Duqm Port complex will be constructed in the third phase.
Duqm Port will be established at Ras Duqm, some 7 km from Duqm town. The site includes the imposing headland of Ras Duqm, a smaller headland some 2 km northwest of Ras Duqm and the seabed within the bay in between. Duqm is being conceived as a main maritime gateway that will serve an ambitious industrial and commercial hub envisioned in the Duqm area and its hinterland. When completed, the facility will stimulate development in this remote part of the Sultanate, as well as bring employment opportunities to this area.
Eleven firms and their joint venture partners have so far collected tender documents for the first phase maritime works contract. Royal Haskoning, in association with Khatib and Alawi, are consultants for the project, which is being overseen by the Ministry of Transport and Communications. In the fray are well-known contracting firms such as Larsen & Toubro (Oman) with Dredging International; Hani Archirodon; galfar Engineering and Contracting; Hyundai; Van Oord; Consolidated Contracting Company and Sezai Turkes Feyzi Akkaya (STFA); Boskalis Westminster Middle East; Great Lakes Dredge and Dock Company with Carillion Alawi; Six Construct Company with Hindustan Construction; MT Hojgaard Middle East; and Penta Ocean Construction Company with Gammon India.
The selected contractor will be required to construct two breakwaters of a length of around 5 km.
He shipyard operator will oversee the construction of the facility in the third phase of the Duqm Port project.
The dry dock will take advantage of the port's proximity to busy regional sea-lanes traversing Oman's coastal waters.
A Day Out of Bechtel's Training Programme
Industrial catalyst
A Day Out at Bechtels Training Programme
Oman Economic Review 2006
