Inland port, logistics park, highway and freight rail to be co-located outside Muscat.
The government of Oman is fast-tracking development of an inland port near the capital of Muscat to speed the movement of ocean cargo from a local seaport to the country’s main population center.
The 30-hectare dry port is part of a larger plan to build a logistics park and retail district outside the city as officials look to diversify the economy from dependence on petroleum.
“The real aim for this is to help reduce logistics costs by providing an inland port with efficient customs capability and supply land for warehousing development,” said Brad Julian, whose eponymous port consulting firm in Annapolis, Md., is advising Oman on the project.
The sultanate early this year launched a tender process for a contractor to lease and manage the intermodal yard for five years. More than a dozen firms that formally expressed interest could be invited to respond to a request for proposals this spring, the former APM Terminals official and World Bank analyst, said. An operator, or consortium leader, is required to have five years of experience operating inland ports and handled at least 200,000 TEUs per year over the last three years.
The need for an intermodal hub increased in August when the government repurposed the Port of Sultan Qaboos in Muscat for cruise business and shifted all container and general cargo about 230 kilometers north to the Port of Sohar, which was originally built to handle breakbulk and bulk commodities such as iron pellets and coal to support industrial activities with re-export potential. The old port of Muscat is in the historic city center and no longer could sustain cargo growth. It handled more than 450,000 TEUs in 2012, well above the stated annual capacity of 300,000 TEUs. The port is constrained by non-industrial property and narrow streets, and its layout is not conducive to expansion. Morning and afternoon truck restrictions prevent receiving and delivery for several hours a day.
Officials decided to take advantage of the growing demand for tourism and Middle East cruises, especially from European vacationers, by dedicating Muscat to passenger vessels. In 2010, the city welcomed 350,000 cruise visitors compared to 12,000 in 2000 and $10 billion in public-private investment is expected to attract 12 million tourists annually by 2020 compared to 3.2 million today, according to the government.
The majority of Oman’s 3.2 million citizens and expatriates live in the northern third of the country, near Muscat. The Port of Salaleh, at the southern tip of Oman, sits on the Arabian Sea near the approach to the Gulf of Aden and serves as a major transshipment port. But the port is primarily dedicated to relaying cargo between smaller regional vessels and larger vessels plying the main East-West trunk lines, so very little cargo makes its way to the Muscat market. As such, the dry port is not designed to serve Salaleh.
The decree closing the Port of Sultan Qaboos to cargo has forced shippers to incur greater transport costs moving goods by truck back to the Muscat metropolitan area.
The government is developing the South Al Batinah Logistics Area (SABLA) with the goal of reducing the impact of port changes on inland delivery, as well as address the shortage of commercial real estate for warehousing and distribution in Muscat, according to Julian and government documents. Adjacent to the logistics park will be light industrial and retail centers.
The dry port is the cornerstone of the logistics park and free trade zone. It will be located between a new expressway under construction that will connect Sohar and Muscat, and a planned rail route for the GCC Railway. The highway is expected to be finished in 2018, but trucks can use an existing secondary road network until then.
The six members of the Gulf Cooperation Council have for years envisioned a 2,177 kilometer-long, interoperable rail network for freight and passenger travel along the Arabian/Persian Gulf coast. The railway will pass through at least one city in each of the six GCC member states, from Kuwait to Muscat, without stopping at the border for customs clearance. The railroad is seen as a way to spur trade, regional economic integration, and development, as well as lower transport costs.
Each state is responsible for developing its portion of the project and regional networks to feed into the GCC Railway, with various rail lines set for completion between 2018 and 2020, at a total cost of about $30 billion, according to the Khaleej Times in the United Arab Emirates.
The first stage of the rail system has been completed in the United Arab Emirates and Saudi Arabia also has several operational rail lines.
The government of Oman is spending $18 billion to build out its rail network. It recently let a design-build contract for the first line that will run from the Abu Dhabi border at Al Buraimi to Sohar.
Rail service to the SABLA dry port won’t be available until sometime after 2020, so the container yard will initially support trucking operations, Julian said.
The projected demand for the container depot is 410,000 TEUs in 2015, rising to 1.7 million TEUs by 2030, according to a market study conducted by Frost & Sullivan. The numbers include organic container volumes handled by the Port of Sohar, and adjustments for some Sultan Qaboos cargo diverted to ports in the United Arab Emirates because of the shift.
The SABLA should improve supply chain efficiency because containers offloaded from vessels can be immediately trucked from Sohar under a customs bond without having to be appraised or assessed duties until they reach the bonded dry port. Large retailers, for example, can then shuttle shipments to warehouses immediately outside the inland port and supply their stores on the other side of the development.
The inland depot will alleviate capacity issues in Sohar and offer shippers more attractive free time and per diem rates for storage, Julian said. The facility will also support the receipt of empty containers for export loads, return management or repairs.
A container freight station for consolidating and deconsolidating cargo is an option.
Omani officials, intent on mitigating the extra trucking costs associated with rerouting cargo through a more distant port, are also planning to establish a highway corridor for rigs with tandem trailers—a first for the nation, according to the head of Julian Associates.
The expressway will have mixed traffic, but under the proposed program licensed motor carriers could operate dual-trailer trucks on the designated route.
Julian said the Omani government has selected a construction firm to design and build the container yard, which will be a grounded operation. Land is currently being leveled and graded. Officials want to quickly select a bidder to operate the inland port so the company can provide feedback on the design where possible in the schedule. Officials say the facility will be ready in October, but the remaining timetable suggests the end of the year is a more realistic completion date.
The government is funding the $26 million start-up cost for the inland port because it is a greenfield project that needs to be quickly established, but it is leaving the commercial risk to the operator, Julian said. The total investment for SABLA’s first phase is about $150 million.
After the initial term, Oman’s government could seek a longer-term development contract under which a private-sector operator takes the financial risk to expand the depot, including building an intermodal transfer area. Decisions on an intermodal terminal will follow the release of a definitive schedule for the GCC Railway project, Julian said.
“The government is taking on the initial build risk to get over the start-up phase. And once we have more consistent volumes, the project will be restructured to involve much more private capital,” freeing up government money for social-related projects, he said.
This article was published in the May 2015 issue of American Shipper.
