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Case StudySohar Industrial Port Sultanate of Oman

Project Development Brief

C. Bert KrukMarch 11, 2004 Updated March 2008

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Location Sohar

Sohar

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Table of Contents

Project Concept Sohar Industrial Port Masterplan Planned industries in Sohar Cargo and shipping forecasts Management principles and project history Milestones Project status 2004 and 2008

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Project Concept

Reasons for the Government of Oman (GSO) to initiate the development of a new port in Northern Oman• Diversification in non-oil sectors• Import / export needs of an expanding domestic

market• Creation of employment

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Advantages of Sohar as petrochemical cluster

Location outside the Gulf Availability of local natural gas In the future the Delphin pipeline (Qatar) Infrastructure Management expertise Competitive rates

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Sohar Industrial Port Masterplan

Site selection study (JICA) Masterplan design by Brown and Root (early 2000) Location in northern Oman Industrial Port Area: 2,000 hectares Potential Industrial Development Zone: 8,000 hectares

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Technical details(Investments of the Oman Government)

300 km long gas pipeline from local field to deliver 21.5 mio m3 of gas/day

6 km of breakwaters 18 million m3 dredging for the southern part of the port

basin (- 16 m) and the entrance channel (- 16.5m) 1,250 m of quaywall for containers and multipurpose

cargo 550 m quaywall for dry bulk cargo

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Technical details 2

3 jetties for liquid bulk cargoes Common utilities, cooling water in- and outlet and

service (pipelines, roads and utilities) corridors Seawater intake and outfall station of 334,000

m3/hour Wastewater treatment plant of 100 m3/hour 500 MW power station with 50 million gallons of

desalinated water

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Aerial photograph Sohar - May 2001

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Sohar lay-out plan (July 2002)

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Artist impression Sohar

21

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Sohar 2007

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Planned industries in Sohar

Refinery • Input via pipeline from Muscat Refinery• Output: 5.4 mio tons liquid bulk/year (2006)

Methanol plant • Input: Natural Gas (by pipeline)• Output: 1.6 mio tons liquid bulk/year (2006)

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Planned industries in Sohar 2

Polypropylene plantPolypropylene plant• Input from refinery productsInput from refinery products• Output: 0.3 mio tons containerised cargo/year Output: 0.3 mio tons containerised cargo/year

(2006)(2006) Urea plantUrea plant

• Input: Natural Gas (by pipeline)Input: Natural Gas (by pipeline)• Output: 1.1 mio tons dry bulk/year (2006)Output: 1.1 mio tons dry bulk/year (2006)

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Planned industries in Sohar 3

Aluminium smelter• Input: Import of alumina• Output: 0.5 mio ton multipurpose/container

cargo/year (2007) Polyethylene plant

• Output 0.5 mio tons per annum (2007)

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Cargo forecast (mio ton/year)Base Case scenario

0

2

4

6

8

10

12

14

16

2003 2004 2005 2006 2007 2008 2009 2010

Containers and general cargoLiquid bulkDry bulkTotal

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Shipping traffic forecast

0

100

200

300

400

500

600

700

2003 2004 2005 2006 2007 2008 2009 2010

Container and general cargo vessels

Dry bulk vesselsLiquid bulk vessels

Totals

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Common services to be supplied

Nitrogen Formaldehyde Liquid Jetty Operations Towage, pilotage and mooring/unmooring services General cargo and container handling Firefighting services

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Management principles and project history

1999: visit Omani Government Officials to Rotterdam (RMPM)

2000: Negotiations between GSO and RMPM about in-house consultancy

2001: Acceptance of Partnership March 2002: Signing of MOU

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Management principles and project history 2

July 2002: Signing of Shareholders and Concession contracts (SIPC: Sohar Industrial Port Company)

SIPC is a 50/50 Joint Venture between the GSO and RMPM

SIPC will manage Sohar along the principles of a Landlord Port

Cargo handing, industries and services will be executed by and invested in by the private sector (concessions and licences)

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Strategic issues

Financially attractive project Long term trend: Petrochemical industry moves

(partly) to the Middle East Sohar project can be used as Active Business

Intelligence Source Sohar project offer unique chance for younger

RMPM managers to gain experience in the field (HRM)

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Milestones

July 2002: Signing of Shareholders, Concession and Usufruct Agreements between the Sultanate of Oman and the Port of Rotterdam, based on 50/50 joint venture

August 2002: Establishment of Sohar Industrial Port Company – SIPC (SAOC), with a 25 year concession over SIP by Royal Decree (RD 80/2002) to develop and manage a 2,000 hectares industrial area with a word class deep sea port.

April 2004: Arrival of the first commercial vessel carrying project cargo

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Milestones 2

December 2005: The largest investor, Sohar Aluminium, announces a $ 2.4 billion investment in Sohar

June 2006: Arrival of the first liquid bulk tanker September 2006: Refinery in commissioning stage December 2006: Oman International Container

Terminal receives the first container vessel December 2006: The Port of Sohar receives the

Dubai International Maritime Award for Outstanding Success in Port and Terminal Operations.

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Status of the project in 2004

Negotiations with individual clients on lease contracts (so-called Sub-Usufruct Agreements in principle as Flat Lease Rates)

Sub-Usufruct agreements signed with Refinery and Stevedoring Company

Negotiations with all clients on Port Rules and Regulations PRR (Port Bylaws)

Negotiations with all clients on Construction Rules and Regulations (CRR)

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Status of the project in 2004 - 2

Hiring of local staff Organization in place but still too much dependency

on Dutch expertise New potential clients

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Status of the project in 2008

Many internationally established companies have settled in Sohar such as: Air Liquide, Alcan, Hutchison Port Holdings, Larsen & Toubro, LG, Odfjell and Oiltanking

Private sector investments are in the range of US$ 12 billion

Marine services (towage) are provided by private company

International Maritime College Future employment 8,000 direct and 30,000 indirect