Ad Duqm was once, only a few years ago, a small village with a couple of shops, an equal number of local restaurants and it was a cash economy with not even a bank. However times have changed and Oman’s Ad Duqm Port and Free Trade Zone Ad Duqm (Duqm SEZA) hosted Oman Wanfang LLC, a Chinese company, for a signing ceremony on the 19th April for Oman Wanfang to develop 1,172 hectares of land adjacent to Ad Duqm’s port as Oman China Industrial Park at Ad Duqm.
Ad Duqm is a key part of Oman’s renewed focus on economic diversification. It makes use of the geographical location close to major shipping lanes and the potential markets of India, Iran, Arabia and Eastern Africa. Critically Ad Duqm is also outside the choke points of the Strait of Hormuz and Bab Al Mandab offering organisations an open port on the Arabian Sea and Indian Ocean. It follows the Jabal Ali/Dubai model of creating a major Port with an outward-looking Free Trade Zone to jump-start what is intended to be a model city.
Oman Wanfang is a consortium of six private Chinese companies backed by the regional government of Ningxia region (a region with a substantial Muslim population) which also holds a regular Chinese-Arab trade show. The initial agreement for 50 years was signed in May 2016.
The importance of the project to Oman is clear by the attendance of H.H. Sayyid Taimur Al Said
whose profile within Oman is rapidly increasing after his father was appointed Deputy Prime Minister for international cooperation and the Sultan’s special representative.
The project is divided into 3 sections. The largest of 870 hectares will be allocated to other (Chinese) investors and companies under the supervision of Oman Wanfang who will also be responsible for the area’s infrastructure.
The government and Wanfang agreed on the minimum development requirements at Ad Duqm Port and Free Trade Zone undertaken by Oman Wanfang and implementation phases, which will include the development of infrastructure and the establishment of a number of end-user projects.
My other books on Oman include The Land of Frankincense in Dhofar, its UNESCO World Heritage Sites and Sultan Qaboos Grand Mosque.
Subsidiaries of the Power Construction Corporation of China, will invest $400 million to build a city sized 300MW power plant for tenants operating in the China-Oman Industrial Park. The secondary investors may produce assembly plants, vehicle plants including production of Military Humvee-type vehicles from Wuhan Xiao Long Auto-Tech C, halal foods, logistics, and e-commerce units, solar-based equipment from Ningxia Zhongke Jiaye New Energy, car batteries, oil and gas tools, bicycle assembly units, apparel production facilities.
A smaller area of 292 hectares will be developed for an oil refinery with about 230 thousand barrels a day (compared to Oman’s current production of 1 million barrels) and petrochemicals derivatives, aromatics, methanol. Again the responsibility for development and infrastructure will be Oman Wanfang’s.
The balance of the allocated land of 12 hectares will be a tourism project that should include a $150 million 5star hotel, a $100 million hospital and a school.
This is a vast project, considerably larger than the existing port zone and about 50% of the size of Sohar Port. Oman Wanfang will need to develop not less than 30% of the land within 5 years and finish the tourism project within 4 years from the date of signing. Probably the need for a hospital will be the driving requirement for the early finish of the tourism project.
This project which has attracted up to USD301 million from Asian Infrastructure Bank (a Chinese backed organisation) is anticipated to have a $10billion investment that may form a central pivot of Chinese ports in the Arabian Sea part of the ‘One Belt, One Road’ / ‘Belt and Road’ initiative. The northern terminus will be Pakistan’s Gwadar (previously an Omani enclave) whose port will also be the terminus of the revived Karakoram Highway route from north-west China into Pakistan. Like Ad Duqm, Iran will be a probable supplier of gas to power projects at Gwadar.
The port at Gwadar is largely operated by a Chinese company. The southern port seems likely to be Bagamoyo in Tanzania which will be a Tanzanian, Chinese and Omani government project. This project which though signed in 2015 has had a stop/start life so far and with an existing naval port being built as a forward support facility by China in Djibouti it will have competition for investment. The Chinese port at Piraeus might allow ships to exit the Suez canal directly into Europe.
In addition to the Chinese investment, there is an additional Duqm Refinery, a 50:50 joint venture between the Oman Oil Company and Kuwait Petroleum . This project is seeking 65 percent of its $7 billion capital expenditure to build a refinery from both international and local lending institutions. Iran may also build a vehicle manufacturing plant and Britain may become a tenant through its naval support operations based in Ad Duqm port.
The United Kingdom has also signed to build facilities in Duqm, a return to the area after the UK pulled out ‘East of Suez’ in the late 1960s. The larger port will also allow the soon to be launched aircraft carrier ‘HMS Queen Elizabeth’ to berth or to have service. This UK agreement will place the UK along with China and Iran as neighbours.
To support all this activity an additional flight between Ad Duqm and Muscat has started and the airport at Ad Duqm will be expanded to handle half a million passengers a year. This airport expansion is likely to be finished in 2018.
Originally a key sales factor for Ad Duqm and therefore many of these projects was the Oman Rail project which was entirely a freight concept in Oman; it would also connect with the other Arabian Peninsula countries. This project is currently abandoned, though a small section in Oman may be built. Now the principal routes to success for Ad Duqm seem to be as a transhipment hub, port outside the Strait of Hormuz, a local manufacturing base and oil refinery. In many of these areas it is in direct competition with established ports such as Jebel Ali, for transhipment and manufacturing; Fujairah (UAE) for its outside the Strait of Hormuz location and manufacturing as well as oil bunkering and refinery, Khor Fakkan (UAE) for its outside the Strait of Hormuz location and container port. It is also in direct competition with two larger ports in Oman which also offer many of the key selling points.
It remains to be seen if Ad Duqm can offer competition to those ports especially the ones in the UAE with their well-established links and their location in a country which is China’s largest trading partner by far in the region.