VZCZCXRO1886
RR RUEHDE RUEHDIR
DE RUEHMS #0171/01 0511212
ZNR UUUUU ZZH
R 201212Z FEB 07
FM AMEMBASSY MUSCAT
TO RUEHC/SECSTATE WASHDC 7828
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 MUSCAT 000171 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR NEA/ARP, EEB/CBA, EEB/TRA/OTP 
COMMERCE FOR ITA COBERG 
STATE PASS TO DEPT OF TRANSPORTATION 
 
E.O. 12958: N/A 
TAGS: ECON EINV EWWT PREL MU
SUBJECT: SOHAR PORT OFFICIALS THINKING BIG 
 
 
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Summary 
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¶1. Port of Sohar officials continue to think big in terms of 
port expansion as industrial projects for the complex 
continue to come on-line.  The Port is positioning itself as 
a convenient economic alternative to ports within the Arabian 
Gulf, with its dry, liquid, and container terminals already 
up and running.  Port officials do not believe that looming 
gas shortages in Oman will crimp the complex's development, 
and recently expanded land available for development of a 
free zone.  End Summary. 
 
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Location, Location, Location 
---------------------------- 
 
¶2. On February 12, the Ambassador toured the Port of Sohar 
with Sohar Industrial Port Corporation's (SIPC) chief 
executive officer Jan Meijer.  The Port, a 50-50 joint 
venture between the Sultanate and the Port of Rotterdam, 
serves as the anchor the $12 billion industrial development 
planned for the region.  The Port is managed and promoted by 
SIPC, which has entered into a 25 year concession agreement 
with the Omani government.  Meijer is confident that the 
Port's advantageous location outside the Strait of Hormuz and 
within 300km of three large gas reserves will lend to its 
success, as well its relatively short distances from Abu 
Dhabi and Dubai. 
 
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Of Petrochemicals, Metals, and Utilities 
---------------------------------------- 
 
¶3. The Port area, which encompasses 2,000 hectares, runs 
seven kilometers long by three kilometers wide.  The 
construction phase of the project has already generated at 
least 10,000 construction jobs, while 7,000 direct and 28,000 
indirect jobs are expected once all projects are completed. 
 
¶4. The Port complex is divided into sectors encompassing 
petrochemicals, metals, and utilities.  Included in the 
petrochemicals division are a 5.4 million-ton per annum (tpa) 
refinery valued at $1.24 billion, a 1.2 million-tpa urea 
plant valued at $600 million, a 1 million-tpa methanol plant 
valued at $500 million, a 0.85 million-tpa polyethylene plant 
valued at $5.5 billion (Dow is a 50% investor in the 
project), and a 0.34 million-tpa polypropylene plant valued 
at $313 million.  The metals section will consist of a 1.2 
million-tpa steel plant valued at $1 billion, a 0.35 
million-tpa scrap metal plant valued at $40 million, and 
0.325 million-tpa aluminum smelter, to be constructed by 
Bechtel, valued at $2.1 billion.  Indian firm Larsen and 
Toubro will open a steel fabrication facility and, most 
recently, SIPC entered into a $1 billion agreement with 
Brazilian iron ore producer CVRD.  The utility section will 
feature a private 1000MW power plant for the smelter project 
and a 600MW power and 30 million-gallon per day water 
desalination plant operated by Suez Tractabel. 
 
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Open for Business 
----------------- 
 
¶5. The port itself opened for business in 2004 when C. 
Steinweg commenced operations at the port's dry goods 
terminal.  This terminal has facilitated the inflow of 
materials for the port complex's development.  In addition to 
its berths for industrial liquids, Sohar is positioning 
itself as Oman's largest container port with over 7 square 
kilometers of land and a projected 10 dedicated shipping 
berths.  The Oman International Terminal Company, a 
partnership of Hutchinson Port Holdings and Maersk Sealand, 
recently opened for business and currently receives one ship 
per week.  The port overall is already doing brisk business, 
with operations handling volumes that were not expected until 
¶2008.  Once all berths are fully operational, the Port will 
be able to handle 6.8 million twenty-foot equivalent units 
(TEUs) of cargo per year. 
 
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What Gas Concerns? 
------------------ 
 
¶6. Meijer brushed aside the question of the scarcity of gas 
affecting the Port's development.  He noted that at the 
present time, Oman had sufficient gas supplies to continue 
 
MUSCAT 00000171  002 OF 002 
 
 
fueling Sohar's development, and that the government, which 
is offering low-cost gas to tenants of the complex, would be 
able to obtain sufficient reserves either from continued 
exploration within the country or from its neighbors.  Meijer 
stated that "At the end of the day, Sohar lies within several 
hundred kilometers of the world's biggest oil and gas 
reserves." 
 
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Comment 
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¶7. The Port is off to a flying start, though the refinery and 
polypropylene plants were closed for several weeks to address 
production hiccups.  The aluminum smelter under construction 
by Bechtel is on-track, as the framework and roofing for the 
plant's main production center have been completed.  Port 
officials continue to think big, and have recently relocated 
and expanded the proposed free zone, which will now encompass 
3,000 hectare of land adjacent to a planned three-lane 
highway connecting Muscat with Dubai.  Of particular interest 
are the plans to construct the polyethylene plant; the 
government and Dow are reportedly updating the plans for the 
facility, whose estimated construction costs have increased 
since the project's inception.  With the upcoming 
implementation of the U.S-Oman Free Trade Agreement, Post 
expects to see continued interest from U.S. investors in this 
region of Oman. 
GRAPPO