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Abu Dhabi, UAEWednesday 19 December 2018

Exclusive: Oman looks to develop industrial and logistics parks in concession areas

The sultanate has been driving the development of an integrated logistics industry to diversify away from oil

Petroleum Development of Oman is looking to develop further this year. Fahad Shadeed / Reuters
Petroleum Development of Oman is looking to develop further this year. Fahad Shadeed / Reuters

The upstream operator Petroleum Development Oman (PDO) is looking to develop large industrial and logistics parks in two maturing fields as it looks to maximise value, according to a senior official.

“As part of our one-stop-shop to accelerate things for PDO, we’re planning to build two industrial and logistics parks, one in Qarn Alam and one in [the] Marmul field,” the PDO external affairs and value creation director abdul Amir Al Ajmi told The National in Abu Dhabi.

“We found lots of appetite from local PDO contractors for these. Each park will be five million square metres - so a total of 10 million square metres, extendable hopefully in the future and now we’re looking for strategic partners as anchor tenants to bring other supply chains. Hopefully, sometime next year in quarter two, we’ll award this project,” he added.

Oman has been accelerating development of industrial and logistics hubs in port cities such as Sohar and Duqm as it looks to create alternative hubs to the congested and politically sensitive Straits of Hormuz.

With oil prices squeezing its economy, the sultanate - one of the smaller producers in the Arabian Peninsula with a high break-even price for oil thanks to its rocky terrain and unconventional oil and gas formations - has looked to transform its Indian Ocean-facing coastal villages into world-class ports and logistics hubs.

Although oil and gas still accounts for 84 per cent of government revenues, Oman has looked to maximise value from its maturing hydrocarbon reserves by boosting refining and petrochemical capacity at these upcoming free zones. In August, it awarded contracts to develop a US$6bn refinery with a planned capacity of 230,000 barrel-a-day that is part of a freezone hosting a port, a dry dock, an airport, an industrial complex as well as a residential and tourism hub.

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Ongoing development at these zones has piqued investor interest, with a consortium of Chinese firms looking to invest up to $10bn in the planned Sino-Oman Industrial Complex to be located within the Duqm free zone.

The development of logistics and industry around the maturing concession areas in Qarn Alam and Marmul is part of PDO’s “melt to well” strategy to source parts and equipment manufactured in the local market, says Mr Al Ajmi.

“Sezad is working very hard to bring other kind of tenants into Duqm and at the moment the government is building a gas pipeline linking our fields at Khazzan-Makarem to Duqm to provide gas there. Once that finishes, we’ll see [that] the acceleration of tenants to Duqm will be even faster and will save international contractors and suppliers lots of time and efforts,” he says.

The first gas from the BP-operated Khazzan tight gas development project started flowing in September. Production from phase one of the Khazzan project is expected to plateau at 1 billion cubic feet a day, with phase two set to add a further 500 million cubic feet a day.

Qarn Alam and Marmul are both maturing fields that are at the forefront of PDO’s efforts to recover crude through enhanced oil recovery methods. The operator has deployed thermal gas-oil gravity drainage to pump oil from fractured carbonate rock formations in the Qarn Alam field and has maintained production from Marmul through polymer injections.