Ports Bounce Back in the Middle East

By Carly Fields

In a region beset with political rifts and civil wars, and suffering from an unhealthy dependence on oil price revenue, ports and terminals in the Middle East have risen above the tribulations.

The recovery has been spurred by improvements in project and breakbulk cargo volumes in line with better oil and gas prospects, as countries in the region take advantage of oil price improvements. Plus, post-war rebuilding and more immediate humanitarian roles aiding those still locked in conflict have given further impetus to cargo growth.

Breakbulk and project cargo has been the Port of Duqm’s core business since its inception in 2012, primarily driven by oil and gas-related movements. Duqm claims to be the only port in Oman that can handle the largest of the project cargoes, putting it in a “good position,” according to Erwin Mortelmans, commercial director.

However, the mega-cargo sector makes up only a small percentage of project cargo business handled at Duqm, which includes project cargoes for BP’s Khazzan gas field project in Oman, a mega power plant, and a plastics project. “These projects have secured us a large share of movements over the past year,” Mortelmans said. There are projects supplying cargo in the Duqm area as well, with a petrochemical facility under construction.

The Duqm has also been successful in attracting structural cargoes, including oil country tubular goods, or OCTG pipes, used for oil and gas exploration. “This is a very large market in Oman with more than 200,000 tons of pipes imported per year,” Mortelmans said. “These structural cargoes will increase our handling this year, from the 500,000 tons handled in 2017.”

Further, Duqm refinery is expected to reach financial close by the end of the first quarter and Mortelmans expects to see cargoes related to that project moving through the port by the end of the year.

Capacity-wise, Mortelmans said the port still has ample room to grow. It will have access to a 2.2 km-quay in the first phase. Currently, 1.2 km is operational, the remaining part being finalized by a contractor. The full quay is expected to be completed by the end of 2019. Duqm will then be the single operator of five cargo streams: multipurpose; roll-on, roll-off; containers; naval; and dry bulk. The port utilizes two 120-ton mobile harbor cranes, which is “largely sufficient” for breakbulk and container business, with gear on ships used for larger cargoes.

The Port of Duqm is managed by Port of Duqm Co. SAOC, a 50:50 split between the Omani government and a Port of Antwerp consortium. Under an agreement signed with the Omani government in April 2011, the joint venture was granted a 28-year concession to co-invest, operate, manage and market the Port of Duqm.

Salalah’s Growth Markets

At Oman’s other project cargo and breakbulk hub, Salalah, handling projections for this year are also on an upward trajectory. General cargo through the port was 14m tons in 2017 and is expected to rise 5% to 10% this year. The projected increase has prompted plans to expand the cargo terminal, bringing two mobile ship loaders into service that will double productivity and effectively increase capacity.

For breakbulk, cargoes through East Africa and India are fast-emerging growth markets. Ahmed Suhail Qatan, COO of the port’s General Cargo Terminal, added that the stable political and social situation in Oman has encouraged investment and prompted an increase in overall cargo demand.

Specifically for project cargo, Qatan believes that Salalah has the right experience to receive the pipes and equipment necessary for the Petroleum Development of Oman facilities under construction near Oman and for the planned Salalah LNG ammonia and power plant.

Additionally, the port takes its responsibility as a gateway to war-torn Yemen seriously. “We are close to Yemen and are involved in the humanitarian effort there,” Qatan told Breakbulk. “Food is moving through Dubai and Salalah and we are trying to support as much as possible, not as a business opportunity. We see it as our responsibility to assist.”Supporting Iraq’s Rebuild

Another terminal in the region is supporting a war-related infrastructure rebuild as well as the growth being seen throughout the Middle East.

In Iraq, Basra Gateway Terminal, or BGT, part of the global International Container Terminal Services Inc. terminal operating group, signed a contract with the General Company for Ports in 2014 to operate, develop and expand the container-handling facilities at the Port of Umm Qasr. The concession included rehabilitation and operation of the port’s existing facility at Berth 20 and construction of three new berths at Berth 25, 26 and 27. In 2017, BGT was extended operation of Berth 19 and 21 for general cargo and ro-ro cargo, respectively, giving BGT a platform to launch itself in the project cargo sector for oil and gas sector business.

Marko Miskovic, BGT oil and gas project development executive, said the terminal is the only one working 24/7 in Iraq and the best equipped to handle oil and gas related cargoes. He added that prospects for cargo from that sector look promising: “Iraq’s oil production is nearing 4.3m barrels per day, and it is looking to more than double production by 2020. There is reconstruction related cargo as well.”

Iraq’s 2017 budget assumed an oil price of $42 per barrel. With West Texas Intermediate trading at $58 per barrel in mid-February, Iraq now has more margin to pay off debts and fund new projects. Consequently, “forwarders are telling us that there’s large project cargo on the way,” Miskovic said. “New tenders are already coming out now in the oil and gas sector.”

Phillip Marsham, chief executive of BGT, added that BGT is halfway through a $250 million investment in terminal infrastructure and is fully committed to further assist Umm Qasr to develop the port to even higher international standards.

“Although already a market leader in the container business, BGT is now expanding in project and roll-on, roll-off cargo,” Marsham said, “In the last four months we have noticed a big increase in such cargoes.”

There is space to expand further if volumes demand it. “Phase 1 of development covered 800 meters of quay and the development of a further 400 m is about to start. We have 50 hectares of yard available presently and we are commencing development of an additional 15 hectares. If we need space in the coming years, we can develop further as we are not constrained by space,” Marsham said.

BGT is responsible for six berths at the port: Berths 19, 20, 21 and 27, all operational with 200-meter berths; and under-construction Berths 25 and 26, also with 200-meter berths.Saudi’s Population Promise

Farther south in the Gulf, King Abdullah Port, on the Red Sea, is part of King Abdullah Economic City and one of the world’s top 100 ports by throughput. At full build-out, the privately owned port will have ro-ro capacity to handle 1.5m vehicles annually. The port’s first phase of general cargo terminals, to be operated by AMSteel, is expected to open in the second quarter of 2018.

Breakbulk volumes in Saudi Arabia are being driven by a large and young growing population, competitive energy prices and a strategic location, according to Rayan Qutub, CEO of King Abdullah Port. Cargo growth will be further boosted by Saudi Arabia’s ambitious Vision 2030 project and the Kingdom’s move to diversify its exports to reduce dependency on oil in the future.

Breakbulk handling operations at Saudi Arabia’s King Abdullah Port’s stand at almost 20m tonnes, made up of general cargo at 46%, steel at 39%, cement at 8% and timber at 7%.

But more is to come, with Qutub expecting a “hypergrowth situation” through to 2020 with predicted growth of 15% in breakbulk volumes, spurred by the unlocking of certain sectors, such as steel, which is expected to grow from 8m tonnes to 11m tonnes by 2020.

By 2020, King Abdullah Ports expects to be handling 29.5m tons of breakbulk, up from 19.6m tons in 2017. “King Abdullah Port is already ‘walking the walk’,” Qutub said.

King Abdullah Port is the first private port in Saudi Arabia and is owned by Ports Development Co., a joint venture between Emaar Economic City and Bin Laden Group. A total of $2.7bn has already been invested in the port by the private sector. Total investment is expected to be $5bn.

King Abdullah Port signed an agreement with AMSteel, a company specialized in operating ports and handling steel shipments, in October 2017, appointing AMSteel as operator of the port’s first bulk and general cargo terminal berth for a period of 25 years.

The agreement not only marks the start of a new chapter in breakbulk handling in the kingdom, it also reflects the renewed optimism evident in the Middle East as a whole when it comes to improved project cargo and breakbulk prospects.

Carly Fields has reported on the shipping industry for the past 18 years, covering bunkers and broking and much in between.

Photo credit: Port of Duqm

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