As trade in the Middle East hots up, the region’s ports infrastructure is having to keep pace. Nicholas Noe takes us on a tour of the leading players.
Alongside a frenetic expansion in real estate, finance and oil and gas, the six nations of the Gulf Cooperation Council (GCC) have also put themselves squarely at the forefront of one of the world’s largest efforts to buildout domestic port capacity.
From Boubyian Island in northeastern Kuwait to Salalah at the southwestern edge of Oman, more than a dozen such projects are either already well underway or set for groundbreaking in 2008.
According to analysts and industry insiders, perhaps as much as US$20bn-US$30bn could be spent in the next five years in and around the Gulf alone, raising capacity to more than 50mn twenty foot equivalent units (TEUs).
“We are actually anticipating a shortage of capacity,” explains Shuaa Capital assistant vice-president Kareem Murad. “In the Middle East as a whole, the capacity is 32mn TEUs with the bulk of that located in the GCC, and throughput is approximately 24mn TEUs. Although that means a capacity utilisation of 75%, some ports, like Jebel Ali in Dubai, are operating at or above 100%. In the next five years, we expect higher demand in the Middle East and very high utilisation rates, perhaps as high as 108% in the Gulf itself.”
Dubai Ports World’s (DPW) director of Gulf operations, Mohammed Al-Muallem, agrees, pointing to “a consistent growth rate of over 20%” for DPW’s Gulf sector.
“Industry trends suggest that these numbers will be sustained over the next few years in this region. Terminal capacity, for one, is expected to grow by approximately 45% over the next three years, but the gap between supply and demand is getting smaller as regional volumes grow faster than port expansion.”
The red hot GCC economies have, of course, provided ample fodder for such confidence – as have the record high oil prices that undergird much of that growth.
Among the bullish headlines fuelling port-building activity in and around the Gulf, it is widely expected that the GCC states will record average real GDP gains of 6% in 2007, only slightly less than the 7% seen last year, with the United Arab Emirates (UAE) and Qatar leading the pack at an expected 8% increase year-on-year.
Saudi Arabia, the largest consumer market in the GCC with more than 23mn people, is set to see its real GDP grow 4.8% to US$354.9bn, compared with 4.6% last year.
Although continued growth in the outyears will largely be driven by increasing oil and gas production, a broad range of massive infrastructure and development projects – capped by the so-called ‘Economic Cities’s effort (see GTR interview with Sagia director-general Abdulaziz Al-Babutain on p51) – could mean as much as US$1.25tn in new, non-fuel related spending over the next 10 years.
It is little wonder then that most estimates have the number of ships entering the Gulf rising from the current 45,000 to as much as 70,000 by 2010, with the newest generation of 10,000-plus TEU ships expected to call at UAE ports like Jebel Ali or the Indian Ocean side Khorfakkan port as trans-shipment hubs for final destination delivery to one of the GCC states themselves – instead of the previous trend largely slanted towards trans-shipment to Europe and Africa in the west or South Asia and China in the east.
In fact, according to Al-Muallem, with the rapid growth of Dubai, the split between transit and destination traffic at the sprawling Jebel Ali port and free zone is now approaching 50:50 – which means that if other rising GCC metropolises like Abu Dhabi (UAE), Doha (Qatar) and Manama (Bahrain) follow Dubai’s model of explosive growth, their own new and expanding ports will likely also see an increasing amount of final destination traffic.
Whether or not this trend bears out, however, one thing is certain: even though operators and governments routinely deny it, the new maritime efforts in the GCC certainly have their sights set on Jebel Ali, both as a model to be followed and, as some quietly hope, one to be surpassed.
Despite Saudi Arabia’s standing at the economic heart of the GCC, port operation continues to be led by the Emirate of Dubai, and especially Dubai Ports World flagship Jebel Ali port located just south and west of Dubai.
Indeed, as but one measure of comparison, the latest AAPA survey had the Jeddah Islamic Port, the main Saudi gateway on the Red Sea, ranked 28th globally in terms of TEU traffic (2.8mn), while Jebel Ali came in 9th (7.6mn).
More recent numbers merely emphasise the point: that Jebel Ali is and will likely remain the sector leader in the Gulf for many years to come, if nothing else, because Jebel Ali is set to grow almost as dramatically as some of the newer projects coming online in the neighbourhood.
As DPW’s Al-Muallem happily points out, “the current expansion plans at Jebel Ali are on schedule and we will cater to a total capacity of 14mn TEUs by the third quarter of 2008” – that is 2mn TEUs greater than the current combined capacity at the four UAE ports that DPW currently operates at Jebel Ali, Port Rashid, Mina Zayed and Fujairah and more than 5mn TEUs larger than the total throughput at all four ports in 2006.
Indeed, the final master plan for Jebel Ali, envisioned in 15 stages of expansion and set to be completed by 2030, stands to boost capacity to a staggering 55mn TEUs. What’s more, DPW, now the fourth largest operator in the world with a market value of US$21.6bn after its November IPO, says it is on track to double its current worldwide capacity to 90mn TEUs over the next 10 years.
“There are many new developments taking place in the Gulf that could have an effect on Jebel Ali,” explains Kenneth Bedward, chief commercial officer at the Kuwait-based KGL Ports International. “The new Saqr Port in the emirate of Ras al Khaimah [recently expanded and operated by KGL], the new port in Bahrain, the extension of Khorfakkhan and the extra capacity at Salalah in Oman.
“Having said that,” he adds, “Jebel Ali will still dominate and handle 60% of the Gulf traffic.”
To maintain, and hopefully, increase this ratio, DPW has taken delivery of 14 mega gantry cranes, bringing the total to 45. The gantries, manufactured by ZPMC in China, are reportedly the largest of their kind and the first of their type to be installed in the Middle East, able to lift two 40ft or four 20ft containers simultaneously.
With the new equipment, Al-Muallem believes that the next generation of super-ships in excess of 10,000 TEUs (of which some 200 are believed to be on order) will begin calling at Jebel Ali in the next two-to-three years.
By that time, DPW’s US$33bn, 140 square km Dubai World Central (DWC) should be coming together as one of the world’s largest ‘super-hubs’s – with a new airport (Al-Maktoum International Airport), Dubai Logistics City (DLC) and the expanded port and 48 square km free zone at Jebel Ali.
Critically for shippers, the airport, together with DLC, will be able to handle 12mn tonnes of freight per year, perhaps as early as mid 2009. That means the ability to move a container from a vessel at Jebel Ali Port into the new air terminal without pass-through time at either the congested Dubai International Airport or the equally congested road network in and around the Jebel Ali free zone.
According to one recent industry report by Booz, Allen, Hamilton, this kind of transport flow is precisely the kind of integration that the global shipping industry is tending towards – and for which the Middle East as a whole is ideally suited: “A new transport concept? ‘acceleration in motion,’s offering a conversion from sea transport to air transport,” is becoming more important, the report argues.
“Such a service allows the shipper to start with cost-effective sea freight transport [and] if the need arises, while the goods are already in motion, the shipper can manage almost in real time how fast additional supplies will be brought to market. Given the transport lengths and times between Europe and Asia, the Middle East is a natural location to do the sea-to-air conversion? . In fact Dubai has already made significant infrastructure investments in the integration of its airports and seaport [which] proves the viability of the concept.”
Of course, even if the DWC project remains on track, and even if the sea-to-air model pushes forward in the coming years, it will still face stiff competition within the UAE itself from two other major ports: Khorfakkan in the emirate of Sharjah and the new Khalifa port being built halfway between Abu Dhabi and Dubai.
For DPW, any possible concerns over competition are likely focused on Khorfakkan since 1) the Indian Ocean side port is the only other one capable of handling the new super-ships; 2) It already ranks in the top 50 ports worldwide with throughput approaching 2mn for all of 2007; 3) The relatively nearby Sharjah airport is already a major sea-to-air hub for global players like Lufthansa; and 4) in any case, the new Khalifa port is to be managed by DPW itself.
As far as Gulftainer, the operator at Khorfakkhan, is concerned, despite the growing competition in the region, there should be adequate demand to go around in coming years.
“It is true,” explains Gulftainer’s commercial manager, Keith Nuttall, “that many of the Gulf states are looking to expand their ports? But are these new, huge ships going to go further up into the Gulf
- Is the new A380 going to land in Bristol
- These ships are designed for big trunk routes where they can then be hub and spoked out.”Ticking off a list of advantages in calling at Khorfakkan, Nuttal focuses on three headline points: Gulftainer’s terminals at the port are widely considered the fastest in the world (at an average of 200 moves per hour); shipping companies prefer the location because of its strategic and geographical location outside of the Strait of Hormuz; and, significantly, with Gulftainer’s Inland Container Deport (ICD) or the several smaller ports on the Gulf side of the emirate, trans-shipment to Dubai or elsewhere (which represents 75% of Khorfakkan’s throughput) is both time and cost-effective.”It is worth restating that the level of congestion within countries has reached really critical proportions,” adds Nuttal. “A terminal like ours can offer another valuable gateway? to the edge of Dubai, for example, or the heart of Sharjah. Everyday, you have 15-20 km of truck congestion just waiting to get into Jebel Ali.”
“Jebel Ali has capacity problems and congestion,” agrees KGL’s Bedward. “This will get worse with the continued development of the Emirates as well as the imminent closure of [DPW’s Dubai city] Port Rashid and moving the lines to Jebel Ali, which will also only worsen the situation.”
Anticipating a possible increase in congestion, as well as a strong rise in overall demand, Gulftainer is set to add another 400m of key length to its existing 1,460m, a draft up to 16.5m and six more super post panamex cranes by the end of 2008.
By that time, however, construction at the new US$2.4bn Khalifa port being built by Abu Dhabi, in partnership with DPW, should be in full swing.
The multi-purpose maritime facility, located halfway between Dubai and Abu Dhabi, will consist of a 2.2 square km port island 5km offshore in the Taweelah area, in addition to 100 square km of industrial, logistics, commercial, educational, and special economic and free zones.
Phase 1A, scheduled to be operational by the end of 2010, should have an annual throughput of 2mn TEUs and more than 6m tonnes of general cargo. Capacity is expected to rise to 8mn TEUs by 2015 when the port will be fully able to accommodate the current and future marine traffic served by Abu Dhabi’s main downtown port of Mina Zayed (which will then be completely shut).
Capping it all off, Abu Dhabi is also in the midst of building out the exclusively industrial port at Mussafah, in the southern part of the emirate, to accommodate up to 9mn tonnes per year. The facility, scheduled to be fully operational by the end of 2009, is being designed as a primary driver of diversification efforts in the UAE overall, with a particular focus on boosting the emirates global position in the metals and cement sectors.
Qatar set for rapid growth
Although the peninsular nation of Qatar counts several seaports – including one in the capital Doha and one at Ras Laffan (a US$1bn facility opened in 2006 which is also one of the world’s largest liquid natural gas export points) – total container traffic has generally hovered in the low 100,000-200,000 range. That anaemic level of activity is set to change however, or so the government hopes, with the opening of a new US$5.5bn port to be built on reclaimed land in Mesaieed, 40km south of Doha.
The proposed facility will cover a total area of 20 square km, including the already existing port and industrial zone, and will be built in phases, with the first phase bringing capacity for 2mn TEUs per year online, possibly by 2010.
Although far smaller than the Mesaieed effort, Qatar is also planning to open a new port closer to the capital by 2009-10 to effectively replace the current port downtown.
Founded on 500 hectres of reclaimed land 4km east of Doha International Airport – which itself is in the middle of a US$4.1bn expansion – and linked to the mainland by an 8.5km causeway, the US$206mn port will be able to accommodate 3mn TEUs per year in the first phase and will include a free zone linked to the airport.
Overall the New Doha Port (NDP) will eventually stand as one of the world’s largest offshore ports, with over 5km of breakwaters and containment dykes and separate berthing and port facilities for visiting naval ships, up to and including a Nimitz class aircraft carrier and escort ships.
Although the tiny island kingdom of Bahrain has long been a centre for regional and international finance, trading activities, and especially the trans-shipment of goods, has never been its forte.
Through one of the most extensive port privatisation efforts in the Gulf, however, the government is earnestly trying to change that.
Billed as the ‘Gateway to the Gulf’, the new US$530mn Khalifa Bin Salman Port (KBSP) is on track for opening in late 2008 under the auspices of APM Terminals, who will have broad powers to set prices, determine employment and map out plans for the future.
Although the current port of Mina Salman has seen strong growth in the past few years – it handled more than 4.7mn tonnes of cargo in 2006 and should see a 15% increase in traffic for all of 2007 – APM hopes to move all operations to KBSP as soon as possible.
At a depth of just 10.5m, Mina Salman is struggling to accommodate larger ships.
KBSP, in contrast, has already been dredged to 15m, while container capacity should reach 1.1mn TEUs when fully operational, compared to 300,000 TEUs at Mina Salman.
Berthing will also be increased 25% above Mina Salman, to 1.8 km of quay, with 900,000 square metres of area in total which, it was reported in December, will likely overlap with a new 1mn square metre free zone.
Although the ‘Gateway to the Gulf’s strategy may be predicated on the somewhat questionable assumption that shippers would rather call farther north than the main UAE ports in order to trans-ship, both the government and APM stress a key point: if shipping volumes increase at just 7% a year – the low end of regional estimates – KBSP’s original capacity will be swallowed up in only 15 years anyway.
Given the new ports close proximity to Saudi Arabia via the King Fahd Causeway, additional trans-shipment flows, if they come, would therefore likely serve more as a welcome afterthought, rather than a make-or-break component of the project.
Kuwait falls behindAs far as Kuwait’s container terminals are concerned, trans-shipment, especially to the 60mn person Iraqi market, has been crucial for growth. Indeed, with most Coalition-related supplies coming through the country since 2002, the main ports at Shuwaikh outside of Kuwait City and Shuaiba 45km south of the capital have boomed.
Still, in comparison to the rest of the Gulf, the throughputs have been relatively small: perhaps approaching 800,000 TEUs in 2007 at both ports combined. Although that number will likely represent a double-digit increase over 2006, Shuwaikh and Shuaiba have both been dogged by a reputation of excessive bureaucracy, inefficiency and an inability to meet apparent demand.
As one industry representative comments frankly (but without attribution): “Real privatisation has just not happened. 30 years ago, Kuwaiti ports were leaders in the Gulf, but there has not been investment in the interim.”
Be that as it may, the Kuwait Ports Authority (KPA) is pushing ahead with a modest menu of investments: according to some reports, it is set to order as many as 13 post-panamax, ship-to-shore gantry cranes for Shuwaikh and Shuaiba, plus associated landside handling equipment. Working with Gulftainer as a consultant, KPA has operationalised six berths – which is said to have reduced vessel waiting time and helped accommodate extra throughput. Mobile cranes have also been brought in by Gulftainer to assist with loading and unloading operations.
Meanwhile, at Shuwaikh, dredging is moving forward to increase drafts from 8.5mn to 10mn, while at Shuaiba, operated by KGL Ports International, the company has announced it will undertake a US$60mn modernisation effort in the coming year.
But even as these efforts proceed, the real focus of maritime activity in the future for Kuwait will likely be at Boubyian Island 50km northeast of the capital, where the government is finally moving forward with the initial stages of building a US$1bn port.
After several delays, work finally began in late 2007, when a three-company consortium led by China Harbour Engineering Company began work on a US$410mn contract to oversee the initial construction and development of the port’s infrastructure – including a 36km, three-lane bridge with the Kuwait mainland – over the next 3.5 years.
The Boubyian Island port project, which is part of an US$86bn plan to develop the northern region, is to begin terminal operations in 2009, eventually a 3.5mn TEU capacity to market in the next 15 years.
Although Boubyian has been variously criticised for diverting much-needed investment dollars away from the existing ports, a recognition seems to have set in that port development in Iraq proper – at Umm Qasr for example – could lag far behind the immediate trade needs of Iraq (and Iran’s ) huge populations, even if stability is forthcoming in the next few years.
Kuwait’s new port at the mouth of Iraq, only a few kilometres away from the tri-border region, should be able to capitalise on that fact. But even if it does not, as a number of analysts and industry representatives are quick to point out, Boubyian may be the only way to induce real changes in the country’s port sector – creating both momentum and a model for changing the way that the government and the country as a whole does business.
Saudis get serious on reform
Like its immediate neighbour to the north (with whom it holds no fewer than two ongoing disputes over port ownership), the Kingdom of Saudi Arabia has long been dogged by a reputation of running its ports in an inefficient and overly burdensome manner.
As the UAE and others accelerate their efforts to attract trans-shipments as well as final destination traffic, the Saudi government has increasingly made it clear that the time for change has come.
As one indicator of this shift, in early December, the president of the Saudi Ports Authority, Khaled Bubshait, reportedly told the most popular, pro-government daily Al-Watan that “the fees and tolls collected by the Saudi ports are too high compared to the fees and tolls demanded by ports in the UAE, which are lower”.
According to Bubshait, the paper said, “the UAE ports enjoy more flexibility in determining prices and reducing them as opposed to the state-owned ports in Saudi Arabia which are governed by strict, fixed regulations”.
Bubshait adds, however, that, “the Authority is serious in its intentions to introduce changes and reforms”.
Although the larger Red Sea port at Jeddah will most likely be the main focus of the impending ‘reform’s efforts, the primary Gulfside facility at Dammam (located at the midpoint of the eastern coast) is both expanding and introducing important changes.
By year-end 2007, the operator – International Ports Services (IPS) – was likely to have raised capacity from 800,000 TEUs to 2mn TEUs, making King Abdul Aziz Port one of Saudi Arabia’s fastest-growing. According to government estimates, container traffic jumped to more than 500,000 TEUs in the first half of 2007, up from 450,000 TEUs in the first half of 2006.
Perhaps as significant, the port also became only the second one to introduce SaudiEDI, a national customs interface, which speeds cargo flows through an online exchange of documents between agents, customs brokers, the customs department and IPS.
The real future proposition for Dammam seems, however, to be built on the Saudi Landbridge – an ambitious, US$5bn effort to build a 1,100km railway linking Jeddah, on the Red Sea, with both the capital Riyadh and, via the existing rail link, the Abdul Aziz port at Dammam on the Gulf.
According to local reports, bids have already been submitted by a number of groups, including, the Bin Laden family, Samba Financial Group and Kuwait’s Agility, with the winner to be announced in early 2008.
Although meeting the expected increase in final destination traffic for the kingdom itself is clearly a high priority and incentive for the project, proponents stress that shippers will be able to avoid the 10-day journey around the peninsula when the landbridge is finally able to move the promised 3.2mn TEUs per year from Jeddah to Dammam.
“It will be a big deal,” stresses KGL’s Bedward. “The transit time saved makes it very attractive.”
But even proponents acknowledge that the landbridge itself will likely only reposition the kingdom as a major trans-shipment hub if the project locks together with the long-proposed GCC railway – since, in but one scenario, shippers would have to load goods onto a train at Jeddah, unload them at Dammam, reship them by boat or truck, and unload them once again.
“The landbridge is aimed at the Saudi market and is still open to question,” notes Gulftainer’s Nuttal.
“But all of us would welcome the expansion of the rail network in the GCC. It’s been discussed for 15-20 years now, however, so we don’t see it happening for many years, even if you start this now.”
In an apparent attempt to dash such low expectations, the GCC revealed before its annual meeting in December, that it was kick-starting the rail effort as a part of the common market target.
The US$6bn, 1,000km long railway is now apparently in the midst of a feasibility review that Ramiz Al Assar, World Bank senior transport specialist, believes could be unveiled in mid 2008 – with a possible completion date as early as 2015.
“All GCC member countries are fully committed to the project and there is no going back on this vow despite some hurdles that still need to be overcome,” he told a recent conference in Dubai.
Although such predictions in decades past were often wildly off the mark, this time things may be different. Not only do GCC states like Saudi Arabia have the cash and vision to realise such huge infrastructure projects, several have already begun work on their own rail networks designed to bolster the intra-GCC line.
Indeed, in the autumn of 2007, the UAE said it was on target to launch an 800km passenger and cargo network by 2013, while Kuwait said in November that it will break ground on a US$14bn rail master plan in early 2008.
Oman holds the key
Although the farthest afield of the six GCC states, the Sultanate of Oman, like its neighbours, firmly believes it holds the key to the future of both trans-shipment and, with its new industrial and free zones, trade in general.
At the heart of its strategy are the two ports of Sohar along the northeast coast (opened in 2004) and Salalah in the southwest (1998).
Having just started to receive container traffic in December 2007, the US$12bn Sohar Port development project already is reportedly on its way to reaching the goal of handling 800,000 TEUs by the end of 2008.
“The terminal is ready for business? [with] the capability to go up to 6mn if required,” says Jan Meijer, CEO of port operator Sohar Industrial Port Company (SIPC), which splits operation with the Port of Rotterdam.
Located at the mouth of the Strait of Hormuz, and with burgeoning aluminium and fertiliser production, Sohar serves as an ideal gateway to the Emirates and beyond since the road network avoids shipping to the inner Gulf by having freight moved in a matter of hours by land to Dubai, Abu Dhabi and the capital Muscat – all of which are within 240km of the port.
For trans-shipment farther out, the Port of Salalah, on Oman’s Indian Ocean coast, is already fixed as the top regional player behind Jebel Ali and Khorfakkan.
In 2006, it saw a throughout of 2.7mn TEUs, up from the 2.5mn in 2005 but apparently below demand.
As a result, like so many of the GCC ports, Salalah’s operator APM Terminals found good cause to begin a vigorous expansion effort, adding two additional berths during 2007 that increased capacity to 4mn TEUs by year’s end, with an additional three berths planned over the next three to five-year period.
All of which means that, according to company officials, by 2011 Salalah will be able to handle some 9mn TEUs per year.
“The GCC will have and is moving towards a seamless transportation network,” says Ramesh Ramakrishnan, second vice-president of the UAE Shipowners Association.
“Once all of these things unfold, definitely from our past experience Jebal Ali always rises faster than the other ports do to the occasion. But as we have seen in past years, all of these ports get their share of the business and oversupply should not be an issue.”
“The volumes,” he adds simply, “are flowing in.”