Infrastructure development is prioritised for future expansion

Strong construction growth in Oman has been driven in large part by focused infrastructure spending, with the government offering a host of opportunities in its development of transportation megaprojects in recent years. “The country is still developing, so all projects which are vital to expanding infrastructure and catering to population growth are vital,” Vedat Koca, country manager for STFA Construction Group, told OBG. “These are the projects that will go ahead regardless of the economic situation,” he added. Road and rail links in particular have benefitted from the infrastructure push, with road upgrades facilitating the flow of traffic from the expanding Sohar Industrial Port (SIP) along the Batinah highway to Muscat. Oman’s sizeable railway project, meanwhile, is expected to drive construction growth and enhance spin-off expansion along the entire value chain, from producers of raw materials to value-added manufacturing facilities.

In Review 

In its five-year development plan, the government allotted an estimated OR30bn ($77.7bn) for development projects, an increase of 113% over the previous five-year plan, according to Al Maha Financial Services research. With logistics representing the backbone of trade and economy, a major portion of spending has been allocated to transport infrastructure, most notably in railway and highway upgrades; Al Maha estimated that transportation projects comprised 66% of total construction spending in 2013. Infrastructure developments have benefitted from Vision 2020’s economic diversification strategy, which aims to expand Oman’s non-oil economy and enhance its position as a logistics, trade and petrochemical centre. The government plans to invest $14.8bn on land infrastructure, including $8bn on 12,704 km of road, while consultancy Business Monitor International reported that the sultanate will spend an estimated $50bn on infrastructure over the next 15 years, most significantly on the Oman National Railway project. Although previous infrastructure investment were targeted at ports and airports, the shifting in commercial activities from Muscat’s Port Sultan Qaboos (PSQ), to Sohar Industrial Port (SIP), coupled with forwards movement on the GCC-wide railway project, which will span all six GCC member countries when complete, have mandated intensified investment in road and railway infrastructure to improve and enhance the flow of goods within Oman and the wider GCC region.


Outside of the railway project, roads represent the most significant sub-sector for infrastructure construction expenditure in the sultanate. The Ministry of Transportation and Communication (MTC) is working to create a national network of separated, dual-carriage highways connecting major cities and towns within Oman, and improving links to Saudi Arabia and the UAE.

Highway projects have dominated the government’s construction spending in recent months, with the Oman Tender Board (OTB) allocating significant resources to new roads projects in 2014, despite the total overall value of contract awards falling between 2013 and 2014. In July 2014 the OTB announced it had awarded OR616.3m ($1.6bn) worth of construction contracts during the first half of 2014, a 28% drop from the OR857.2m ($2.2bn) of contracts awarded in the first half of 2013. The majority of these contracts were set aside for highways, including further allocations to the Al Batinah expressway project.

Al Batinah Expressway 

The Al Batinah expressway project is perhaps the largest and most important road project currently under development in the sultanate. In August 2014 PSQ in Muscat ceased commercial shipping activities, which shifted instead to the SIP. The highway network that connects Muscat to Sohar and, eventually, the UAE already witnesses some of the highest levels of traffic in the sultanate, and an influx of 70,000 new vehicles running the route between Muscat and Sohar led to a spike in congestion in September 2014. The Al Batinah expressway project, which is estimated to have a worth of $2.6bn, is expected to be able to alleviate some of this congestion by upgrading the 265-km highway into an eight-lane expressway. The project has been divided into 11 separate packages, and the Times of Oman reported that the project’s first 10 packages have already been floated and are under various stages of planning and construction. Some $1.7bn in construction contracts for the project were awarded in 2012 and 2013, and over $100m of new contracts announced in 2014.

In June 2014 the MTC floated a tender for the project’s seventh package, with five international contracting companies, including Strabag Oman, Consolidated Contractors Company, Gharbia Enterprises Establishment, Larsen and Toubro Oman, and Yuksel Construction, reportedly in the running for the contract. In August 2014, another tender for package 10 was floated, while the Oman Tender Board announced in July 2014 that it had awarded two additional contracts for the project, worth a combined total of OR40.1m ($103.88m), during the first half of 2014.


Oman’s section of the GCC-wide railway project spans over 2200 km, and represents the sultanate’s most significant infrastructure investment, with the project currently comprising 45% of the total value of all transportation construction projects, or nearly 30% of total construction spend in the sultanate, according to Al Maha Financial Services.

The Oman National Railway Project is planned to be implemented in nine separate segments, involving construction of a double-track network, offering diesel-powered freight and passenger lines, and linking cities and ports across the sultanate when construction finalises in 2018. The $15.5bn network will be partially financed by a $10bn provision from fellow GCC members, forming one of the largest stretches of the GCC’s 6000-km international rail line, worth over $100bn. Segment One is currently under tender, and will link the SIP to the GCC-wide railway network at the Oman-UAE border towns of Buraimi and Khatmat Millahah.

The MTC’s Oman Rail Company (ORC), established in January 2013, is responsible for overseeing the planning, design, tendering, and construction of the rail system, and has already awarded millions in contracts, with more expected when the project breaks ground in 2015. Although the company’s establishment indicates that the network will not be privately owned, foreign expertise is widely considered to be critical for the project’s full implementation. “New projects, such as the rail project, will be the first of their kind in Oman. Such projects will require more expertise and will demand more value from all contractors involved,” Dilip K Sharma, general manager of Voltas Oman and Lalbuksh Voltas Engineering Services and Trading, told OBG. The government has offered a host of contracts to private players in recent years. A tender to design nine new freight yards was floated in March 2013, and in June 2013 five groups submitted bids for a project management contract. In August 2013 Italian firm Italferr won a OR12.35m ($32m) design contract for the project, unveiling its expansive master plan for the project at a rail symposium in September 2013.


Recent tender announcements have demonstrated the government’s commitment to breaking ground on the project in early 2015. The ORC floated a pre-qualification tender for a contract to build Segment One, a 207-km stretch of rail linking Sohar to Buraimi in August 2014, announcing that a total of 18 consortiums and joint ventures had qualified to participate in the project’s design and build phase.

The first segment will be rolled out in three separate sectors: Sector 1A, covering 127 km, will run from the Sohar station, outside of the SIP, to the Oman-UAE border, crossing mountainous terrain and following the existing motorway across Wadi al Jizzi. Sector 1B covers a 34-km spur stretching from the end of Sector 1A to the Buraimi station, crossing mountains to finish at the Buraimi plain, while Sector 1C’s 38-km spur line will connect the SIP to Sector 1A.

The successful bidder will secure a contract for the design, supply, installation, construction and completion of works related to the first segment, while related contracts will also see a number of new facilities, including stations, freight years, wayside maintenance bases, and maintenance depots constructed along the first segment, as well as a further 8 km of track connecting junctions at Sectors 1A, 1B, and 1C.


The railway is also expected to boost materials suppliers and manufacturers, which will be especially beneficial for local producers who have suffered from falling global commodity prices in recent years. At Oman’s National Railway Symposium in September 2013, Italferr’s Middle East Regional Head Luka Beccastrini highlighted the heavy material demands of the rail project, including significant quantities of sand, cement, concrete, and minerals, as well as 12,000 km of rail, 90 assorted locomotives, 30 diesel multiple units, 80 passenger coaches and 500 freight wagons.

New demand for construction materials will have a dramatic impact on industry and manufacturing. The MTC announced in March 2014 that it had floated a tender for a consultancy contract, in which the winning bidder will advise the government on how best to meet the materials demands of the railway project.

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The Report: Oman 2015

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