Regarded as one of the more conservative and traditional GCC states, the construction industry in Oman is beginning to see benefits from the diversification policies initiated under the Vision 2020 plan.
With over $36.24 billion (OR 14 billion) investment outlined in the 2015-16 budget, the Omani construction industry has truly arrived. And right now, there´s a whole lot of action going on.
Oman on the move
The government´s investment in transport and social infrastructure, with a focus on rail, air and sea, aims to diversify modes of transport and encourage tourism. Its plans for the national rail network are also moving ahead rapidly, with the first phase of the 1,000 km track linking Muscat to the UAE to be completed by 2017.
Additionally, six new airports are to be constructed across the country over the next five years, along with the expansion of current airports. And the Sohar Industrial Port Company is planning to construct a new port city in Sohar Port at an approximate value of $12 billion.
Further, the rapidly increasing population is driving demand for energy projects, which account for nearly 61 per cent of the total construction projects in the Sultanate. Moreover, an investment of $8 billion was recently announced on commercial and residential developments indicating a strengthening property market, which coupled with heightened interest from developers in tourism projects such as luxury hotels and resorts, is attracting both regional and international players.
Government initiatives, such as improved access to home financing options, publicly backed affordable housing schemes and regulatory reform to reduce transaction costs in the market, have helped expand the number of households in the local consumer base. At the same time, reforms in regulations governing foreign investment in the sector have been vital in attracting more financing. The expansion in the job market is also adding to the number of individuals and households looking to invest in housing.
One of the main hallmarks of Oman´s real estate market in recent years has been the development of ITCs, which are demarcated zones that allow freehold ownership by foreign nationals and, in most cases, offer two-year visas for investors. These developments serve as a vehicle for increased foreign investment in the sector. Oman´s ITCs are generally mixed-use developments that cater to high-end clientele. The Wave - Oman´s first ITC project - was launched in 2012.
The demand for residential units in Oman during 2013-14 has been quite robust with standalone villas forming a major portion of this demand. These villas are particularly popular with expatriates. Enquiries for shorter-term leases are on the rise, mostly owing to the nature of jobs and contracts created in the country. Expatriates working on short-term projects are demanding fully furnished residences, easing pressure on the limited supply of villas, but there is still a shortage of this type of accommodation. According to the data from Savills´ 2014 report, there is an estimated 720,000 sq m of office space graded as Class A or B space in Muscat. Of this, 34 per cent is classified as Class A office space. Multinational companies, construction and architectural firms take up most of this space. According to Cluttons, the demand for Grade A office space is likely to reach 1 million sq m by 2018.
Small and medium-sized enterprises (SMEs) are another growing commercial segment with a strong appetite for office space. Global consultancy AT Kearney´s 2014 Global Retail Development Index report ranks Oman as the 17th most attractive destination for retail investment. A GDP of over $72 billion supports a stable consumer base of 3.6 billion people, with incomes averaging $25,000 per person.
The national rail network is one of the largest infrastructure projects in the country´s development pipeline. With an estimated cost of $19.30 billion (ú12.4 billion), by the time it is operational in 2018, the 2,135 km project will be implemented in nine phases, covering the length of the Sultanate. It will connect with the wider GCC network. The project is funded in parts through GCC and state sponsorship. The Oman Rail Company leads the development within the country and recently called for tenders for Phase-I with the expectation that construction will begin in early 2015. The company has floated tenders for the construction of an additional 1,207 km of railway infrastructure linking the country´s three maritime gateways at Sohar, Duqm and Salalah. The Omani company aims to complete three further segments of the nine-segment national rail network by awarding contracts worth an estimated Dh 22 billion to Dh 29.3 billion.
Oman´s road infrastructure is now the fastest growing part of Oman´s transport infrastructure sector.
The Ministry of Transport and Communication (MOTC) has a 25 year road network plan (2006-30), and 2013 alone saw companies submitting bids for over $574 million (ú370 million) worth of roads projects. Further expansion continues; for instance, the Al Batinah Expressway is now in its second phase and will cost approximately $2.48 billion (-1.6 billion). The 265 km, eight-lane road will link the capital, Muscat, to the new Sohar Port and industrial area, and extend up to the UAE border.
Strategically important for Oman´s economy, industrial and commercial development in port cities has been a major factor in its drive to diversify. There has been large-scale expansion at Duqm Port, including the construction of a new port and dry-dock complex (due to be completed 2014), and the development of its surrounding facilities. This has cost around $1.71 billion (ú1.1 billion). There is also significant port construction elsewhere in Oman such as the $124.1 million (ú80 million) expansion project at the Port of Sohar.
Three phases of development have been planned at Muscat International Airport, eventually boosting its already large capacity of 12 million passengers per year to 48 million by 2050. In addition, an airport opened in Duqm in the southeast in July 2014, although construction on its third phase continues.
Water, power and waste disposal are all part-privatised in Oman, but the proposed large-scale Qurayat desalination project will have a 20-year water purchase agreement with the state-run Oman Power and Water Procurement Company. Bids for this project opened in September 2014. The winner will build, own and operate a facility with the capacity to produce 200,000 cu m per day of potable water, which is expected to become operational by the second quarter of 2017.
New materials: Towards a greener future
As the whole of the Middle East takes its cue from the UAE in promoting sustainable, green building practices, the use of construction materials with reduced environmental impact are being employed in Oman bridge-building projects. One such green building material is ground granulated blast furnace slag (GGBFS), produced by steam-quenching molten iron from a blast furnace to produce a glassy, granular material that is then dried and ground into a fine powder. It is now being employed in Middle Eastern bridge construction projects to provide up to 70 per cent of the cementitious content of the structure, improving its durability and increasing its lifespan by up to 100 years while simultaneously reducing its ecological impact. Further, while currently utilised in a limited fashion in the GCC, the wholesale use of advanced plastics and fibre reinforced polymer (FRP) materials in combination with traditional steel could prove immeasurably useful for bridge construction in the region, resulting in quicker build times, more durable structures and lower long-term maintenance costs.
The governments and transport authorities in the Middle East have been quick to realise the benefits of introducing cutting- edge construction technologies and methodologies. Oman is no exception as the scale of its projects and inherently complex terrain call for a more sophisticated approach to ensure that proposed infrastructure projects are completed promptly and safely.
Concrete sensors are an innovative new technology that provide significant time and cost saving to a company as they are placed directly into a concrete structure after the pouring process to measure nonstop compressive strength evolution. The sensors inform construction site managers and decision-makers when the concrete has sufficiently hardened via their real-time internet connection, enabling fast and accurate decision-making. For instance, Doka, purveyor of ´Concremote´ sensors to Dubai Municipality, estimates that implementation of its product delivers a time saving of 47 per cent, cost saving of 32 per cent, quality improvement of 55 per cent and total business value increase of 40 per cent.
Many current road expansion projects in Oman require the repair and expansion of existing arterial roads. Currently, the most widely used system of repairing damaged road sections is to mill the road surface down, haul the material away, remix the asphalt and then haul it back to the construction site to repave the original surface. This is evidently a long, slow, dirty and inefficient process with significant environmental impact and economic drawbacks in the form of increased lane closures and road congestion. The use of LIDAR and remote sensing technologies (light detection and ranging) allows for the mapping of road surfaces and their depressions with pinpoint accuracy. This sensor data can be turned into a 3D point cloud processed image that forms the design for a bespoke asphalt mat shaped to compensate for surface variations. The result is a smoother and more durable driving surface that won´t see the same potholes and depressions emerge.
Green road construction methods
The construction of major new roads and road network upgrade projects require masses of material and manpower. This, in turn, causes significant ecological impact, as the necessary components are transported to and from the construction site. Currently, one mile of two-lane asphalt road with an aggregate base can require up to 25,000 tonne of aggregate. Once the removal of unsuitable material from the site is factored, this equates to roughly 5,000 truck movements. One technique currently utilised in Oman and the UAE by leading construction companies is the recycling of asphalt and other building materials such as the concrete from demolished buildings for road construction aggregate.
Standard forms of contracts
Contracts for building and civil works awarded by public authorities to local and international contractors are typically based on the Sultanate of Oman Standard Documents for Building and Civil Engineering Works, third edition 1981. There is an updated 1999 fourth edition. However, the earlier edition is still widely used. Publication of the 2012 fifth edition (based on FTdTration Internationale des IngTnieurs-Conseils (FIDIC 1999)) is still awaited (see Question 37, Reform proposals). It appears that a final review is being carried out by the Ministry of Legal Affairs. For electrical and mechanical works, the government publishes a separate set of Standard Documents, based on an earlier edition of the FIDIC Yellow Book. The FIDIC suite of contracts (and for plant projects the IChemE suite) are also widely used and accepted. The Oman Standard Conditions and the FIDIC suite of contracts are used for both local and international projects.
The Labour Law (promulgated by Sultani Decree 35/2003) and the regulations and decisions made under it, regulate all aspects of employment in Oman, including the hiring of Omani nationals and expatriates. All employees must be employed by an Omani national or a company registered in Oman. Omani employees must be registered with the Public Authority for Social Insurance (PASI). There is a standard form of contract, which is used to register national employees with the Ministry of Manpower and PASI. Expatriates require a labour clearance (for the position), an employment visa and a residence permit. There is an Omanisation policy in place, which provides a minimum percentage of Omani employees for each employer, based on its sector of operation. Some positions, including drivers, receptionists, ministry liaison officers and Arabic typists, must be filled by Omanis.
Big ticket PROJECTS IN OMAN
Oman National Railway High Speed Network
The Oman Railway Company (ORC) has envisaged the creation of a new freight and passenger network with future scope for high-speed rail. The route will connect Oman´s centres of population and growth-drivers and will also be part of a regional Gulf rail network. With an estimated total length of 2,135 km, the network will be divided into several segments: one linking Oman´s borders with the UAE and another servicing the southern parts of the Sultanate such as the port of Al Duqm, Salalah and the Yemen border. Construction will be carried out in three phases: the first phase comprises a 230-km link from Sohar to Muscat, the second phase is a 560-km line from Muscat to Duqm, the third phase involves extending the line from Duqm to Salalah. The network´s construction should be ultimately completed by 2018 at an estimated cost of $15 billion.
The eight-lane Batinah Expressway is one of the cornerstones of the Ministry of Transport and Communications´ long-term strategy to improve connectivity with Oman´s neighbours and simplify access between its provinces. Its completion will significantly ease traffic flow rates around the Muscat-Dubai border, reducing the average journey time between the two cities by at least an hour. Construction work on the carriageway has been split into six separate segments, of which, the second segment is perhaps the most challenging as it involves overcoming 10 km of challenging sand dunes. This section will also require the construction of seven wadi bridges and three major overpasses. Overall completion is expected to happen by May 2017 at an estimated cost of $2.6 billion.
Expansion of Muscat International Airport-Phase-I
Oman Airports Management Company SAOC (OAMC), a closed joint stock company owned by the Government of the Sultanate of Oman, is carrying out an expansion plan of the airport. The $1.8-billion project includes the expansion of the existing terminal and the construction of a new one. The expansion will be carried out in four stages. In the first stage, the passenger capacity of the existing terminal will be increased to 12 million passengers. In the second, third and fourth stages the capacity will be further increased to 24, 36 and 48 million passengers respectively. A new passenger terminal building is also part of the expansion plan. The building will have 32 boarding air bridges, an additional runway and a control tower.
Musandam, Oman: Diba-Lima-Khasab road project
Among the Omani Government´s key transport infrastructure expansion goals is the construction of strategic linking roads between the various wilayats (provinces) throughout the Sultanate to stimulate interprovincial trade and traffic. The Diba-Lima-Khasab road project is of particular note as part of this strategy, not only for its length, but primarily for the associated challenges in its construction. The 65 km coastal road will require seven tunnels and 18 bridges with a cross-section consisting of two lanes with asphalt shoulders of 2.5 m width on each side. The project is considered to be one of the strategic linking roads in Oman that will stimulate trade and facilitate the flow of traffic between the wilayats of the Musandam governorate and contribute to revitalising tourism in the governorate.
Al Duqm IWPP
The Al Duqm Independent Water and Power Project (IWPP) will be the first coal-fired power plant in the GCC. The proposed plant is expected to have an electricity capacity of 1,000 mw.
Al-Madina Azarqa (Blue City)
Al Madina Azarqa (Blue City) is a massive residential development in Oman. The city will cover 34 sq km and accommodate around 200,000 residents. Blue City will include residential, commercial and business clusters, and a university with a capacity of 10,000 students. Foster and Partners is the master planner. Meanwhile, Hyder Consulting Middle East Ltd is the infrastructure consultant. In addition, Clifford Chance and Shearman & Sterling acted as legal advisors. The project will be built in 12 phases and is expected to be complete in 2020.