Construction work is set to begin in earnest on Oman’s first bitumen refinery — an ambitious venture that will, for the first time, help offset imports of bitumen for road building and other applications. The greenfield project is backed by Sohar Asphalt LLC, an Oman-registered company owned 90 per cent by prominent Bahraini businessman Shaikh Mohamed bin Salman bin Abdulla al Khalifa. The balance 10 per cent is held by well-known Omani investor Dr Juma Ali Jumaa. Total investment in the venture, which is set to come up adjoining the Sohar refinery of Orpic at the Port of Sohar, is estimated at $386 million.
Last week, Sohar Asphalt’s President Shirish Basmatkar announced that the company had secured the all-important environmental clearance from the Ministry of Environment and Climate Affairs (MECA), paving the way for the physical construction of the bitumen refinery to get under way.
“We are delighted to achieve this important project milestone, which effectively clears the decks for the start of construction work on this strategically significant project. When operational by the first quarter of 2020, Sohar Asphalt will begin supplanting bitumen imports with a world-class, high quality and competitively priced commodity,” Basmatkar told the Observer.
At the heart of the project is a 30,000 barrels per stream day (BPSD) capacity bitumen refinery designed to process heavy crude into bitumen as the main product, as well as atmospheric and vacuum distillates as byproducts. Annual production is estimated at one million tonnes of bitumen and 600,000 tonnes of naphtha, straight-run distillates and vacuum gas oil (VGO). According to Niloy Bhattacharya, Executive Director, the joint venture of Oman-based EMC Group and Indian engineering firm McNally Engineering Company has been awarded a contract valued at $315 million for the execution of the project on an Engineering-Procurement-Construction (EPC) basis.
“The EPC contractors will shortly mobilise to get cracking on this important project,” said Bhattacharya. “The front-end engineering design (FEED) is nearing completion by Spanish engineering firm Tecnicas Reunidas (TR), while the geotechnical survey of the 27-hectare site at the Port of Sohar is essentially ready as well. We envision a 24-26 months timeframe for the project execution phase.”
Importantly, heavy crude as feedstock for the bitumen refinery is proposed to be sourced from Venezuela, Cuba or other central or south American producers. Transported by crude carriers, the feedstock will be discharged at the Liquid Terminal of the Port of Sohar and temporarily stored at facilities operated by Oiltanking Odfjell Tank Terminal (OOTT) at the port.
Around 120,000 tonnes of crude storage capacity has been earmarked for the bitumen project at OOTT’s tank terminal at the port, supplemented by a further 120,000 tonnes of tank capacity planned at the project site itself.
Besides the Sultanate, potential markets for Sohar Asphalt’s principal output of straight-run bitumen, primarily used in road paving, will include the wider Gulf region and the Indian sub-continent, said Basmatkar.
“Our product, which will come in two key grades, will be supplied by tanker to markets across the region. Demand for bitumen is growing in this region, driven by investments in road building infrastructure. Besides, our bitumen will be ideally suited to the climate and environmental conditions of the Middle East.”
Commenting on the financing of the project, Bhattacharya added that around 75 per cent of the project cost will be funded via debt, with the Bahraini investor pitching in the balance 25 per cent as equity. We are talking to a number of local financial institutions for the debt component of the project finance. Financial close is proposed to be achieved by April this year,” he added.