Port of Salalah

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Salalah’s versatility beats the slump

2010-11-11

 

Port of Salalah handled just under 3.5m teu in 2009, a substantial increase on the 3m teu throughput of 2008.

Salalah’s versatility beats the slump

 

From a modest start in 1997, the Omani container transhipment port has achieved consistent double-digit growth

FOR a growing number of ships’ crew, the port of Salalah looming on the horizon is a welcome sight after an unpleasant and often prolonged encounter with pirates.

The Omani port, perhaps better known as a key container transhipment hub on the Arabian Sea, is often used as the first port of call for vessels whose crew have just been released from the clutches of Somali pirates following a ransom payment.

The port also plays host as a supply base for the visiting warships that provide protective escorts for merchant shipping in the sea lanes.

From that dual role has emerged another, one as an intelligence network for masters — both military and civilian — to exchange information on possible pirate sightings and near misses.

Port of Salalah chief executive Peter Ford explains: “Salalah is the best place to come after a vessel has been boarded, a ransom paid and the crew is released, because it is the only safe place or refuge in the area.

“Also, the International Task Force often uses the port as a base. We have a significant number of warships of all nations coming in and out of our port, which makes it a very safe bubble.

Mr Ford continues: “What we have started in the last month is to build on that safety aspect and to make it even better for our customers, who still have to go through a dangerous area. As the port authority, our pilots meet face-to-face with the master of every vessel that comes into the port.

“We started gathering that face-to-face intelligence in order to pass it back to the taskforce for better redirection of assets and focus. When they come on board to take a ship in, the pilots talk to the master and ask about any suspicious activity, any skiffs that they have seen or even a vessel that did not approach them.”

This information is relayed back to the port authority and then designated on a map with an accompanying report, which is sent to the taskforce to assess as necessary.

But it is not one-way traffic, says Mr Ford, as the pilots are feeding back information from the taskforce, not just to individual vessels, but to the regional operations centres that direct and control merchant shipping.

“They are very appreciative of that data. It means they can assess better the risks with that information and route their vessels appropriately.”

It is not an accident of geography that Salalah — 1,000 km south of Omani capital Muscat — plays such an important role in intelligence gathering in the battle against piracy.

In the 1990s, the industrial-scale container hub was built on the site of a fishing harbour, with the sole intention of capturing Middle East transhipment traffic, with Sea-Land and AP Moller-Maersk as the anchor customers.

AP Moller-Maersk’s container handling subsidiary, APM Terminals, is a 30% shareholder in the port of Salalah, with the Omani government holding 20% and the remainder held by both private investors and investment funds.

“It took a lot of convincing to persuade people that building a huge port in the middle of the desert was a good idea,” says Mr Ford.

“Salalah doesn’t have a local market and at that time was not a major destination for shipping lines.

“In 1997, it was just desert with a small amount of general cargo terminal. So, to convince the Omani government and the container world that this was going to be a worthwhile, multibillion-dollar investment for a transhipment terminal took quite some doing.”

From those modest and ambitious beginnings in 1997, Salalah handled just short of 3.5m teu in a recession-plagued 2009, registering a substantial increase on the 3m teu throughput of 2008.

Few ports can boast of such an achievement, although Mr Ford — just a few weeks into the Salalah job from a senior European position at APM Terminals — is not resting on the port’s laurels of consistent, double-digit growth.

And despite the APM Terminals stake in the port, Mr Ford stresses that rubbing shoulders with Maersk Line as a “diversified customer base” are APL, Mediterranean Shipping Co and CMA CGM.

“We’re not only the port authority, but we also operate as a public-private port. We don’t lease the terminals out to individual operators but do the whole thing ourselves. It works quite well and allows us to be incredibly flexible and responsive to business needs,” he says.

There is no shortage of planned container capacity in the Middle East, primarily north of the Strait of Hormuz and in the Middle East Gulf, with an estimated minimum 20m teu of annual terminal-handling capacity in the pipeline.

Salalah, south of the Strait of Hormuz pinch point, has annual terminal capacity for 6m teu and 2.5 km of berth space, but management has plans to expand the port’s handling capacity as part of a master plan agreed with the Omani government, which meanwhile has its own ambitions to expand its other port assets along the coastline.

“Throughput last year was up 11% on 2008 and we expect growth of around 11% this year,” says Mr Ford.

“Some 98% of our cargo is transhipped. The majority of the transfers are Asia to Europe — around 70% — but we do service a huge amount to the markets of India, Pakistan, East and South Africa and, of course, the Middle East Gulf.

“We will handle somewhere in the order of 900,000 teu to and from the Gulf, 650,000 teu to and from Africa and then about 750,000 teu from India and Pakistan.”

The Port of Salalah master plan already has the backing of all the investors. “The plans are ready to pull the trigger on constructing berths seven, eight and nine,” says Mr Ford.

“The question is, when will we need it? If we look growth as it is today, then we will probably need the extra capacity around 2014, that is if we have volumes growing at 15% per annum. But if we have a slightly lower growth rate, then the timescale is a couple of years longer.”

At a time when pouring concrete for new container capacity is not the favoured option, he is looking to streamline container handling processes at Salalah to “arrive at the best possible solution in the fastest possible time, and eliminate waste and variances from your processes”.

Building on similar experience in Europe as chief operating officer, Mr Ford expects to squeeze out a further 15% of additional annual handling capacity at Salalah. “Customers crave consistency, they crave good service but more than anything they crave consistency; the ability to deliver what the terminal will deliver when they call.

“What I found in Europe was that there is a high amount of variation in terminals as a whole.”

As part of the process in Europe, APM Terminals “reaped significant benefits for both the customer and for us on the bottom line,” he says, adding: “First we eliminate waste and standardise the product. This will be our major focus in Salalah.”

As a transhipment hub, Mr Ford knows that competition is strong, with lines able to switch their business for the best deal: “We compete in a difficult and fickle market. Transhipment can be carried out in a particular area, and lines can move within a certain geographic boundary without impacting their network.

“But Salalah is a great place to do business with, and the port is right on the shipping lanes of Asia-Europe trades, without an awful lot of deviation,” he adds.

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