London: Abu Dhabi will launch the first phase of its new multibillion-dollar Khalifa Port on Saturday, as the capital pushes ahead with its principal infrastructure projects to diversify its economy away from oil.
Khalifa Port, located in Taweelah, between Abu Dhabi and Dubai, has been built alongside an industrial area known as the Khalifa Industrial Zone Abu Dhabi or Kizad. Together, the two have cost a total of $7.2billion (Dh26 billion) so far, with the government saying the project is still in its initial phases.
Abu Dhabi, alongside other Gulf capitals, has looked to upgrade its port facilities in a bid to generate more industrial business in a region where oil receipts still dominate government revenue. As it does so, it will have to compete with Dubai’s own, much larger Jebel Ali port and neighbouring Oman, which is developing Duqum, another mega-port.
But Martijn Van de Linde, chief executive of Abu Dhabi Terminals, the operator of Khalifa Port, says that there is not an oversupply of port capacity in the Gulf despite other operators in the region. “The main target is to serve and support the long-term growth of the Abu Dhabi economy and to serve as an enabler for Kizad,” he says.
The first phase of the semi-automated container terminal will handle 2.5 million 20ft equivalent units (TEUs) of container traffic and 12 million tons of general cargo, and will serve all the existing customers of Abu Dhabi’s former principal port, Mina Zayed.
The next phase, which will be built according to market demand, would see that doubled to five million TEUs, says Van de Linde. That capacity is dwarfed by Jebel Ali’s 14 million TEU capacity, which is planned to rise to 19 million by 2014.
By the end of the year, all the shipping lines using Mina Zayed will be redirected to Khalifa port. Mina Zayed will be turned into a facility for cruise liners as part of Abu Dhabi’s tourism drive. The former gateway handled about 767,000 containers last year, an increase of 47 per cent from the previous year.
With Khalifa port focused on domestic growth in Abu Dhabi, its emergence as another container player in the UAE will have a limited impact on DP World, Dubai’s main port operator, says Redwan Ahmad, an equity research analyst at EFG-Hermes in Dubai.
“Khalifa Port is more for their own needs in Abu Dhabi to help economic growth there,” he says. Current demand in Abu Dhabi stands at 700,000 TEUs. “Jebel Ali is a different beast altogether,” he says.
Dubai companies may even be set to gain from the new port, which will be within easy reach of Dubai World Central, the vast new airport and trade zone under construction on the city’s outskirts.
Emirates Aluminium, in which Dubai’s Dubal owns a 50 per cent stake, will be the anchor tenant of Kizad, the port’s complementary industrial zone. The annual production capacity of Emal is forecast to reach 1.3 million metric tons by 2014, and the company says it will eventually become the world’s largest single-site aluminium smelter.
But attracting companies to Kizad will not be easy for Abu Dhabi, given the relative head start of Dubai and the global macroeconomic backdrop. Although Dubai was first to launch a major airport, financial centre, airline and bustling trade zones, Abu Dhabi remains undeterred.
“There’s no formal cooperation other than the normal industry co-operation,” says Van de Linde, of the relationship with Dubai’s port operator. “We don’t benchmark ourselves locally — it’s really built to compete with the highest standards internationally.”
The opening of a new UAE port, however, comes amid a flattening of global growth in the industry, whose prospects correlate closely to international trade. In results released on Wednesday, DP World posted flat growth in the first half of 2012, amid a global environment described as challenging by its chairman, Sultan Bin Sulayem.
The operator, which controls ports in Asia, Africa, Europe and Latin America, said its focus on faster growing emerging markets is allowing it to ride through a global slowdown in container traffic that started last year.
DP World has reported a 7.5 per cent year-on-year rise in container cargo, with Asian cargo handled by the company rising 12 per cent in the first half.
The Dubai Ports operator has continued to grow its global footprint through the global economic crisis.
Though both Abu Dhabi and Dubai are keen to play down any competition, port rivalries are not new to the Gulf. Kuwait and Iraq are both building port projects within close range of each other at the tip of the Gulf, with the plans sparking a long-running diplomatic spat between the two countries.