Oman’s $3 Billion Railroad Plan to Blunt Iran Oil Risk: Freight

Oman, which faces Iran across the Strait of Hormuz, said it’s poised to start raising cash for a $3 billion rail line offering an alternative route for oil and freight shipments that funnel through the 21 mile-wide channel.

The nation of 3.3 million people, located on the southern side of the strait, is considering issuing bonds by the end of 2014 to kick-start funding for the track across some of the Arabian peninsula’s harshest terrain, Abdulrahman Al Hatmi, a director at Oman National Railway Co., said in an interview.

Iranian threats to close the Hormuz waterway have been a recurrent theme in Western relations with the Islamic republic since the 1979 revolution. While tensions have begun to ease after an interim deal aimed at halting Iran’s nuclear program, Al Hatmi said the “very expensive” rail line is more than justified by the new trade opportunities bypassing the strait would offer Oman’s southern port of Salalah.

“We are moving fast now,” he said at a rail conference in Dubai. “One of the key changes we’ve made is to connect to Salalah, which is the mouth of the whole region and will play a major role in transforming the whole logistics map.”

Oman wants to push on with its leg of the so-called Gulf Cooperation Council Railway due to stretch 1,350 miles from the borders of Iraq to the shores of the Indian Ocean by 2018 just as nations including Kuwait — which have less to gain from the project — say they’ll struggle to meet agreed deadlines.

Rather than hugging the coast to reach Oman, the line will take the shortest route east from Abu Dhabi on the Persian Gulf, crossing the border from the United Arab Emirates near the desert town of Al Ain before plowing for 100 miles through the Hajar Mountains, which rise to 10,000 feet, and reaching the ocean near Suhar, 150 miles north of Omani capital, Muscat.

The terrain makes the leg the most challenging of the GCC line and the bill may be higher than the current estimate, according to Al Hatmi, who said studies are under way to pin down the final cost. From Muscat, Oman wants the line to continue south across its arid interior to the ports of Duqum and Salalah, ending at the border with Yemen, he said.

Full article: Oman’s $3 Billion Railroad Plan to Blunt Iran Oil Risk: Freight (Bloomberg)

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