Oman as a Logistic Hub for VLCC Operations Dissertation

Introduction

The current period observes a considerable decline in economic growth in most of the major economies of the world. While this is clearly a major concern, well-established economies with a developed superstructure are able to survive on the basis of accumulated wealth. (Fernandes & Rodrigues, 2009). Developing economies try to build such a superstructure in order to survive the storm. There is a need of a suitable strategy that could be used to achieve economic growth and a choice among the existing models. (Rodrik, 2005).

In particular, in recent times, an outward-looking trade policy has been favoured. (Stiglitz, 1996; Fernandes & Rodrigues, 2009). Besides, Fernandes and Rodrigues (2009) discuss such features as ‘Special Economic Zones’ that have appeared in the struggle to boost employment, import/export goods and thus earn much needed foreign exchange currency. The authors offer to take into consideration the geographic location of these Special Economic Zones because they could be defined as a major driver in transforming their region into a business hub. The logistics of the movement of goods internationally play a major role in this. (Lee & Hobday, 2003).

With the onset of globalization where the East has become a major factor in the world economy, many countries in Asia and the Middle East are positioning themselves to be logistic hubs. They develop their infrastructure by strengthening transport links both internally and externally and build relationships with key players in the logistics chain. By doing this, they hope to attract additional foreign investment into the country and free up resources for further development. In this competitive field, the choice of a location on a busy trade route will be a key factor in the deliberations of investing companies.

This choice is also relevant for companies involved in VLCC operations. The location and the quality of the facilities form a critical part in strategic logistics planning. Facilities such as easy physical access, rapid communications systems, paved and wide internal access routes, storage facilities, refrigeration plant, are all of interest to those companies utilizing free port distribution centres, including VLCC operators.

There are four major elements essential to the successful operation of a logistics hub. These are location, efficiency, financial sustainability and level of services. Other attractive features for users are cost efficiency, punctuality, and reliability or rapid transit times. (Ackchai S. et al, 2007).

Cleary geographical location is one of the most crucial features. This has direct and indirect impacts as there are many stakeholders involved ranging from potential investors, policy makers, contractors and subcontractors, to finally hub operators, hub users and the community. Externally there is an interest to transport providers encompassing the three principal modes of transportation- road, rail and maritime routes.

The Sultanate of Oman, under the wise leadership of His Majesty Sultan Qaboos, has made and is continuing to make every effort to diversify its economy. This is an objective of ‘Vision 2020’ covering the period from1996 to 2020. This contains and enumerates all the strategic objectives and priorities from the development of the basic infrastructure required through such processes as transportation, industrialization, manufacturing, and tourism. It includes that very important component, human resources development.

The necessary resources to drive this ambitious programme are supplied initially by the oil and gas sector. As the economy grows there will be an increasing input from other sectors. This will be necessary if economic growth is to be sustained. In addition to oil and gas reserves being a finite quantity, as a marketable product, it is subject to economic and political changes, largely out of the control of individual governments. Revenue levels cannot be guaranteed although producer countries do their best to regulate these.

The government aim is to double the level of GDP per capita by the year 2020 (Oman Vision 2020). Some major factors present obstacles such as the achievement of efficient integration into the global economy. The current period of rapid technological advance makes some production techniques obsolescent even before they are fully implemented.

Potential for rapid growth encourages the government to favour particular sectors. The logistics sector is one of these seen as essential to assist economic growth and encourage diversification. It is seen as a fundamental component of the overall plan. In view of this, the Supreme Council of Planning has produced the ‘Sultanate of Oman Logistics Strategy 2040’ (SOLS 2040). This strategic analysis illustrates the aims and objectives within the logistics sector. The principal goal is to increase the contribution of logistics facilities, developed to support the international movement of goods, in increasing GDP.

In addition, such development will lead to the creation of quality jobs for Omani citizens. Considerable resources have already been invested in infrastructure and logistics the ports and environs of Sohar, Duqm and Salalah. The effectiveness and efficiency of the sector are under continual scrutiny by the Government with the aim of stimulating efficient management, producing smooth operational systems and ensuring economic charge structures.

Other Gulf countries have similar ambitions regarding their ports. While these are to some extent in competition with Oman, it will benefit all when good maritime and modern overland connections are available between Oman and its neighbors. The accessibility of Omani ports to international shipping between East and West will allow Oman to extract maximum advantage from its strategic location while also serving the Gulf Region. Large vessels requiring services and maintenance will not have to risk passage through the busy and politically sensitive, Straits of Hormuz.

They will also save on cost and transit time if they can be handled by any of the three major Omani ports (Salalah, Duqm, Sohar) and related facilities. An overland rail connection is planned to Saudi Arabia which will provide access to that huge consumer market which lacks major port facilities. A distribution hub to facilitate the import-export business will attract shippers serving both the West and the Far East, and take advantage of growing global commerce.

In support of the above aims, this study has been carried out with the aim of analyzing the advantages of Oman as an integrated logistics hub, identifying any gaps which may exist and recommending corrective actions if appropriate.

Research Significance

As more regions of the world develop in terms of business and commerce, the environment, locally, regionally and internationally becomes increasingly more competitive. This is true of all industrial and commercial activities as all countries are anxious to ensure their future and share of world resources in the age of globalization.

While many aspects of world trade are beyond the control of individual countries, the movement of goods will always form part of that trade. Bearing in mind, the distances involved in the export/import of goods, staging points in the process are essential, both for maintenance purposes and re-distribution of goods. This is where the science of logistics is applied in the form of logistic hubs. These provide significant economic benefits through increasing trade and investment flows between countries.

This has been realized worldwide and, in particular, in the Gulf Region and Oman. There is fierce competition in establishing such hubs in the region where countries are taking advantage of increasing international trade, deregulation and globalization. Such activities also attract inward investment as they are seen as profitable resources. They are enhanced by the continued industrialization of the newly emerging economies and changes and improvements in transportation technology and methods.

All the above factors have created a growing demand for specialized logistics management services and appropriate facilities in prime locations. Estimates in 2002 showed that the logistics industry was expected to grow at an annual rate of 3 to 10%. (Economic Review Committee, 2002). This expectation created a strong stimulus for countries, suitably placed geographically and with good marine access and expansion potential in port facilities, to develop their logistics industry. They would thus be able to gain from the expected growth in demand as a regional and international logistics hub. This has resulted in fierce competition in the Gulf region where several countries have such potential and are hoping to establish themselves as having the leading logistics hub in the region.

The Omani government is no exception to this tendency. It is actively developing the economy on many fronts, including providing the resources and facilities necessary to establish such logistics hubs. It is taking advantage of its excellent geographical location and port facilities to establish the best logistics hubs in the region, in the face of fierce competition from its neighbors. The next step is the utilization of the resources in order to upgrade their facilities technology and make infrastructure more effective and cost efficient. Countries such as UAE & Saudi Arabia have considerable oil wealth which they can devote to projects in an attempt to boost growth and industry, and develop their infrastructure and labor force.

Major economies no longer exist only in the west. This has resulted in international organizations relocating to parts of the world more suitable for their purposes. This has affected world trade patterns and trade routes. This has implications for the logistics industry. Increasing competition within world trading companies and the potential economic benefits in providing a logistics hub are the motivating factors for this study. It is necessary to identify and examine the key features of a successful logistics hub.

Aim

To determine if Oman is a suitable location for an effective and economically attractive logistic hub for VLCC operations for the international shipping trade.

Objectives of this Study

There are several specific objectives as follows:

1. To determine if Oman is a suitable location for an effective and economically attractive logistic hub, with particular reference to VLCC operations.
2. To examine the competitive advantages of Oman compared with others in similar aspirations. This will include physical location, access to shipping routes, Government policies and economic factors.
3. Discuss the technical and economic feasibility and viability of a VLCC logistics hub in Oman.

Literature Review

The Concept of Logistics Hub

This study attempts to identify suitable locations for a logistic hub by considering its requirements. An integrated logistics hub with particular reference to VLCC operations is discussed in many projects. Such steps as the identification of the facilities in Singapore should be taken in order to compare the purposes of different logistics hubs.

Communication and transportation lines in the age of global trade are very long. The advent of refrigeration many years ago opened up world trade in foodstuffs. The oil trade encouraged the building of large oil tankers and their counterpart, bulk carriers. More recently containerization has facilitated the export of dry goods.

Since supply chains are long, with many integrated links, to remain competitive companies must analyse every link and search for the best value of services required within that link. Since the chain extends over many regions and countries where economic conditions may vary, they must use the presence of lower costs if any and explain the possibility of local circumstances and economies of scale. Time is also an essential ingredient as time spent in long journeys or more costly port fees can be crippling.

Goods need to be offloaded as close to their final destination as possible for rapid distribution. The customer requires a rapid response to his needs which must be balanced against supply costs. The various strands of the supply chain need to be well integrated if success is to be achieved. This is the role that a successful logistics hub can play, bringing together all the key players in a single location.

Traditionally, sea freight has been much cheaper than other modes of transport over long distances. Its carrying capacity vastly exceeds air freight which is consequently much more expensive. Nevertheless, air freight has its place in a logistics hub as there are many items, from essential medicines to gourmet foods, which require rapid transportation. Cost efficiency is a requirement irrespective of the mode of transportation. Furthermore, sea and airfreight may be used in combination for distribution purposes (Majdalani et al, 2007).

The Middle East presents itself as a natural sea to air conversion hub and a refuelling stopover for the freight industry because of its geographical position and accessibility by sea. The chosen method could help to reduce transport timing frames in 5 to 7 days. Still, the peculiar feature of this method was the possibility to conserve cost effective transport in the sea. A definition of a logistic hub was presented by the Working Group on Logistics (2002). It was stated that “A logistics hub is a centre or specific area designated to deal with activities related to transportation, organization, separation, coordination and distribution of goods for national and international transit, on a commercial basis by various operators.” (The Gleaner, 2013).

Besides, the definition includes the description of these operators and their abilities to own, lease or rent the buildings and/or the facilities of the hub that include warehouses, storage areas, and distribution centres, offices, trucking and shipping services. (The Gleaner, 2013).

With reference to Oman, the hub must contain all those elements found to be necessary through the experience of others. There are many purposes that should be taken into consideration byb managers of logistics hubs. For example, entity and its relationship to international business and commerce should be underlined. Besides, logistics hubs should be managed by one neutral, legal body that could form a partnership between the government and the representatives of private interests.

It has been suggested that a successful logistics hub must have two main elements, territorial planning coupled with infrastructure rationalization. (Notteboom and Winkelmans, 2001). Such approach could utilize the area that is usually dedicated for the hub and aims at protecting the environment, avoiding certain residential areas that are characterized by traffic pollution, and building the infrastructure that is important for meeting specific needs of the operations.

For a long period of time, high-quality transport facilities turn out to be essential items in order to stay competitive. Oman is not the only country in the region looking to develop tax-free zones containing logistics hubs. With globalization, this growth will continue. With the growth of industry in developing countries, particularly in the East, the need for the most efficient transport and logistics solutions will continue to be felt. Bureaucracy can be a limiting factor where the authorities are not aware of the advantages of logistics hubs. Oman has an opportunity here to raise its profile in the world ‘doing business’ index.

The logistics hub must be fully aware of the likely costs. These include transport costs, industrial outlay, staffing and materials. The total turnover must be of the same level in order to contribute industrial productivity of the region. The hub should take the steps that help to optimize all elements that are crucial for the logistics chain. This includes internal transportation of goods, warehouse utilization and manpower. Each element in the chosen logistic hub has its goals and peculiar feature that should be discussed.

Introduced by Al Hajiri (1999) and evaluated by Fernandes and Rodrigues (2009), the main elements include sufficient multi-modal transfer system, appropriate telecommunications systems, port charges, cargo and container handling facilities, terminals for various commodities, and the required rail and road connections that are used for the connection between the hub and local consumer areas.

The location of a sea-air hub is ideal when the port is approximately mid-way between origin and destination and air freight cost to that port is not more than 50 present of the air freight cost from origin to final destination. (Baluch, 2005; Fernandes & Rodrigues, 2009). The time elapsed at the various stages is also important. In some cases, activities can be carried out at the hub which add value to a product and thus make beneficial any possible time delay.

To understand the work of a logistics hub, Fernandes and Rodrigues (2009) offer to consider the example of South Korea and it three-step roadmap. The steps include the expansion of the logistics capacity such as the cargo transit and transhipment capacity, the establishment of value-added logistics services such as assembly, packing, labelling and quality control, and the explanation of a global logistics and business centre such as a regional headquarters and regional distribution centre for multinational companies (Han, Chi and Cho, 2004; Fernandes & Rodrigues, 2009).

In a similar vein, the factors which contribute to the success of Hong Kong’s logistics hub were identified. (Jianfa Shen, 2004). A strategic location, free port status with appropriate economic regulations, the connection between mainland China and the world, the status of a quasi-state with high autonomy, low and simple tax system, non-government intervention, excellent infrastructure including a major seaport and international airport create the list of the main factors that help the developers introduce a powerful logistics hub in Hong Kong. (Fernandes & Rodrigues, 2009).

Fernandes and Rodrigues (2009) also used the example of Singapore in order to explain how a successful logistics hub could work in a small community. With the help of the investigations by Tongzon (2004), a number of positive aspects of the hub were identified. For example, it was stated that the chosen hub’s location is strategic indeed and combines shipping and air routes. (Tongzon, 2004). Besides, there is an air terminal with the help of which the link between global organizations is possible. There is also a properly established sea port that could be a good shipping point. (Fernandes & Rodrigues, 2009). Finally, its infrastructure remains to be highly efficient in comparison to the examples of other organizations. All the above are major contributors to Singapore’s success. Those which can be replicated in Oman would be a boost to the success of a similar logistics hub.

Taking into consideration the examples offered by other countries and the opportunities of Dubai, this region could be used in order to establish the required number of facilities that could be offered in the development of duty-free zones and the required logistics hub. In the opinion of some observers, the logistics hub in Dubai could become a global multi-modal type due to such evident features as the successfully developed economic environment, the existing free zones, the available track record, competitive charges, and the facilities that could be used to meet the demands on the local and national levels (Majdalani et al, 2007; Fernandes & Rodrigues, 2009).

To understand the effectiveness of such hub, a certain attention should be paid to the Logistics Performance Index developed by the World Bank. (Fernandes & Rodrigues, 2009). This index aims at providing a comprehensive explanation of supply chain performance. (Arvis et al., 2007). If a country gets a high ranking, it means that it becomes a crucial player in the chosen industry. For example, the Singapore hub takes the leading place in the list of the 150 countries evaluated in logistics performance. (Fernandes & Rodrigues, 2009).

Taking into consideration the evaluation of the hubs in Singapore and other countries, it is possible to identify several important issues that could be applied to the development of the hub in Oman. For example, it is necessary to take into consideration the location and the presence or absence of shipping and air routes. Besides, the presence or absence of air and sea ports cannot be ignored. Finally, it is necessary to consider transport facilities, charges, and the requirements that could be set by the government or the existing administration.

The logistics centre will require many ancillary features. These will include customs infrastructure, postal, bank and insurance services. Office facilities should be available on a short to long term basis. The necessary structures for goods transfer between transport forms such as container loading and offloading and other basic port facilities must be available for rapid movement of goods.

Storage and handling facilities such as warehouses and refrigerated premises and related services are required. Basic transport infrastructure such as road and rail access and timely connections are necessary. An efficient and competent management is required at the planning stage in order to promote investment, sufficient development and planning, and the overall layout.

Having laid out an optimal plan, the management company will be responsible for its implementation from a construction of the infrastructure to marketing the final product in all its aspects. This will include renting, leasing and selling activities, the efficient administrative, financial, commercial and operational management of the hub is crucial for successfully establishing the hub. Such maintenance of the communal property will also be the part of managers’ responsibility. This is an onerous responsibility and requires personnel of the highest calibre.

Taking into consideration the infrastructure and services offered, storage facilities and intermodal terminals remain to be crucial aspects of logistics hubs. Since the hub forms the arrival and departure point for all goods, warehouses are an essential feature to protect goods during any time delay. Specialized storage facilities may be required, depending on the nature of goods and freight handled by the transport operators.

Considerable general warehouse space for dry goods should be available. These should have the necessary loading and offloading facilities and equipment. Refrigerated space may be required for the storage of temperature sensitive items such as foodstuffs and medicines. In all cases, easy access to arrival and departure terminals is required.

Efficient processing of arrivals and departures will encourage patronage of the hub and also keep costs and charges competitive. High-quality services are essential for the success of the hub as it is there to facilitate the movement of goods worldwide. Quality services should complement a well-planned infrastructure.

The more basic features of good service should not be neglected. These include efficient customs and security inspections and clearance, postal facilities, personnel transport within the complex and externally, public telephones and communications services, adequate commercial and public parking space, restaurants, cafes and vehicle cleaning, repair and maintenance facilities. (Working Group on Logistics, 2005).

Characteristics of Logistics Hub/Centre

The main goal of a transport hub is the facilitation of the activities that could be related to such concepts as transport, logistics and the distribution of goods at national and international levels. Of necessity, there will be a variety of operators within the complex. These can be owners or tenants of buildings contained therein, according to their short term or long term needs.

In ideal logistic centre transportation, storage, packaging, labelling and other functions are concentrated in one place. A variety of forms of transport will access and egress the facility. In order to perform the function of a transport hub, a logistics hub has to consider road, rail, sear, waterway, and air aspects.

Logistic transport centres are common in developed countries. They are necessary to enhance the efficiency of urban freight transport systems. This ensures rapid supply chains particularly for foodstuffs and other perishable goods. However, they may put a strain on local infrastructure and initiate conflict with local residents due to noise, pollution and lack of adequate parking facilities or easy access. The location of any freight logistics centre should be considered carefully.

While it may be located initially in a remote region of low population density, in time as it prospers and grows, the situation may change dramatically. Site planners and city planners must consider this or irreversible damage may occur in the near or distant future. This will also add to operational costs as access becomes more restricted and the upgrading of infrastructure becomes essential. (Europlatforms EEIG, 2004). In the case of Europe, centres must comply with established and legally enforceable standards. Such standards need to be established in any such new development in Oman.

Four kinds of logistics centre can be identified, based on usage (Skowron- Grabowska, 2008):

• International logistics centre: This requires the highest degree of organizational and functional development as it must handle the vast international distribution networks over a global range.
• Regional logistics centre: This type of logistics centre deals with the intermediate stages of regional and urban distribution networks.
• Local distribution centre: These serve the urban community.
• Industry distribution centre: These are established by individual companies to serve their particular needs.

Oman Background

Oman is an Arab country that is also defined as a member of the Gulf Cooperation Council (GCC). The intentions of the country are prospective indeed. Besides, the country’s location and opportunities could be used to explain that there are enough chances to develop a powerful world-class integrate logistics hub. Transportation and storage could be defined as crucial factors that promote future growth of the region and the chosen logistics hub. (Fernandes & Rodrigues, 2009).

Oman contributes the development of the logistics hub as a chance to transform the existing opportunities into business quality only in case the productivity of economic sectors could be raised. The analysis of the Oman Strategic Plan and the evaluation of the Oman GDP show that, in 2015, GDP was about $70.25 billion with its value of 11% of the global economy. (Trading Economics 2016). The changes are evident indeed: GDP was $17.72 billion in 1960 and reached $81.79 billion in 2014. (Trading Economics 2016). The conditions could be changed, and the shift about 29% is predicted by 2020.

The country also believed that the integrated logistics hub development could make it a business centre, raise it economic productivity, and improve high production quality standards. (Akram,2011). To achieve the goals and create the required value, the GDP growth should reach the required 11% per year and promote the integration of regional and national economies. (Trading Economics 2016).

Oman is one of the Arab states that promote the idea of economic growth by any possible means. For example, in 2013, Oman Vision 20/20 was introduced in order to describe the positions of the Sultanate of Oman, address its oil resources, and compare GDP data. (Oman 20/20 Vision 2013). Overall revenues are projected to grow at a stable pace and have returned a CAGR of 5% over 2010‐2015. (Gulf Baader Capital Markets, 2011).

Oil revenues that include 897K barrels per day could be enough to meet the standards in case an average price of USD 59 per barrel. (Gulf Baader Capital Markets, 2011). Future Oil and Natural Gas revenue growth is characterized by such numbers as 5.7% and 4.1% respectively over 2010‐2015. (Gulf Baader Capital Markets, 2011). In the same period, current revenue is projected to grow by 3.2%. An overall annual average of total government revenues has been estimated at RO 7,499 million for the plan period. (Gulf Baader Capital Markets, 2011).

Oman enjoys a strategic location at the crossroads of major shipping routes, which accounts in part for its notable history as a maritime nation. It overlooks the entrance to the Arabian/Persian Gulf. It has overland routes also to other Gulf and regional countries such as Saudi Arabia. Such identification underlines the importance of a regional transhipment hub and an international gateway that is used for cargo markets in Saudi Arabia, the United Arab Emirates, and Yemen. This has encouraged the Government to develop the port of Sohar as a deep sea port and duty-free zone in addition to extensive industrial development. This port is located at the northern end of the Sultanate of Oman that is 200 km far from Muscat.

Current investment in the port exceeds USD 15 billion. Such results prove that Sohar could be defined as one of the world’s main ports and free zones that could be developed and improved. This location could be defined as a strategically successful place because of the available global trade routes that exist between Europe, Asia, and the Gulf region. Many industrialization areas could be developed with the help of the creation of petrochemical factories and metal and logistics organizations that could be rapidly developed.

Oman enjoys excellent sea and airports. The telecommunications sector is well developed and being expanded and upgraded continually. It features wide-ranging IT capabilities and is supported by a skilled and disciplined workforce. Oman would enjoy increased competitive advantage in the region by becoming a world class logistics hub. This will not only serve the country and the region but also provide commercial access to and from the Indian sub-continent and further east by providing a staging post for goods bound for and from both east and west.

Oman as a Logistic Hub in Shipping Sector

Bearing in mind the above advantages, Oman is currently in the process of developing plans for a “logistics hub” to help promote and grow the economy. Oman’s history as a trading nation, coupled with its natural advantages in the current era, has encouraged the Government to improve trade activities by enhancing its existing port structure as well as developing new sea ports in suitable locations along its extensive coastline.

The eighth five-year development plan has allocated about RO 502 million for the construction, development and expanding of ports. It has been noted (Ashai et al, 2007) that “the transport and logistics cluster in the GCC countries enjoys a number of unique strengths, including its location, its world class infrastructure and a progressive non-bureaucratic government that has played a role in developing this cluster”.

In support of this and other Government projects, initiatives are on-going to incorporate an information technology platform in all Government projects and maintain statistical databases. To support this, the Government has planned to allocate RO 44 million to the communications and IT sectors under the 8th five-year development plan.

Oman already hosts some of the leading global companies in the field of transportation and logistics. Oman has three areas already designated as free zones. These are the already mentioned, Sohar port, Duqm Port, currently being developed and expanded, and the long established Salalah Port. To complement these, Muscat Logistics City is being developed as part of the Oman World Central project, and will focus on logistics activities. These elements will all contribute to making Oman a world-class integrated logistics hub and moving to the forefront of world transport and trading centres.

In common with other oil-dependent economies, the government is actively planning and preparing to diversify the economy away from dependency on hydrocarbon receipts. While this presents a major challenge, the country’s diverse geography, mineral resources, its rapidly improving land, air and sea infrastructure and growing tourism industry, have impressed regional and overseas investors.

Port of Salalah

While enjoying a long maritime history, the port of Salalah continues to be a major port of call for world trading vessels. It is conveniently located a few kilometres from the city which is convenient for both visitors and crew hoping for rest and recreation. The port is the second largest in the region. The existing direct maritime connections and the possibilities to promote shortest transit times within the region and the markets of Europe, Asia, Africa and the US attract the attention of suppliers and developers.

In order to boost and develop trade and commerce, the Salalah Free Zone has been set up which co-operates closely with Salalah Port Authority to stimulate both local and international business. The experience gained over the years by the Port of Salalah has enabled it to withstand the fluctuations in the global container ships industry, continue to grow and make significant progress in efficiency, safety and technology development. The Port of Salalah performs the function of an engine to contribute the country’s economy.

This serves well the aim of the Omani government to diversify the economy from oil exports while pursuing meaningful Omanization objectives in employment. The container terminal is a key transhipment hub for the Middle East. It forms a major asset in Oman’s expanding import/export trade. The advent of containerization some years ago revolutionized global shipping habits and resulted in a network of specialized port facilities able to handle giant 20 and 40ft long steel box containers, carried by specialized and ever larger vessels. Among such facilities the Port of Salalah ranks in the top 30 ports worldwide. APM Terminals that are the largest container terminal operators globally take responsibility for the port.

To add to Salalah’s growing importance as a logistics hub, a major strategic fuel storage facility comes into operation this year. This is a multimillion dollar project. It is designed initially to serve visiting naval vessels, bearing in mind the strategic location in proximity to major oil routes and the current instability in the region including piracy which has necessitated the deployment of an international marine protection force.

It is planned later to expand the facility to cater for commercial vessels. It is being developed by Mina Petroleum LLC, an energy services company specializing in commodity trading and full cycle logistics for the delivery of petroleum products to remote regions and locations. Construction work on the facility is well under way. The chosen site links up fuel depots owned and operated by Oman Oil Refineries and Petroleum Industries Company (ORPIC).

It is easy to see why Salalah should be chosen as the site for such a depot. Its location close to the Red Sea and the presence of important east-west shipping lanes create good conditions for the achievement of various strategic purposes. Access to the facility is free from the possible restrictions posed by entering Arabian/Persian Gulf waters. This facility will add potential to the development of Salalah and the surrounding region and the attainment of the 2020 goals. It is necessary to invest in the Salalah project because the contribution to local economy and business activities is possible.

In a further contribution to the local economy, Salalah Free Zone is actively creating a new infrastructure for its customers. The port has already implemented a number of agreements and MOUs with Free Zone customers. This will ensure utilization of the liquid jetty as soon as it is ready for commercial operation. The port and Salalah Free Zone will continue to extend and explore joint opportunities. Both will play a significant role in further development of the Dhofar region and Oman as a whole.

Duqm port

Duqm port is one of the major ports in the Oman region due to its strategic location and equipment. (Oman 20/20 Vision, 2013). It is located in the region that is properly industrialized and defined as a prominent economic centre of the county. The port became operational in 2013. Now, it serves as a port for heavy and outsized equipment that could be used in onshore and offshore gas and oil projects. (The Business Year, 2014). The achievements of the port are impressive indeed. For example, it represents a $15-18 billion piece of the grand state plan in order to diversify the existing economy far from oil and gas issues. (The Business Year, 2014).

Therefore, it seems to be reasonable to spend huge investments in order to transform Duqm port into a world-leading maritime logistics hub. Being an important body in the Middle East and North Africa (MENA) and among the biggest industrialized ports globally, Duqm port performs a number of important functions. It unites Saudi Arabia and the UAE and shows the technological and industrial progress of the country. Its people do not want to make a full stop.

There is a need of new factories, refineries, the airport, and a number of hotels and houses so that people could live there and stay any time they want regarding their personal preferences, interests, and needs. The development of communications and transport ideas could help to prove the need of trade investments and promotions in the Middle East. The port of Duqm could be a good start to turn the region into a piece of heaven for employees, citizens, and guests of the region.

It is possible to use local investments and the investments that come abroad. The port is the opportunity to unite nations and create the goal that could unite people with different tastes and interests. They could use their knowledge, opportunities, and goals in order to prove that one place, in the form of Duqm port could be the heart of their work and their achievements by 2020.

Among the peculiar features of the port and ship maintenance, it is necessary to underline repair facilities and the types of routes that could be used in the dry dock. Vessels that complete long routes and spend in the port not much time are the main visitors of the port. These are usually VLCCs (very large crude carriers), container ships, dredgers, LPG and LNG carriers, and barges. The possibility to classify the vessels and provide them with the required portion of services impresses the shipping industry and makes the port recognizable among other ports of the UAE.

Ship conversion is another specialized feature of Duqm port. It has carried out such operations successfully. Its site occupies 1.3million square metres of land in Duqm. The shipyard has been furnished with state-of-the-art facilities. These include two very large graving docks (410m x 95m, 410m x 80m); five quays of 2,800 metres long and draft of 10-12 metres; a variety of jib cranes with lifting capacity from 40 to 100 tonnes, a slop and sludge treatment facility containing slop storage up to 10,000 cubic metres; five workshops able to carry out refitting, electrical repairs, machinery maintenance and repair, plate bending and shaping, sandblasting, painting and cryogenics. (Oman Drydock Company Report, 2011).

The workforce is able to repair any form of LNG carrier component, having been recently awarded the coveted Gaztransport & Technigaz (GTT) licence.( The International Harbour Masters’ Association, 2014). This is a developing area in worldwide transportation of LNG. Duqm port currently handles LNG carriers from Oman, India and Belgium. It has the capability and capacity to tackle the global maritime market. The facility is geared up and ready to repair any kind of LNG carrier.

Finally, the use of deep-sea drilling rigs is the feature that could attract the partners of Duqm port. This niche area can be served by Duqm which provides repair and conversion services to jack-up drilling rigs and drill ships. (Polaris Media, n.d.). Associated companies can also deliver a range of engineering, testing and trial services for offshore projects such as the construction of offshore accommodation barges, offshore jackets and platforms as well as topside modules and sub-sea pipeline manifolds. (Polaris Media, n.d.).

Research Methodology

The following describes the methodology used, the reasons for its selection, the data gathering process, and the analytical techniques used. It is hoped to highlight the problems and limitations in data gathering methods.

Research Approach

To gather data with the objective of advancing knowledge requires discipline in the methods and procedures used if efficiency and clarity are to be achieved. This realization has led to the application of systems and forms suitable for improving knowledge and understanding. Such systems are known collectively as ‘methodology’. (Gill and Johanson, 1997)

The methodology and techniques used vary with the discipline, area of study and nature of the investigation. In respect of data gathering, there are two broad distinctions. Data can be classified as ‘quantitative’ or ‘qualitative’. (Bolden & Moscarola, 2005). Clearly, in any comprehensive study there is likely to be a combination of both.

Quantitative research is more typical of scientific disciplines which are amenable to physical measurement and observation. In addition, much research can be carried out in laboratory conditions where variables can be controlled. Such data can often be expressed in numerical form and made readily amenable to statistical evaluation. Qualitative research usually takes place in circumstances where direct measurement or control is not possible and observations are made on an essentially moving canvass. This is often the case in the social sciences which are observing the human condition from some aspect or another.

Studies may range from simple shopping habits to deeper subconscious motivations in human kind. Predictions about future behaviour in areas such as high finance are of great current interest in the world driven by the stock exchange. Contradictory beliefs often coexist in the human mind and an analysis of behaviour patterns and emotional factors through qualitative studies may help to explain these. While general behaviour patterns may be common in large groups, it is of interest to researchers to investigate the complexity which exists in human behaviour and may affect individuals in special circumstances. Conditions of great stress where individuals are performing serious tasks are clearly one of interest.

As in the physical sciences, quantitive data can serve to aid any research project. Mixed methods and pragmatism are recommended in any study. Selection of an available method best suited to the task in hand is to be recommended rather than using up valuable time in philosophical discussions. Such findings prove that the existing freedoms and the possibilities to use different methods and techniques and choose between quantitative or qualitative approaches, and use innovative ideas. Any single method is unlikely to generate all the information or data required in any research project. A combination of methods can enhance each other.

The nature of the current study suggests, qualitative research methods are appropriate. Quantitative research typifies the deductive approach. Measured data is gathered, analysed, re-tested or expanded as felt necessary and conclusions drawn, usually in support or against a theoretical prediction. (Gills and Johanson, 1997). It exists in parallel with the development of a conceptual and theoretical structure, which is to be tested by observation.

The qualitative approach consists of an observation of actions and behaviour. This is seldom under the direct control of the observer. Causes of such behaviour can only be induced from such observations and not easily subjected to a further testing in replicated circumstances. (Fraenkel and Wallen, 1993) The deductive and inductive approaches represent the two main philosophical positions in research. There is often a wish to apply the methods of the natural sciences to the social sciences wherever possible, this is known as positivism. The alternative approach is referred to as phenomenology and is more concerned with how people experience the world and how things appear to them. (Gill & Johnson, 1997 ). It is, in essence, a subjective process.

In the current research, the qualitative method of face to face interviews will be employed. The researcher hopes this method will reveal the participants experiences, opinions and perceptions. The study is exploratory in nature and the researcher is attempting to probe into personal experiences of individuals and how they view their world.

Methodology Selection

Among qualitative techniques are usually observation of behavior, data gathering via an interview, and the analysis of written or otherwise recorded material. In this study; the questions of the interview will be open end ones and will consist of six questions and it’s chosen to be a face to face interview.

Some of samples were difficult to be reached due to distance constraints and hence the interview was carried out by phone. A self-administered questionnaire may parallel an interview and yield similar results. (Fraenkel and Wallen, 1993). However, body language is absent from the former. The use of different research approaches, methods, and techniques in the same study is known as “Triangulation” (Collis and Hussey, 2003).

Population Sample

While it is desirable to interview as many personnel of any group as possible, it is clearly necessary to target those people whose experiences are most relevant to the study. This must be done, bearing in mind the larger group to which the study results may be applied. (Fraenkel and Wallen, 1993 ). The sample size is relevant to the subsequent statistical analysis and the quality of results and the general applicability of results will depend on this. (Hair et al., 1998).

Sample size will be dictated by the nature of the interview, the accessibility of the information required the nature of that information and the resources and time available to the researcher. (Adair, 1999-87, Patton, 1980). Where the interviewees form a rich source of information in an applied field, small numbers may be sufficient. That is felt to be the case in this study. Bearing in mind time constraints, a group of three personnel were selected. It is not intended to draw conclusions which will be relevant to those outside the likely population sample.

Data Gathering Techniques

Data collected in this type of study is classed in two categories, primary and secondary. Primary data is collected directly by the researcher. Secondary data is sought from sources outside and previous to the current research. Both forms are necessary for a full understanding of the subject and drawing likely conclusions from it. (Fraenkel and Wallen, 1993). Primary data usually includes the facts that researchers gathered during questionnaires, interviews, and observations. Relevant studies, such as this should contain both primary and secondary data.

Secondary Data

Secondary data can be a valuable resource in any study. It can provide a better understanding of the subject; help avoids repeating past work, and save time and effort. (Val Belton, 2001). In addition to the previous application of such data, it may be re-analyzed with respect to current studies where it may be relevant in a new aspect. Since the data is extant, access is direct and without major costs in time and resources.

Easy access and improved analysis techniques can yield further information of value. Review of previous work helps formulate research ideas when designing a project. It also provides a chronological perspective. It may also have cultural aspects worth noting. It may be finally used in support or opposition to any proposed theories or conclusions drawn from the current study. (Newman, 1995) and (Bell, 2000) cited by (Al-Riyamy, 2001).

A review of the worldwide literature was used as the method to gather secondary data. This provided an overview of previous work in the field. It also supplied previously published data and information collected for other studies but which matched project requirements. Information was obtained from a variety of sources. These included libraries, public and academic, journals and articles, newspapers, internet magazines and electronic journals. Company data sources were also consulted.

Primary Data

Primary data is the information that is gathered in order to support the goal of an investigation. It has to be targeted, therefore, the design of technique employed, selection of the specific data required and the conditions under which it is gathered are all matters of importance. The administrator himself is part of the investigation so must also be chosen carefully. In this instance, the researcher himself plans to carry out the necessary tasks.

An interview consisted of a certain list of questions. These were developed and field tested by colleagues of similar background to those targeted by the survey. This was essential in order to ensure clarity, feasibility and validity. Since the respondents in such a survey are volunteers, they must be protected from any discomfort, physical or psychological that may arise due to this study procedure. In addition, the study should not be a cause for conflict between employer and employee or any other parties.

Significant problems of ethics have been encountered where intrusive investigations are carried out. Security of information has not always been guaranteed and repercussions have been felt by participants. This discourages many from taking part in what are essentially intelligence gathering exercises. The question of ‘right and wrong’ can become blurred and open to interpretation by third parties. From its outset, such intrusive investigations must be considered from an ethical standpoint and academic advice sought from a respected source. (Fraenkel and Wallen,1993)..

Data Analysis

There is little point in collecting data blindly without a method of correlating and analyzing such data. This is the function of the data analysis. It should bring, order, structure and meaning to the collection of data (Adair, 1999). Current computational facilities allow many ways in which data can be analyzed. The choice of the appropriate method depends on the type of data, in general whether it is qualitative or quantitative. While quantitative data is amenable to mathematical and statistical laws, qualitative data analysis has no clear guidelines which are universally accepted. (Hussey & Hussey, 1997).

The analysis of qualitative data has a subjective element on the part of the researcher which requires him to ensure he is fully familiar with its content and origin. Unlike laboratory measurement, data may initially be connected in the form of rough notes and personal observations recorded over a period of time. Unless such notes are carefully recorded, dated and referenced their value is greatly diminished.

Therefore, a systematic method and strategy must be employed from the outset. By careful classification and sub-classification of data gathered, helpful patterns may emerge which help to focus the research into relevant areas. (Hussey and Hussey, 1997). Brief summaries of progress are helpful in clarifying detail and indicating what may be required further and any deficiencies which may exist, particularly with respect to current theory. This will stimulate theoretical advance.

The value of any data analysis will depend on the insight enjoyed by the researcher and his ability to interpret the trends illustrated within the data. He has to recognize the perspective that could be offered by the respondents and investigate the impact of the information gathered. Data collection and analysis were carried out in this instance in tandem. Both were reviewed periodically in the light of any significant additional information. This helped to further categorize and group the data in a more illuminating configuration. The researcher has attempted to use a variety of instruments to collect data. This is recommended in order to complement each method’s strengths, to enhance the validity of the investigation and guard against misconceptions and misinterpretation.

Problems and Limitations

Minimizing disturbance to participants, time constraints and ethical questions presented most difficulties. Finding suitable times for interviews within a work environment is difficult for all. It may bring staff into conflict with their work demands or with their employer. Response time was also difficult to gauge and not within the control of the researcher. Many were not cooperative and did not respond.

Repeated requests and telephone calls were made. Language difficulties were also experienced since English is a second language where people are uncomfortable in expressing their thoughts, ideas and opinions openly. The number of samples taken was limited and unlikely to be reflective of a wider study within the general population.

Analysis

Interviews with Industry personnel

When interview carried out, personnel who took part; are from fields of Logistics projects and Shipping operations. They shared the same views about the impact of the Oman’s location – as a logistic hub – on the international shipping routes, the level of competition with other countries in and out the region, and the existing infrastructure of Oman.

Research Findings

The core elements that need to be resolved in order for Oman to effectively implement the necessary changes and to achieve its goal of making logistics a core part of the Oman economy are the following;

• Markets which will identify, analyze and monitor the opportunities for Oman, with understanding the technology, business, or trade flow changes.
• Trade facilitation that includes but not confined to both customs and legislation.
• Technology that is improving and increasing the utilization of transport and logistics technology.
• Human Capital which combines the education and capacity and the capability

Conclusion

The main objectives of this study are to determine if Oman is a suitable location for an effective and economically attractive logistic hub, with particular reference to VLCC operations. The study examined the competitive advantages of Oman compared with others in the similar aspirations. This included physical location, access to shipping routes, Government policies and economic factors. Adding to the study discussed the technical and economic feasibility and viability of a VLCC logistics hub in Oman.

The researcher develops research question for the study, and begin with a literature review of the concept of logistic hub and its main elements, features & characteristics, followed by a discussion about Oman and its location as a logistic center for VLCC operations, by give a clear overview about its location and the role implemented by the government policies and economics factories expended to located Oman to become logistic center for VLCC operations. Also the study discussed the main ports in Oman which consider as the main logistic centers developed by the government and the main services they provide for such supertankers operations.

The researcher applied interview as a techniques to collecting data about Oman logistic hub centers prove that Oman can be a logistic location for supertankers operations. The main finding was that the physical logistics infrastructure in Oman was excellent and could be used as the example of an integrated hub at a global level. Sohar, Duqm, and Salalah are the three main ports in Oman. They are usually invested by new people that come from different parts of the world in order to use the opportunities of the region, raw materials, security promoted by Oman ports, and the level of customer satisfaction. A certain portion of attention is paid to the location because it connects West and East worlds.

In addition, the researcher believes that Oman has to cut quite a distance before achieve a perfect.

Logistic Hub for VLCC Operation (i.e. Singapore). However, it’s an outstanding effort from government of Oman to develop a promising infrastructure which should place Oman amongst the best logistics hubs. Financial markets, the existing corporate governance system and employees introduce the logistics importance. Oman proceeding in a correct direction towards a world class logistics, and that require more attention to the human element and government subsidies.

Recommendations

Based on the above conclusions and findings, a list of recommendations could be offered:

1. The development of Oman as an integrated logistics hub is possible in case the development of robust maritime, aviation, and local transport could be used as the main supporters of the global economy.
2. The communication of the goals of the logistics strategy to Government, industry, schools and the wider society is required.
3. The creation of programs to assist in communicating the logistics strategy in Oman should be promoted.

Annotated Bibliography

Adair, C. (1999). Cracking the glass ceiling Factors Influencing Women. New Delhi: Surah 4 Good word Books.

The dissertation explained the importance of data sampling in any kind of project. Though the dissertation is not connected with the topic of the current project, the approaches and methods used by the author to discuss the barriers in the workforce helped to make the right decisions in the research process and understand how to choose an appropriate research design and setting in regards to the offered conditions. (Adair, 1999).

Baluch, I. (2005). Transport logistics: Past, Present and Predictions. Dubai, UAE: Winning Books.

Baluch (2005) investigated various transport logistics innovations in order to describe their impact on the modern transport logistics industry and define the prospects of its future development. The book is appropriate for the project because the author used the United Arab Emirates in his discussions about the possibilities of eco-friendly solutions, the existed varied environment, and the needs of managers to comprehend their goals in regards to the governmental expectations.

Economic Review, C. (2002). Developing Singapore into a Global Integrated Logistics Hub. The report of the working group on logistics.

The report introduced a list of strategies and recommendations to improve the competitive level of Singapore. The chosen source is relevant to the current project because its authors described the logistics features and used different forms of analysis to explain how the country could be changed. The roles of bonded warehouse operators, the expeditions of cargo shipments, and immigration details should be considered in the development of a logistics hub. (Economic Review, 2002).

Bolden, R. and Moscarola, J. (2005). ‘Bridging the Quantitative-Qualitative Divide’, Social Science Computer Review. pp.450 – 560.

In the article, the authors discussed several approaches to analyze the information in qualitative and quantitative research. They underlined the necessity of the bridge between those two research approaches to understanding how to use the information gathered. (Bolden & Moscarola, 2005). Qualitative and quantitative types of analysis have a number of peculiarities. To create an effective logistics hub project, it is necessary to comprehend the difference between those two types.

Fernandes, C. and Rodrigues, G. (2009). Dubai’s Potential As An Integrated Logistics Hub. Web.

This article is the basis for the project because its authors aimed at examining the potential of the integrated logistics hub in Dubai, and the task of the current project is to examine the same issues but those of Oman. The gaps, surveys, and facilities are discussed to explain the process of logistics hub development and integration in different cities of the UAE. Oman, as well as Dubai, has all chances to become a world class logistics hub. (Fernandes & Rodrigues, 2009).

Exploring Logistics Hubs, (2013). The Gleaner, Web.

In this article, much information about logistics hubs, its features, and the activities within the hub is given. The worth of this article is the definitions given and the explanations offered. The developer of the article admitted that a logistics hub is not the core of transportation, separation, and other activities. It is also a place that should be properly equipped and organized in order to promote commercial constituency. (The Gleaner, 2013).

Gulf Baader Capital Markets. (2011). Oman Economic Outlook: Marching Towards Stability… Web.

In this report, much information about the budget of Oman, the conditions of the global economy, and the description of the key economic challenges of the country are offered. A number of vulnerabilities remain in the country, and the government, as well as the managers and logistics hub developers, has to investigate the current state of affairs to promote growth and success. (Gulf Baader Capital Markets, 2011).

Lee, Y. and Hobday, M. (2003). New Globalisation Strategy: Can Korea Become a Business Hub in Northeast Asia?’ Management Decision. Korea, pp.498 – 510, 41 (5).

The role of the Korean Government in hub business is discussed in the article. The authors paid attention to the essence and outcomes of the economic crisis in the country and the steps that could be taken to cope with the challenges caused by the process of globalization and too high expectations. The ideas of how to implement a new market-orient paradigm could be used in the development of a new logistics hub for port operations. (Lee & Hobday, 2003).

Ministry of Transport and Communications, (2015). Oman Logistics Strategy 2040 (SOLS 2040), Highlight Oman Logistics Strategy 2040. Web.

In this source, the activities of the Sultanate of Oman are described because they play an important role in the field of logistics in the country. Much attention is paid to such aspects as a successful geographical position, an appropriate infrastructure, and even the stable political climate. (Ministry of Transport and Communications, 2015). This source helps to understand what steps could be taken to promote the development and integration of the logistics hub in Oman.

Notteboom, T. and Winkelmans, W. (2001). “Structural changes in logistics: how will port authorities face the challenge?” Maritime Policy and Management. pp.71 – 89, 28(1).

The authors of this article described the conditions under which the market environment of ports could be changed. It was necessary to investigate the role of port authorities in order to clarify the connection between transport, trade, and shipping in port management. (Notteboom & Winkelmans, 2001). The chosen source is relevant in serving the project’s objectives because it helps to comprehend the worth of structural changes and improvement in logistics.

Oman 20/20 Vision. (2013). Web.

The worth of the chosen report is the possibility to look at the current steps the country’s government and the representatives of the Omani economic field and analyze their influences on the situation in the country. It was reported that the last decade was important for the Omani people because the programs and policies promoted and diversified the economy of the country. (Oman 20/20 Vision, 2013). The facts from this sources were used for the creation of the project about the Oman logistics hub.

Polaris Media. (n.d.). Greek shipping giant Springfield shipping awards Oman drydock company (ODC) two OBO to VLCC conversions. Web.

This article is chosen for the project in order to gather enough information about the current state of affairs in Oman ports on the example of Oman Drydock Company. The description of the port of Duqm helped to understand how the geographical location, slash costs, and time should be defined by the developers of the hub. (Polaris Media, n.d.). This information is relevant to the project because it informs about the peculiar feature of the port that a significant part of the Omani logistics hub.

Trading Economics, (2016). Oman GDP. Web.

This online source is used in the paper because definite and credible information about Omani GDP is presented there. Though it is not a peer-reviewed article or newspaper article, this statistical data is used to explain the current economic changes in the country. The fact that the GDP value is about 11% of the world’s economy is mentioned in the paper to prove that the development of the logistics hub is appropriate in Oman.

Shipyards.gr, (2011). Oman Drydock Company General Information. Web.

Oman Drydock Company is the core of the report chosen for the paper. Its targets, goals, principles, and opportunities are discussed in order to explain how the work of employee should be organized. Procurement, fabrication, removal, and fitting as the main processes of ship repair, as well as engineering, erection, and installation as the main processes of ship conversion, are discussed in the report and used in the paper to explain the worth of logistics hub in ports. (Shipyards.gr, 2011).

Rodrik, D. (2005). Rethinking growth strategies, Handbook of Economic Growth. Helsinki: eds. P. Aghion & S. Durlauf, Elsevier, North Holland, Chapter 14.

The growth policies of developing countries are necessary for the discussion in the project because they show what activities improve the current state of affairs and what activities have to be removed. The developers of logistics hubs should understand the importance and seriousness of economics. (Rodrik, 2005). The author underlined that technical aspects should be considered because they helped to define the weaknesses of the systems used by the economic theorists.

Shah, N. (2015). Recent Labor Immigration Policies in the Oil-Rich Gulf: How Effective Are They Likely To Be?. Web.

In this article, the author explained the immigration policies and their connection to the oil-rich Gulf region. It was stated that though the decline of construction workers’ demand was observed, the government underlined the importance of such workers in ports. (Shah, 2015). Till the demand exists, people could believe in the worth of their contributions and activities. The growth of population in the Gulf region, the importance of construction processes, and the regulations for migrants are the concepts that could be taken from the article and used in the paper.

Stiglitz, J. (1996). Some lessons from the East Asian miracle. Vol. 11. The World Bank Research Observer, pp.151 – 177.

The article aims at discussing the attributes of the economic growth in East Asian countries and explaining the term “East Asian miracle”. (Stiglitz, 1996). The author underlined the fact that the identification of the factors played an important role in developing countries and contributed the changes in the economic field. That analysis could be used as the basis for understanding main economic issues and describing the ingredients of economic success.

Majdalani, F., Kuge, S. and Koegler, U. (2007). Middle East Transport and Logistics at the Crossroads. Web.

The evaluation of the Middle East region in terms of transport and logistics operations was given in the chosen article. The authors mentioned that trade relations with Asia and Europe that could be supported by the Middle East countries, as well as the participation of the ports in international trade, played an important role in the regional economy. (Majdalani, Kuge, & Koegler, 2007). This article is helpful for the project because it includes the main features of trade relations and the necessity to contribute the spheres of logistics and transportation of the region.

References

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Al-Hajri, G. (1999). The Impact of Sea-air Mode on Air Cargo Transport. Surrey, England: A-Z Group Ltd.

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Collis, J. and Hussey, R. (2003). Business research: A Practical Guide for Undergraduate and Postgraduate Students. 2nd ed. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan.

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