The GCC’s hidden gem

Emerging as a global oil hub and most visited tourist destinations, modest Fujairah shows it has more to offer GCC contractors than its infamous Gabbro rock.
By Elizabeth Broomhall
Sat 27 Nov 2010 12:00 AM

Beyond the bustling streets of Dubai
and Abu Dhabi, hidden
behind a majestic mountain range, one of the UAE’s more modest Emirates is quietly
preparing for a surge in its construction market.

Known by some as ‘the jewel of
the Middle East’, not least because of its exotic landscape and strategic location,
Fujairah is expected to become a key competitor in the UAE’s construction market,
attracting developers, consultants and contractors from around the GCC as it emerges
to become one of the region’s most popular tourist destinations and global oil hubs.
As a tourist destination, Fujairah’s attraction
is mostly based upon its unique characteristics. As well as being the only Emirate
that is almost totally mountainous, Fujairah is
one of the few places in the region that continues to offer a quaint, rather than
contemporary get away.

Other draws include an array of natural beauty-spots, from unspoiled,
sandy beaches, to waterfalls, coral reefs and natural marine reserves. “Fujairah
is well positioned to be a destination for tourism given its location on the Gulf of Oman and its natural beaches, coral reefs
and mountainous terrains,” explains Ammar Al Assam of Dewan Architects, currently
working on several projects in the region. “As a result, in the last few years there
has been a variety of tourism projects, mainly waterfront hotels, springing up on
the famous Al Aqa beaches.”

One of the most infamous tourism projects in the region is the
US $817m Al Fujairah Paradise. Located between three mountains, the development
is set to provide 1,000 five-star villas and a 250-room hotel with a view to boosting
the number of visitors and foreign investors to the area. Similar projects include
the Al-Aqa Hotel resort, Fujairah Complex and Fujairah Mall, all of which will include
a number of tourism facilities and are being built by UAE-based Commodore Contracting
Company. “One of the reasons Fujairah is on the
verge of rapid development is because it is a prime tourist destination in the UAE,”
confirms Commodore branch manager Shadi Abu Khuzam. “In the next ten years, it will
have three times the number of hotels and resorts that exist today, and it is very
possible that the airport
of Fujairah, which is currently
used only for domestic flights and small private aircrafts, will be expanded to
meet the standards for international flight.” Thus, he explains, for contractors
with experience in hotel and airport projects, Fujairah
presents a goldmine of opportunities for new contract wins.

But the best thing about Fujairah
is that opportunities are not limited to this one sector. Equally important, is
its huge potential to become a global oil hub due to its strategic and unique location
on the open sea of the Arabian Gulf and the Indian Ocean, close to both East and
the West shipping lanes but outside the Strait of Hormuz.
Not only does this make Fujairah a convenient refueling
or ‘bunkering’ station for thousands of ships and tankers travelling through the
region every year, but an extremely safe port during times of conflict.

These factors, in addition to its convenient offshore anchorage
area, characterised by deep water and a smooth sea bed close to shore, (enabling
large tankers to access the port) have rendered Fujairah the second largest bunkering
point in the world after Singapore.
Currently, it caters for as many as 100 ships a day in need of fresh supplies, fuel
and repair work, and its emergence as an oil hub has followed naturally.

“In the Middle East, oil and
oil products are regularly transported from one country to another due to some countries
having a deficit of products and others having a surplus,” says oil storage company
Vopak’s Christiaan Nielsen. According to him, Fujairah
plays a massive role in accommodating these oil flows, through both its tank storage
facilities and product blending services. “When refineries are set up they are focused
on the refining of oil, and on making the building blocks for other products such
as gasoline. For them, storing products is a hassle and they’re not always competent
in the blending process. Fujairah, due to its strategic
location, is a region which focuses on delivering that service.”

So, how does this translate into a demand for construction? For
a start, it means Fujairah is looking at expanding
its port, increasing the number of oil storage tanks and developing its infrastructure,
not to mention building an oil refinery to maximise the region’s capabilities. This
is in addition to the Abu Dhabi Crude Oil Pipeline project, designed to transport
1.5 million barrels of crude oil per day over a distance of 370km ready for exportation
out of Fujairah.

“Currently, the Emirate of Fujairah has ambitious plans to increase
the oil storage capacity, with major storage tanks planned to store Fuel Oil, Crude
Oil, Gas Oil and Jet Oil,” explains marine engineering firm Topaz’s CEO Fazelbhoy.
“Recently, Topaz was involved in the piping and structural works for BAM International
on the offshore jetty extension of Vopak Horizon Fujairah Limited, and we hope to
be part of future developments as well.”

According to the figures declared by government advisor Dr Salem
Khalil in April this year, the existing cluster of tanks along the Fujairah coast currently stands at 120 with a storage capacity
of 3.1 million cubic metres. By 2012, this is expected to increase significantly,
with an additional 140 tanks and an extra 4.2 million cubic metres worth of capacity.
Incidentally, some specialised engineering firms are already involved in these expansion
plans through land reclamation projects. Fujairah Bulk Shipping engineering is one
of them. “At the moment we are involved in one of the largest land reclamation projects
in Fujairah,” says chief operating officer Jamie
Staggart. “The completed land mass will be used to process and export oil delivered
from Abu Dhabi through
the new pipeline.

“The project is expected to be completed by mid 2011, shortly
after which we expect a lot of the building for the oil storage facilities to commence.”

Among the storage facility projects already under construction
is the expansion of Vopak’s oil terminal, on track to add 600,000 cubic metres of
storage facilities and four to six additional berths. “Currently we have 48 tanks,
but we’re looking to add another 21,” says Vopak. “At the moment, the region is
expanding, so there are several other companies doing the same thing, and in the
future we will be looking at even further expansion opportunities.”

Speaking about the oil refinery project in Fujairah, he adds:
“There are plans to build four more oil refineries across the GCC, one of which
will be in Fujairah. Fujairah
is a good location for an oil refinery because of its storage facilities. It means
the oil can go straight from the refinery to the storage facilities via a pipeline
without having to use vessels. So far, the project has been announced, but as yet
I don’t think they’ve awarded the main contract.”

The only discrepancy for bidders is that they must have a license
to work on oil and gas projects alongside specialist experience in the field. “Fujairah is a business-friendly Emirate and it presents great
opportunities for all types of contractors,” says Fazelbhoy, “but due to the challenging
nature of the work, the oil and gas industry demands high safety and quality standards
along with specific certifications and pre-qualifications.”

Generally speaking then, Fujairah
is no different to anywhere else. Or is it? According to contractors and architects
already working in the Emirate, there are in fact a number of idiosyncrasies which
should be taken into consideration by anyone looking to win contracts in the region.

“Work in Fujairah is less complicated than in other Emirates,” says
Khuzam. “In comparison to Dubai,
for example, regulations are far less stringent. Things like: You can use virtually
any material on your project, you can buy from anywhere, there is very little interference
from the municipality and much fewer compulsory site inspections. Also,” he adds,
“the authorities are very approachable. With it being a small city, you get to know
people personally. Everybody knows everybody, so the consultants, municipality and
the contractors all know each other. This is not like Dubai municipality which is huge and where you
are very unlikely to meet the same people all the time.”

Additionally advantageous, he suggests, is that often, it can
be cheaper to build in Fujairah. “It is slightly
less expensive to build in Fujairah, in the sense that you can hire people for less,
so subcontractors and workers would not cost you as much as they would in Dubai. At the moment, the
rent for labour camps, which is obviously a big cost in any construction project,
is also lower than it is in Dubai,
but if the construction market takes off then I’m sure the prices will increase.
But in the past, Fujairah did not experience the
same hike or drop in prices that some of the other emirates experienced.”

Other benefits arise from Fujairah’s
unique climate and terrain. Most significantly, the fact that the state has stronger
soil than other Emirates means contractors can save a large amount of money on piling
and shoring.

Khuzam explains: “The soil in Fujairah is more solid and has
a higher baring capacity, which means you don’t have to have huge foundations like
you do in Dubai,
and in most cases you don’t need piling, you can just have a raft foundation, which
saves on costs. Shoring is the same. Normally, where excavation sites cannot stand
on their own you have to shore them, but in Fujairah
they normally stand without shoring.”

Less appealing, are the problems caused by Fujairah’s
sometimes harsh climate. Whilst heavy winds can threaten to batter down perimeter
fencing, a 30-minute period of rainfall has been known to wash out earthworks and
site mobilisations, not to mention carrying off portacabins and site offices. “In
Fujairah you can expect your fence to fall down
or fly away at least a couple of times a year, especially if you are near to the
sea,” says Khuzam. “It also rains more frequently than in Dubai, and when it does, you will usually have
a flood on and around the site. This is particularly damaging at the beginning of
a project, if you have just finished excavating for example, because your excavated
area can become a pond or a lake and you have to do it all again.”

According to Khuzam, it therefore becomes more important when
working in Fujairah to protect your materials,
purchase a strong perimeter fence and dig a ditch around the project to avoid site
flooding. “Your fence must be able to withstand much more wind than in Dubai and you should allow
the wind to pass through rather than block it. Obviously, every project is different,
but in some cases it may also be possible to have a trench or a ditch around the
project so you can redirect the water.”

Potentially last, but certainly not least, of a contractor’s
Fujairah-specific building problems are those related to earthquake exposure. Being
closer to Iran and the relevant
seismic zone, Fujairah supposedly has a higher chance of earthquake than Dubai and Abu Dhabi,
putting pressure on contractors to take more precautions during construction. “In
Fujairah, the risk of exposure to earthquakes is about 10-15% more than in Dubai and Adu Dhabi, so it’s
important to ensure that your vertical elements are rigid enough to take any horizontal
movement,” says Khuzam. “Normally buildings are only designed to take vertical loads,
but where there is a risk of earthquake the core has to be designed in a way to
absorb earthquake movements and transmit loads down to the raft foundation.” He
adds, however, that this tends to be a bigger issue for high rise buildings and
taller structures, the majority of which are built in Dubai
and Abu Dhabi rather than Fujairah.

Other downsides of working in the region are less to do with
geography and more to do with the business context. Among them are occasional project
delays due to a less sophisticated administrative environment and an absence of
clear policies and procedures, not to mention the apparent power shortages that
have slowed the region down for some time. “At the moment Fujairah
has limited access to power, which means it can be difficult to get power to labour
camps and often we have to rent our own generators,” says Khuzam. “That said, there
are at least four substations being built at the moment, and I imagine more in the
future as more projects occur. Within a year or less there will be much more power.”

The question is: are power shortages, administrative delays and
a few climate-related challenges enough to stop hungry contractors from entering
the bidders market? Probably not. Whether or not there will be room for them all
in such a small city is another issue.

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