Duqm's Cargo Mix and the Investment Case

The cargo behind the capital

Duqm's commercial-terminal infrastructure finished with a reported project cost of USD 292.95 million, against an appraisal budget of USD 353.33 million. By 2023, the dry bulk and general cargo recorded in AIIB's later evaluation amounted to 1.347 million tonnes, against an original forecast of 11.634 million. The civil investment and the demand supporting it had followed sharply different paths. [1-3]

For a port owner deciding when to commit cranes, yards and associated utilities, Duqm offers a demanding investment test: identify the cargo that pays for each capacity increment, its route to the terminal and the decisions that release it. Aggregate port throughput can conceal a shortfall in the particular cargo streams on which the investment was priced.

What reduced the project cost

The financed IP2 package provided roads, yards, utilities, buildings and piled crane beams behind an existing commercial quay. SEZAD announced the Serka-MSF agreement on 13 November 2016 at OMR 107.3 million; the completion record gives the original C66/2016 contract as OMR 107.334 million. AIIB's completion note records an OMR 12 million claim settlement, equivalent to USD 31.2 million, already included in the USD 270.03 million actual infrastructure cost. Adding that settlement to the reported final infrastructure account would count it twice. The wider USD 292.95 million project total also includes supervision, management and financing costs. [2, pp. 2-5; 4]

The USD 60.38 million reduction against the appraisal total requires closer examination. USD 37.94 million came from unused contingency: 62.8% of the reduction. Base costs fell by USD 18.20 million, and capitalised fees fell by USD 4.23 million. The published rounded totals leave a USD 0.01 million reconciliation residual. The budget therefore absorbed the claim and still finished below its original total, with unused provision accounting for most of the difference. [2, p. 3]

These accounts measure different commercial exposures. A construction settlement affects the delivery budget; unused contingency reduces the amount ultimately required; cargo receipts support the operating business. A successful construction-cost reconciliation leaves the demand assumptions to be tested separately.

Rebuild the comparison cargo by cargo

The 2016 appraisal forecast 9.199 million tonnes of dry bulk, 2.435 million tonnes of breakbulk and 921,000 TEU of containers for 2023. The 2025 learning review records 1.109 million tonnes of dry bulk and 238,000 tonnes of general cargo for that year. Matching those two tonnage categories gives 1.347 million tonnes against 11.634 million, or 11.6% of forecast. Containers have their own measure: the review's results table reports approximately 16,000 TEU against 921,000. [1, Annex 3, Table 1; 3, Tables 3 and 5]

The same review lists 7.084 million tonnes of liquid bulk and presents a broader 8.45 million-tonne result elsewhere. The original appraisal located the liquid terminal separately and excluded liquid-bulk and refinery benefits from its commercial-terminal financial case. Liquid cargo can strengthen the wider port business while leaving the original dry-cargo and container revenue assumptions unfulfilled. Combining the broader total with the narrower forecast obscures that distinction. [1, Annex 3, paragraphs 12 and 23; 3, pp. 23 and 27]

IMWO original calculation and graphic

Containers carried most of the benchmark revenue

Cargo mix changes the financial exposure. The appraisal listed flat tariffs of OMR 0.8 per tonne for dry bulk, OMR 50 per TEU for containers and OMR 2-3 per tonne for general cargo. Applying those rates to its 2023 forecast gives OMR 58.28-60.71 million across the three categories. Containers contribute OMR 46.05 million, approximately 76-79% of that simplified tariff-weighted total. [1, Annex 3, Table 4; IMWO calculation]

Holding those old tariffs constant and substituting the reported 2023 quantities reduces the same calculation to OMR 2.16-2.40 million, about 3.7-4.0% of the corresponding forecast benchmark. This is a quantity sensitivity at 2016 appraisal prices. It isolates the effect of the cargo mix; actual receipts also depend on later tariffs, discounts, ancillary services and operating arrangements.

The comparison uses the rounded 16,000 TEU in the review's Table 3. Its Table 5 labels the container row in tonnes, conflicting with the TEU basis of the original forecast. That second row is excluded from the calculation. The general-cargo range retains both published tariff endpoints; vehicle-specific charges and liquid cargo sit outside this calculation.

IMWO original calculation and graphic

The missing inputs were outside the construction package

The appraisal's mineral-export demand depended on rail connections bringing cargo to Duqm. Its container forecast depended on manufacturing and other activity in the industrial zone: the appraisal translated 22 million tonnes of industrial goods into 1.4 million loaded TEU, then 1.68 million TEU including empties by 2031. The later learning review identifies delays in the railway and industrial development among the explanations for lower traffic. These were concrete inputs to the demand forecast, controlled through investments and commercial decisions beyond IP2's civil works. [1, Annex 3, paragraphs 4-10; 3, effectiveness and efficiency assessment]

For an equipment decision, the distinction changes the evidence required. A mineral route needs an operating mine, an available inland connection and a terminal handling arrangement. A container stream needs producing tenants, a route to market and shipping services able to carry it. A completed yard or crane rail releases terminal capacity; the cargo-generating investment releases demand. Each should have a separate date and accountable party in the investment programme.

AIIB's review rated the project Successful overall while rating efficiency Less Than Efficient. Infrastructure can provide an operating platform while its early utilisation and economic returns trail the case used to approve it. The review's operating observations concern 2023 and earlier years; subsequent expansion or new services belong in a later operating comparison. ^[3]

Test a delayed cargo stream before ordering the next increment

The original economic sensitivity reduced benefits by 15%, lowering the estimated economic internal rate of return from 25.5% to 20.4%. The realised shortfall in the matched dry-cargo volumes was much larger than that test. Volume attainment and total economic benefit have different bases, so a new return calculation requires the underlying cash-flow model. The learning review reports that the original model was unavailable for reassessment. [1, Annex 3, Table 3; 3, efficiency assessment]

The model also assumed operating and maintenance costs equivalent to 65% of revenue. That proportion needs a fixed-cost challenge when cargo arrives late. Serka's published scope includes seventeen operational and administrative buildings, yard lighting, water and firefighting networks, sewerage, pumping and crane beams. Those assets bring inspection, servicing and minimum availability commitments through a low-throughput year. ^[5] A lender or owner testing a delayed industrial locator should retain those committed costs while moving the associated tonnes, TEU and tariff income to the revised date. Otherwise, a proportional cost assumption can make the downside appear easier to absorb than the operating commitments allow.

IMWO proposes a cargo-linked capacity release account for each major equipment or terminal-capacity decision. Start with the named cargo origin and its committed volume; identify the railway, industrial plant or shipping service that must be available; record the agreed commercial start date and handling-income basis. Against that stream, show the capacity already funded, the next irreversible order and the minimum annual cost carried if demand slips. The investment committee can then compare ordering now with a deferred or smaller equipment increment on the same cargo and cost assumptions.

At Duqm, that account would have separated mineral-rail timing from industrial container demand and from liquid-terminal activity. It would also have kept the construction claim, unused contingency and operating income in their own accounts. The decision becomes specific: how much additional capacity should be committed, for which cargo, and how long can the business carry it before that cargo arrives?