A project linking the Omani port of Sohar with the United Arab Emirates rail network is expected to give a significant boost Oman‘s economy.
The Hafeet Rail project aligns with both the UAE's Centennial Plan 2071 and Oman Vision 2040, fostering economic growth, social cohesion, and sustainable development in both nations.
The railway will cut the travel time between Abu Dhabi and Sohar to just 100 minutes, with freight trains reaching speeds of 120 kilometres per hour. There will also be regular passenger services between the UAE and Oman, which will also boost business cooperation opportunities.
The container terminal at Port of Sohar is managed by Hutchison Ports, which stands to benefit from increased trade resulting from the rail link. Hutchison Ports Sohar is a modern container-handling facility capable of accommodating the latest generation of mega vessels. The terminal is located on the Gulf of Oman, approximately 200km from Muscat and 160km from Dubai. It has an annual capacity of 2 million TEU (twenty-foot equivalent units).
The 238km railway network will include 60 bridges as well as tunnels stretching 2.5km. It will link five major ports and various industrial and free zones across the two nations. A single freight train journey on the network is expected to transport more than 15,000 tonnes of cargo, or approximately 270 standard containers. Sectors set to benefit from this new capacity range from mining to iron and steel, agriculture and food, retail, e-commerce, and petrochemicals.
Hafeet Rail is a joint venture between Etihad Rail, Oman's global integrated logistics provider Asyad Group, and Mubadala, one of the UAE‘s sovereign wealth funds.
Project finance debt
Stage One of Etihad Rail runs 264km, connecting the inland gas fields of Liwa and Shah to the port of Ruwais. It became operational in January 2016.
Stage Two opened in February 2023. It runs 603km from Ghuweifat, in the far west of the UAE on the border with Saudi Arabia, to Fujairah on the Gulf of Oman.
The Hafeet Rail connection project recently took a big step forward, with the signing of US$1.5 billion in project finance debt, which is supported by US$1 billion of equity.
Standard Chartered, as lead financial adviser, played a pivotal role in procuring the required debt funding for the project’s development since early 2023. First Abu Dhabi Bank acted as co-financial adviser.
The project finance debt was sourced from a combination of UAE, Omani, regional, and international banks across conventional and Islamic finance tranches in both UAE dirham and Omani rial.
Participating UAE banks were Abu Dhabi Commercial Bank, Arab Bank, Commercial Bank of Dubai, First Abu Dhabi Bank, National Bank of Kuwait, Abu Dhabi Islamic Bank, and Bank Ajman.
Those from Oman were Ahli Bank, Bank Dhofar, Bank Muscat, National Bank of Oman, Oman Arab Bank, Ahli Islamic Bank, Bank Muscat (Meethaq Islamic Banking), Bank Nizwa, and Alizz Islamic Bank.
Vital commercial, investment hub
“The strong interest shown by leading banks in both countries to finance the project reflects the strong confidence in this strategic investment," comments Asyad Group chief executive officer Abdulrahman Al Hatmi. "The success of Hafeet Rail in securing this bank financing not only boosts the transport and logistics sector but also stimulates economic growth and enhances commercial activity between the two countries.
"The joint Emirati-Omani rail network project will undoubtedly enhance the competitiveness of both countries and the region as a vital commercial and investment hub, connecting them to global markets through the ports and state-of-the-art airports,” Al Hatmi adds.
Law firm Dentons provided comprehensive advice on all aspects of the project financing. Additionally, lawyers at the firm guided the concession agreement for procuring construction and services on the UAE section of the line, along with a track access agreement to enable various UAE companies involved in the project to access relevant sections of the existing rail network.
In April this year, the civil works and construction tenders were awarded. Siemens Mobility, together with its consortium partner Hassan Allam Construction, was awarded the Design and Build Railway Systems and Integration contract. Siemens Mobility and Hassan Allam Construction will deliver the design, build and integration of the ETCS Level 2 signalling, telecom and power supply systems.
Civil works contracts were awarded to an Omani-Emirati consortium led by Trojan Construction Group and Galfar Engineering, along with Tristar Engineering and the National Infrastructure Construction Company.
