The downturn has seen the wheels come off many of Oman’s planned property developments as the sultanate’s lawyers have increasingly come to draw from its energy reserves for work.

Much like his oil-exporting Gulf counterparts, the sultan of Oman, Qaboos Bin Said Al-Said, spent years diversifying his economy after amassing surpluses from an oil price rally that ended in 2008.

Oman upped investment in infrastructure and mounted a bid to privatise its power, ports and water sectors under an ambitious 2006-2010 development plan. The sultanate is hoping to attract about US$7.8bn in overseas investment into strategic segments of its economy, which is currently dominated by the oil and petro-chemical sector.

As part of this, the property market was liberalised in 2006 to allow foreigners to buy freehold property. But the advent of the global credit crisis dashed hopes of a sustained rush of international buyers. Foreigners can own property in certain tourist developments, known as Integrated Tourism Complexes (ITC), which also gives them access to Omani residency visas. ITC clusters have sprouted up throughout the country and are currently in different stages of implementation. Sites usually comprise golf courses, marinas with hotels and spas.

It’s these projects that have been most visibly affected by the downturn, says Paul Sheridan, a partner in the Muscat office of London-based law firm Denton Wilde Sapte. “The property market, that is fairly fledgling anyway, has run into difficulty as it’s opened up to overseas buyers. The problem is that there are obviously not a lot of foreign buyers about at the moment,” Sheridan says. “ITC work has definitely slowed down. But the government’s been quite clear that it wants things to continue.”

Drying up
Oman real estate faces a similar headache to Dubai in that developers draw working capital from sales on villas and houses, which have mostly dried up.

One of the largest ITCs under construction is Al Madina A’zarqa, known as Blue City, covering 32sq km of a site north-west of the international airport at Muscat. Five thousand properties are planned.

The US$200m Jabal Resorts project in Sifah, just south of Muscat, is planning a luxury Banyan Tree and Angsana resort. The Wave, a clutch of beachfront villas, apartments and townhouses in the capital, is also under construction. Since the financial crisis hit the Gulf in late 2008, bank financings that underpinned investment in these developments have hit the buffers.

Lawyers are reporting a drop in instructions from international players for project finance advice, and are now being called on for restructurings of existing debt. Instead, water and power have been keeping law firms busy.

The legal market in Oman remains dominated by a small number of domestic and international firms. In addition to those on the ground a few other global firms remain active in the country, often servicing clients from Dubai or Abu Dhabi. Most firms can grab a slice of projects such as the US$1bn Salalah international water and power plant (IWPP), a desalination works in the south-west of Oman, which is this year’s highlight.

Bruce Palmer, a partner at US firm Curtis, Mallet-Prevost, Colt & Mosle, says after years of expansion, followed by a decline in the wake of the financial crisis, the credit market for IWPPs in Oman appears poised for a recovery. While 2008 saw a project volume in the Middle East of about US$50bn, nearly six months passed before the GCC saw its first IWPP financing of 2009. Bahrain’s Addur IWPP closed on June 29, raising US$2.1bn and bringing the overall project volume for the region to US$6.7bn for the year.

IWPPs are crucial to Oman’s long-term plan for a government-backed development of infrastructure alongside a healthy privatisation programme, which has been somewhat scuppered as oil prices have tumbled.

Palmer says: “The drop in oil price has affected Oman’s five-year plan, but the government has said it will spend through a budget deficit, so there’s obviously hope that the price will return. In general, there’s enough work for everybody in Oman. There’s not the over-saturation that you’ve found in Dubai,” he adds.

Curtis, a New York firm that set up in Oman 12 years ago, has established itself as a solid player in project finance, corporate and commercial work and litigation. It has 11 lawyers, three of whom are litigators, and is planning to hire up to four corporate banking specialists in 2010.

Energy renewal
Foreign and local companies including General Electric, Mitsubishi and AES Corp have recently shown an interest in two power plants planned in Oman over the coming years. Oman is looking to boost its generation capacity and is investing heavily in electricity projects to meet demand, which is growing by about 15 per cent annually.

“International banks are now putting consortiums together to finance infrastructure projects, things like these power plant privatisations,” says Lorenzo Bruttomesso, a senior associate at Al Busaidy Mansoor Jamal & Co (AMJ).

AMJ, which set up in 1979, is one of the largest local law firms in Oman, and now has 35 lawyers and a number of support staff. Bruttomesso says port and shipping continues to be a significant portion of the firm’s business. It acted for Hutchinson Port Holdings (HPH), the company managing the Sohar Industrial Port, a strategic trading hub in the north of the country. The money will be used to finance the construction of the jetty at Port of Sohar.

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