China's Cosco Shipping Ports will invest $400 million in building a container terminal in Abu Dhabi as the emirate aims to expand trade with the world's second largest economy, a senior company official said on Wednesday.

The bulk of China's trade with the United Arab Emirates currently goes through Dubai, the regional hub, but Abu Dhabi is hoping to take some of that trade as it invests billions of dollars in infrastructure, real estate and tourism to diversify its economy away from oil.

Abu Dhabi Ports awarded Cosco Shipping a 35-year concession to build and operate the terminal at Khalifa Port, Abu Dhabi's main port. It will be the second terminal at Khalifa.

According to a filing with the Hong Kong Stock Exchange, Cosco said the concession is valued at around $738 million in total.

"We plan to divert Chinese vessels from Dubai to Abu Dhabi once the terminal is operational," Raymond Wong, deputy general manager, Cosco Shipping Ports Ltd told Reuters.

Dubai's Jebel Ali port is much larger and only about 40 km (25 miles) north along the coast.

The Chinese company will set up a joint venture company for the project, to be called Cosco Shipping Ports Ltd - Abu Dhabi, with Cosco Shipping Ports holding the majority stake and Abu Dhabi Ports taking a minority stake.

Under the agreement, Cosco Shipping will operate a container terminal with a draft depth of 18 m, with 1,200 m of quay wall and adjacent land. The first 800 m of the quay length (and the corresponding concession area) is expected to commence operations in H1 2018 and the latter 400 m (and the corresponding expanded concession area) is expected to commence operations in 2020.

Once the expansion areas are occupied, the concession area will span approximately 70 hectares with three berths, which will add 2.4 million TEUs a year to the port’s existing capacity of 2.5 million TEUs. The agreement includes the option for a further 600 m of quay length in the future to allow for anticipated volume growth. The nominal annual handling capacity will increase to 3.5 million TEUs when all phases are complete, creating a new overall annual capacity of up to 6 million TEUs.

The global port operator giant will establish a joint venture company in 2016 to operate the new Khalifa Port Container Terminal 2 in Khalifa Port, one of the world’s fastest growing container ports and a leading hub for the Middle East, Africa and South Asia (MEASA) region.

As per the agreement, the joint venture company will be entitled concession rights of Khalifa Port Container Terminal 2 for a span of 35 years, with a renewable period of five additional years. CSPL SPV will have the controlling stake in the joint venture company.

The signing ceremony was held in the presence of Dr. Sultan Ahmed Al Jaber, the UAE Minister of State and chairman of Abu Dhabi Ports; Zheng Chiping, deputy director of the foreign investment department of the National Development and Reform Commission of PRC; and  Wan Min, president of China Cosco Shipping Corporation Limited.

Captain Mohamed Juma Al Shamisi, CEO of Abu Dhabi Ports, and Zhang Wei, vice chairman and managing director of Cosco Shipping Ports Limited signed the agreement, ushering a new prosperous journey of Abu Dhabi Ports, in line with the progressive aspirations of Abu Dhabi Vision 2030 for a more diversified economy.

“The signing of the concession agreement between Abu Dhabi Ports Company and Cosco Shipping Ports Limited will significantly expand trade between China, the UAE and the broader region. It will greatly enhance the UAE and Abu Dhabi’s role as a key logistics and trading hub, between East and West and will also serve to further diversify the UAE’s dynamic and growing economy,” said Dr Al Jaber.

 “With the development of China’s “One Belt One Road” strategy, there is boundless potential for expanding the UAE-China relationship further. We look forward to closer collaboration with China and to creating even greater economic progress for both our nations in the years ahead,” he added.

Wan Min said said: “Abu Dhabi’s Khalifa Port is a strategic hub along the ‘One Belt One Road’, as it has unique geographical advantage for the development of terminal and logistics businesses. Its well-developed transportation and nearby ample supply of cargoes are conducive to Khalifa Port, to become the next hub port in the Middle East region. Khalifa Port Container Terminal 2 will be the second overseas terminal in which Cosco Shipping Ports holds the controlling interest.

“This investment is expected to strengthen Cosco Shipping Ports’ sustainable growth and create value for our shareholders.  With the strong support from the large container shipping fleet of Cosco Shipping Group, the company will dedicate its efforts to develop Khalifa Port Container Terminal 2 as a hub of the Upper Gulf region in the Middle East for international container shipping liners.  We are confident that the project will stimulate the implementation of ‘One Belt One Road’ initiative, and will promote strategic cooperation between China and the UAE,” he added.

Captain Mohamed Juma Al Shamisi, CEO of Abu Dhabi Ports, said: “The Khalifa Port is continuously growing and expanding in every aspect - adding value for its key stakeholders and the international community. Through the new synergy, Cosco Shipping Ports Limited will bring additional volumes to the Port - adding to Abu Dhabi Terminals’ on-going business in Abu Dhabi. It will also ensure that the Khalifa Port maintains a competitive environment in serving the shipping industry as well as local business. Along with the added capacity, the shipping giant will facilitate specialist expertise, experience, technologies, practices and knowledge transfer, increasing Abu Dhabi Ports’ competitiveness on a global scale.”

Besides Khalifa Port, Cosco Shipping Ports Limited operates a global network of 46 terminals  and 169 berths across mainland China, Hong Kong, Taiwan, Korea,  Singapore, Greece, Turkey, Egypt, Belgium and the US.

Khalifa Port is the major container gateway port of Abu Dhabi and is strategically situated between Abu Dhabi and Dubai with excellent hinterland connections and geographic location.

The expansion of the quay wall is part of the broader developments at the Khalifa Port, which include an innovative new terminal booking, tracking and transaction system for sea and land based users, advanced RoRo facilities, new liner calls, the development of a regional liner hub and transhipment business to South Asia, as well as the addition of approximately 14.5 million sq m now leased in the adjacent Khalifa Industrial Zone (Kizad). – Reuters and TradeArabia News Service