OMAN 2015 THE OIL & GAS YEAR The Who’s Who of the Global Energy Industry www.theoilandgasyear.com 9 781783 021062 ISBN 978-1-78302-106-2 ARTICLES | INTERVIEWS | VIEWPOINTS | MARKET ANALYSIS | RESOURCES | PROJECTS | MAPS | INVESTOR SPOTLIGHTS A fine balance H.E. Salim bin Nasser AL AUFI Undersecretary of the Ministry of Oil and Gas Blessing in disguise Raoul RESTUCCI Managing Director PETROLEUM DEVELOPMENT OMAN The long view Usama BARWANI CEO PETROGAS E&P
Transcript
OMAN 2015
THE OIL & GAS YEAR The Who’s Who of the Global Energy Industry
A fine balanceH.E. Salim bin Nasser AL AUFIUndersecretary of the Ministry of Oil and Gas
Blessing in disguiseRaoul RESTUCCIManaging DirectorPETROLEUM DEVELOPMENT OMAN
The long viewUsama BARWANICEOPETROGAS E&P
6 THE YEAR IN REVIEW
7 VIEWPOINT: H.E. Salim bin Nasser Al Aufi, Undersecretary of the Ministry of Oil and Gas
8 THE YEAR’S AWARDS9 OMAN AT A GLANCE
10 THE INVESTORS INDEX11 INTERVIEW: Jonathan Wilks, UK Ambassador to Oman12 THE YEAR IN ENERGY
14 DIPLOMACY & POLITICS
15 ARTICLE: The power of pragmatism. Oman’s approach to diplomatic relations positions it well for trade
16 INTERVIEW: Musallam Al Mandhari, Oman Society for Petroleum Services
16 IN EMPLOYMENT: Projected 2020 demand for employees in selected sectors of the oil and gas industry
17 MARKET ANALYSIS: Seoul position. Kim Daesik, South Korean Ambassador to Oman
17 IN TRADE: Oman’s crude oil exports by destination, 201419 INTERVIEW: Shahswar Al Balushi, Oman Society of
Contractors
20 THE STRATEGIC ROUNDTABLE
21 PARTICIPANTS22 SECTOR FOCUS DEBATE
26 EXPLORATION & PRODUCTION
27 ARTICLE: Steady gains. Enhanced recovery helps raise output28 INTERVIEW: Raoul Restucci, Petroleum Development Oman30 OPERATIONS REPORT: The Khazzan tight gas project.
Yousuf Mohammed Al Ojaili, BP Oman30 RESOURCE: BP’s major global gas projects and reserves31 COMMENT: Price losses, production gains. Output up in dip32 INTERVIEW: Said Al Adawi, Intaj33 RESOURCE: Production and exports through the 2014-
2015 oil price slowdown34 COMPANY PROFILE: Occidental of Oman35 PULLOUT MAP: Oman’s oil and gas blocks, 201536 COMPANY PROFILE: Mitsui E&P Middle East38 PROJECT HIGHLIGHT: Block 66 development39 COMMENT: Regional rollback. Privatisation is on the horizon40 INTERVIEW: Magnus Nordin and Fredrik Robelius,
Tethys Oil
41 COMMENT: A hard sell. Muscat seeks foreign investment 42 INTERVIEW: Anil Chopra, PetroTel43 INVESTOR SPOTLIGHTS: Daleel Petroleum, Masirah Oil,
Partex Oil and Gas44 INTERVIEW: Salim Al Sibani, OOCEP44 IN ASSETS: OOCEP’s assets45 COMMENT: Investments in jeopardy. Low oil prices lead
companies to pull out of costly production in Oman46 COMPANY PROFILE: CC Energy Development47 INTERVIEW: Chris Breeze, Shell Development Oman47 RESOURCE: Historical timeline of Shell in Oman 48 RESOURCE: PDO’s enhanced oil recovery projects and trialsFOLDOUT RESOURCE: OOC’s international investments49 INTERVIEW: Usama Barwani, Petrogas E&P50 GEOLOGY REPORT: Structural styles of hydrocarbons
reservoirs50 RESOURCE: Oman’s hydrocarbons reservoirs51 IN THE REGION: Oman's crude oil and condensate
exports in 2014, compared with OPEC countries
52 THE YEAR’S FOCUS: Development of SLCCs & LCCs
53 ARTICLE: Lead by example. The Omani government takes a collaborative approach to localisation
54 INTERVIEW: Hamoud Al Tobi, Al Shawamikh Oil Services55 ARTICLE: Localisation for a strong economy. Efforts are
underway lower the country’s high unemployment rate56 COMPANY PROFILE: Al Sahari Oil Services Company57 COMMENT: Strengthen the economy through SMEs.
Economic diversification through small business support58 INTERVIEW: Saif Said bin Rashid Al Darai, Seeh Al Sarya
Engineering 58 IN SPENDING: Yearly spending on LCCs and SLCCs by PDO59 ARTICLE: SLCCs and LCCs in a nutshell. A guide to
understanding the SLCC and LCC schemes 60 IN PROGRESS: SLCC contracts and shareholders61 INVESTOR SPOTLIGHTS: Hamraa Al Daroua Petroleum
Services Company, Al Ghalbi International Engineering & Contracting, Al Haditha Petroleum Services, Al Baraka Oilfield Services
62 ENGINEERING & CONSTRUCTION
63 ARTICLE: Oman builds up as oil prices fall. Engineering and construction firms prepare for lower profit margins and local companies fight to take a bigger share of the market
CON
TENTS
OM
AN 2015
2
The Who’s Who of the Global Energy Industry
OMAN 2015 THE OIL & GAS YEAR
The Who’s Who of the Global Energy IndustryTHE OIL & GAS YEAR | OMAN 2015
14Diplomacy & PoliticsOman strives to maintain positive relationswith countries in its region, pursuing strongand stable diplomatic and economic ties.Muscat is now uniquely positioned for eco-nomic co-operation with Iran as its neigh-bour across the Strait of Hormuz opens newtrade ties. The sultanate’s quiet approach toforeign relations has benefited its stabilityat home and opportunities for trade abroad.
26Exploration & ProductionOmani oil production reached 992,700 barrelsper day in June 2015. The country’s target is980,000 barrels per day for the year. The govern-ment is expanding its push to step up the use ofenhanced oil recovery techniques in its maturingassets and heavy oilfields, an approach that hasturned around a decline in output over the pastdecade. Developments such as the Khazzan tightgas project and Amal West’s heavy oil extractionare expected to boost production in coming years.
www.theoilandgasyear.com
In partnership with:
Content partners:
52The Year’s Focus: Development of SLCCs and LCCsOman’s fifth super local community contractorwas registered in June 2015. The initiative, ledby Petroleum Development Oman and theMinistry of Oil and Gas, is steadily directinggreater amounts of hydrocarbons wealth tocommunities living in concession areas. Somecompanies have welcomed the programme,while others believe it dampens competition.
92Oilfield ServicesThe Omani government spent $11.5 billionon drilling projects in 2014 in its continuingefforts to keep oil and gas production on asteady rise. This spending has been paral-leled by an expansion in the industry’s en-hanced oil recovery projects, and these twotrends mean a constant stream of work bothfor local and international oilfield servicescompanies that will continue for many years.
62Engineering & ConstructionEngineering and construction companies inOman are preparing to operate with lowerprofit margins as the price of oil remains ina slump. In the first quarter of 2015, thecountry saw a decrease of 43.3 percent incontract awards. However, project spendingwill continue, undergirded by the sultanate’srobust sovereign wealth fund. In this climate,local companies are continuing a struggle toclaim a larger share of the sector’s projects.
65 INTERVIEW: Devaki Khimji, Al Turki Enterprises66 INTERVIEW: Hans Erlings, Galfar Engineering & Contracting66 IN PRODUCTION: Oman’s natural gas production,
2004-201467 COMPANY PROFILE: Petrofac 67 IN FOCUS: Selected Omani projects awarded to Petrofac,
2005-201568 COMPANY PROFILE: Powertech Engineering69 MARKET ANALYSIS: An in-country challenge. Sayyid
Mohammed Ali Al Said, VEC Oil & Gas Consultants70 INTERVIEW: Salim Al Kindy, Tebodin & Partner71 INVESTOR SPOTLIGHTS: Larsen & Toubro Eletromech,
Composite Pipes Industry72 INTERVIEW: Alex Clark, Special Technical Services72 RESOURCE: Major Omani infrastructure projects74 COMPANY PROFILE: TMK GIPI75 COMMENT: Corrosion costs. A $500-million project to
replace pipeline infrastructure76 VIEWPOINT: Engineer shortage. Ahmed Al Mazrui, Mott
MacDonald76 IN TRAINING: Regional tertiary students enrolled in
engineering, manufacturing and construction courses, 201377 INTERVIEW: Nasser Al Habsi, Precision Engineering and
Consultancy78 INTERVIEW: Simon Karam, Sarooj Construction Company79 INVESTOR SPOTLIGHTS: Dohat Al Khaleej, Bin
Muqadam Engineering 80 INTERVIEW: Milind Shastri, Oryx Metal Industries81 COMPANY PROFILE: Mudhaher Establishment82 INTERVIEW: Abdullah Hassan Al Maqbali, AWS Engineering 83 INTERVIEW: Murtaza Jariwala, Vanguard Engineering &
Oilfield Services83 IN VALUE: Regional construction sector values, 2014
84 FINANCE & LEGAL
85 ARTICLE: Power through low prices. Muscat could diversify the economy with banking sector support
85 IN GROWTH: Oman’s GDP, 2005-201486 INTERVIEW: H.E. Nasser bin Khamis Al Jashmi,
Undersecretary of the Ministry of Finance87 INTERVIEW: Abdullah Al Jufaili, Sharakah87 IN RANKING: Rankings of regional countries by quality of
credit system, 201588 VIEWPOINT: Small and medium change. Raphael Parambi,
SME Development Fund89 INTERVIEW: Abdul Hakeem Omar Al Ojaili, BankDhofar
89 IN RATINGS: Moody's ratings for Gulf governments, 201590 INVESTOR SPOTLIGHTS: Vision Insurance, Bank Muscat90 RESOURCE: Oman’s foreign direct investment inflows and
outflows, major macroeconomic indicators and Doing Business ranking
91 COMPANY PROFILE: Dentons
92 OILFIELD SERVICES
93 ARTICLE: No oil left behind. Oman’s government spent $11.5 billion in 2014 on oil and gas exploration
94 INTERVIEW: Zeinoun Klink, Halliburton94 IN REVENUE: Halliburton’s quarterly revenue, 2013-201595 COMMENT: Steamed up. Oman’s success with steam injection 96 MARKET ANALYSIS: A solar fuel for oil. Rod MacGregor,
GlassPoint97 MAP: Heavy oil basins98 INTERVIEW: John Murphy, Nabors Drilling Services99 INTERVIEW: Mohsin Al Hadhrami, Schlumberger Oman99 IN RIG COUNT: Monthly rig counts in the Middle East,
2014-2015100 COMPANY PROFILE: FOS Energy102 COMPANY PROFILE: Target Oilfield Services103 INVESTOR SPOTLIGHTS: Gasway, Drilformance 104 INTERVIEW: David Washbrook, Fugro Middle East & Partners105 COMPANY PROFILE: National Drilling & Services Company106 INTERVIEW: Hilal Al Busaidi, Gulf Energy107 INVESTOR SPOTLIGHTS: AIB-Vinçotte International and
Partners, National Oilwell Varco108 COMPANY PROFILE: Compass Oil Services109 INVESTOR SPOTLIGHTS: Synergy Petroleum International,
OHI Petroleum & Energy Services, Weatherford
110 SERVICES & SUPPLIES
111 ARTICLE: A new era for growth. Upgrading industry equipment and standards can help raise production, lower environmental impact and improve safety
112 COMPANY PROFILE: Oilfield Inspection Services113 INVESTOR SPOTLIGHTS: DNV GL, Bureau Veritas Oman114 INTERVIEW: Sultan Al Busaidi, UNOS115 INTERVIEW: Mohammed Barwani, Safety Technical Services115 IN SAFETY: Injury rate among reporting operators per
million hours worked, 2011-2013116 COMPANY PROFILE: Seven Seas Petroleum117 COMMENT: A services sector in need of manufacturers.
Oman’s oilfield services slowed by a lack of local manufacturing
CON
TENTS
OM
AN 2015
4
OMAN 2015
The Who’s Who of the Global Energy IndustryTHE OIL & GAS YEAR | OMAN 2015 www.theoilandgasyear.com
119 ARTICLE: Power through. Oman has made multi-billion-dollar investments in its downstream sector to increase the value of its petroleum product exports
120 IN PRODUCTION: Orpic’s fuel output by type, 2013 121 COMPANY PROFILE: Orpic122 PROJECT HIGHLIGHT: Muscat-Sohar Pipeline Project123 INTERVIEW: Ahmed bin Saleh Al Jahdhami, Oman
Power and Water Procurement Company 123 IN POWER: Oman power plant outputs and utilisation, 2013124 INTERVIEW: Guillaume Baudet, Sohar Power Company126 PROJECT HIGHLIGHT: Salalah-2 Independent Power Project126 IN SPENDING: Oman’s electricity demand and investments
in its power sector, 2014-2019127 INVESTOR SPOTLIGHTS: ONEIC, Al Batinah Power
Company, United Power Company, SMN Power Holding
128 MARINE & LOGISTICS
129 ARTICLE: Centre stage. Oman hopes to expand its role in the regional marine and logistics sector through improved and expanded infrastructure
129 IN SERVICE: Salalah Port statistics, 2013-2014130 COMPANY PROFILE: Oman Drydock Company131 INVESTOR SPOTLIGHTS: Verwater Shanfari International,
Marine Technology132 INTERVIEW: Daniel Nordberg, Gulf Agency Company Oman132 IN LOGISTICS: GCC overall logistics performance index 133 COMMENT: Modern capacity. Oman plans to bolster its
logistics and transportation infrastructure to support its goal of becoming a regional trading centre
134 COMPANY PROFILE: Port of Duqm136 COMPANY PROFILE: Sohar Port and Freezone137 RESOURCE: GCC Rail Network138 INTERVIEW: Tarik Mohamed Al Junaidi, Oman Shipping
Company
140 EDUCATION & TRAINING
141 ARTICLE: The talent gap widens. Oman faces a severe skill shortage, especially among nationals
142 INTERVIEW: H.E. Rawya Saud Al Busaidi, Minister of Higher Education
144 MARKET ANALYSIS: A public-private balance. Lawrence Alva, National Training Institute
145 INVESTOR SPOTLIGHTS: TATI, Caledonian College of Engineering
146 EXECUTIVE GUIDE
147 ACCOMMODATION150 EVENTS151 ACKNOWLEDGMENTS | ADVERTISERS INDEX152 IN BRIEF
CON
TEN
TSO
MAN
201
5
5
OMAN 2015The Who’s Who of the Global Energy Industry
THE OIL & GAS YEAR
The Who’s Who of the Global Energy Industry THE OIL & GAS YEAR | OMAN 2015
118Downstream & Power GenerationThe drop in oil prices has prompted the Omanigovernment to push to expand the country’sdownstream and petrochemicals sectors inorder to add value to its hydrocarbons prod-ucts. Investments such as the $3.6-billion LiwaPlastics Project are being made in tandemwith support to raise feedstock productionfrom gasfields such as Khazzan and Makarem.
128Marine & LogisticsOman’s location, paired with recent develop-ments in local and regional infrastructure, haspositioned the country as a potential logisticscentre and gateway for trade between the Mid-dle East, North Africa and Asia. The governmentis investing in expanding its railway network aswell as the ports at Salalah, Duqm and Sohar –which is located on the Strait of Hormuz. Thecountry is also developing industrial zonesalongside these ports in a bid to secure this role.
110Services & SuppliesWith production shutdowns due to equipmentfailures and maintenance causing a persistentloss of 50,000-70,000 barrels of oil per day inOman’s oil production, facility and equipmentupgrades are sorely needed to ensure a higherand more reliable rate of oil and gas output.Ageing equipment is also placing health, safetyand environment standards in the spotlight.The sultanate needs to tackle both issues withthe help of inspection services providers.
www.theoilandgasyear.com
Publisher: Emmanuelle Berthemet Editor-in-Chief: Gilles Valentin Regional Director: Ioana Marins Country Director: Uğur Özdemir Country Co-ordinator: Anastasia CariukManaging Editor: Simon Johns Production Manager: Alex Mazonowicz Chief Sub-Editor: Amanda Towle Deputy Chief Sub-Editor: Suzanne Carlson Web Editor: AngusFoggie Co-ordinating Sub-Editor: Laura Moth Sub-Editors: Leyla Amur, Jessica-Elise Turner Austin, Jessenia Chapman, John Houghton-Brown, James Kiger, Daniel Salinas,Jordan Schultz, Matthew Vance Editorial Intern: Dilara Gülekçi Contributors: Ian Ackerman, Barış Altıntaş, Nick Ashdown, Noah Blaser, Aylin Erman, Jon Hemming, LewisKing, João Marques, Matt Mossman, Helena Oh, Reuben Silverman, Christina St. John, Oliver Tree, Dominic Whiting, David Wilson, Sjoerd Ten Wolde Creative Director:Begüm Alpay Co-ordinating Art Director: Didem Tereyağoğlu Art Directors: Javier González, Hasan Ilkan Cebeci, Ahmet Sağır, Melis Tüzün Circulation & CommunicationDirector: Laura Carr HR: Ece Özmen, Begüm Yurttaş Head of Finance: Hasan Meriç Printing: APA Uniprint Production: The Oil & Gas Year, Ltd. ISBN 978-1-78302-106-2E-mail [email protected] visit www.theoilandgasyear.com Cover: photograph courtesy of OPAL
The Oil & Gas Year is a trading name of The Oil & Gas Year Ltd. Copyright The Oil & Gas Year Ltd. 2015. All rights reserved. No part of this publication may be reproduced, storedin a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopied, facsimiled, recorded or otherwise, without the prior permission of TheOil & Gas Year Ltd. The Oil & Gas Year Ltd. has made every effort to ensure that the content of this publication is accurate at the time of printing. However, The Oil & Gas YearLtd. makes no warranty, representation or undertaking, whether expressed or implied, nor does it assume any legal liability, direct or indirect, or responsibility for the accuracy,completeness or usefulness of any information contained in this publication.
7 A fine balanceH.E. Salim bin Nasser AL AUFIUndersecretary of the Ministry of Oil and Gas
11 Mutual benefitsJonathan WILKSUK Ambassador to Oman
12 The Year in Energy
THE YEAR IN REVIEW ph
oto
cour
tesy
of S
ohar
Por
t and
Fre
ezon
e
THE
YEA
R IN
REV
IEW
VIEW
POIN
T
7
VIEWPOINT
The Who’s Who of the Global Energy Industry THE OIL & GAS YEAR | OMAN 2015
H.E. Salim bin Nasser AL AUFI
A fine balance
Undersecretary of the Ministry of Oil and Gas H.E. Salim bin Nasser AlAufi describes the challenges still prevalent in Oman’s energy industryand outlines how the country’s oil production could reach 980,000 barrelsper day in 2015. The ministry is aiming to create a more efficienthydrocarbons industry by cutting waste and boosting market confidence.
The cost of oil production in Oman is still low and majoroperators are working hard with services providers andother local companies to increase efficiency. All partiesare examining the value chain and cutting waste to trans-form the challenge of low oil prices into an opportunity.
This topic was discussed at the Society of PetroleumEngineers conference in March 2015, when the consensusamong all the players was that greater collaboration wasnecessary in order to create trust within the industry.Operators do not have to prescribe everything to theirservices providers, and should trust them to executequality work without the need to interfere.
A FAIR PRICE: The gap between Oman’s cost of productionand global oil prices is wide enough for exploration andproduction companies to make a profit. There may be afew operators that struggle duringthis oil cycle phase because their out-put is low. In such cases, operatorsthat are producing small amounts ofoil and gas will need to scrutinisetheir costs, and make cuts accordingly.
The profit margins for operatorsin Oman are realistic and companiesare not expected to go bankrupt.There is a reasonable return on theirinvestments, compared to returnsseen in many other oil-rich countries.
Debates regarding fair oil pricesare ongoing. A barrel price of $110 istoo high for the consumer, but $50per barrel of oil is too low for theproducer. Shale oil produced in theUS initially flooded the market, but now many explorationfirms in North America are struggling to turn a profit.For example, producers of Canadian oil sands need oilprices of at least $90 per barrel to break even.
The Omani budget was balanced at a much higheroil price than this, and the country has large public ex-penditures. The Ministry of Oil and Gas has made itclear that if the price of oil drops below the cost of pro-duction, we will behave similarly to other businesses bypurposefully reducing our activities.
READY TO PRODUCE: Global energy consumption is in-creasing annually due to a rising population and rapidindustrialisation in some regions of the world. Oil andgas have been oversupplied at times in history, and the
price of hydrocarbons was self-corrected by the market.This is what is currently taking place.
The Ministry of Oil and Gas has already clarifiedthat it will continue to invest in Oman’s energy industry,but will be more cautious with investment decisions.Operators prefer to keep investing in Oman becausedrilling operations pay off in six months, on average.Small and medium-sized projects, whether for conventionalor secondary recovery, will most likely reimburse theoperators’ initial investments within three years.
Rabab Harweel, an enhanced oil recovery project ledby majority state-owned Petroleum Development Oman,was launched when oil prices were high and is now prof-itable. By February 2015, it had recovered the initial in-vestment, so the only cost is the cost of operation. If theoil and gas industry ceases investment when crude supply
is high, the world will encounter afuel shortage within a few years.
Fortunately, the majority of up-stream companies in Oman have thewill and capabilities to help the min-istry in increasing the country’soutput to 980,000 barrels of oil perday (bopd). For example, local com-pany CC Energy Development Omanended 2014 having extracted 30,000bopd. State-owned Oman Oil Com-pany Exploration & Production didnot produce oil in 2014, but its outputin 2015 has already grown quicklyto reach around 6,000 bopd.
Oman has the potential to pro-duce 1 million bopd as long as it
does not continue to experience frequent unscheduleddeferments of 50,000-70,000 bopd. More needs to be ac-complished in regards to asset management and preven-tative maintenance to avoid failure of equipment, pumps,compressors, pipelines and wells.
OFFSHORE ENCOURAGEMENT: Norway’s DNO and UScompany PetroTel are both present in offshore blocksnorth of the country. In April 2015, block 41 was relin-quished by Total as the company could not justify con-tinuing operations after studying the block in depth.
The ministry is reviewing the marketing strategy foropen blocks where historical exploration activities werenot successful. This could include executing data-gatheringprogrammes before pushing blocks back on the market.
Oman has the potentialto produce 1 millionbopd [if ] it does not
continue to experiencefrequent unscheduleddeferments of 50,000-
70,000 bopd.
THE YEA
R IN REV
IEWTH
E YEAR’S AWARD
S – OM
AN 2015
8
THE YEAR’S AWARDS – OMAN 2015
The Who’s Who of the Global Energy IndustryTHE OIL & GAS YEAR | OMAN 2015
The Sohar Refinery Improvement Project is underway. In May 2014, state-owned Oman OilRefineries and Petroleum Industries Company secured $2.8 billion in financing for the structure’smodernisation. The project will increase the refinery’s capacity from 116,000 barrels of oil per dayto at least 180,000 barrels of oil per day and improve the Oman Export Blend, ensuring that it meetsEuro 4 standards. The UK’s Petrofac and South Korea’s Daelim have been awarded $2.1 billion forengineering, procurement and construction works for the project, which will come on line in 2016.
Founded in 1972, Galfar Engineering & Contracting (GEC) is Oman’s largest local engineeringand contracting firm with ongoing endeavours valued at $1.75 billion. The firm specialises inhydrocarbons and civil construction projects. In July 2014, PDO announced that the company’s$100-million GEC north Oman service contract had been extended from August 2014 to August2015. Contracts won since 2014 include a $56-million deal to clear a site for the Duqm Refineryand a $110-million agreement to construct a gas gathering system for the Khazzan Gas Project.
Intaj is the 100-percent Omani-owned new operator in the nation’s hydrocarbons market. InNovember 2014, the Ministry of Oil and Gas awarded 5,808-square-kilometre block 56 to ajoint venture composed of Indonesian energy firm MedcoEnerji (75 percent) and locally ownedIntaj (25 percent). The play’s first well is expected to be drilled no later than 2016. The servicesarm of Intaj has been involved in surface, downhole service and manufacturing activities. Thelocal company is also planning to expand its footprint into the coiled tubing business.
Established in 2011, Al Sahari Oil Services (SOSCO) is the second super local communitycontractor, or SLCC, working in the southern concession area. In May 2013, the company beganwork on a $110-million well intervention services contract awarded by PDO. SOSCO has 217 em-ployees and a 93-percent Omanisation rate. The firm manages 52 local companies; 12 of whichare participating in PDO projects. SOSCO’s commitment to searching for and implementing newtechnology has helped the company to triple in value since entering the Omani market.
National Training Institute (NTI) became a part of UK’s Babcock International Group in2014. The institute specialises in a number of disciplines such as technical training, businessskills and IT. In Oman, NTI is training locals to become top-end hydrocarbons technicians forupcoming projects, such as the Khazzan Project. NTI, the government and industry operatorsare developing a local workforce through the Omanisation programme. NTI’s technician trainingcentre in Ghala is currently preparing Omani locals for work on the Khazzan Project.
MAN OF THE YEAR
Raoul RESTUCCI
Following his 2010 appointment to Petroleum Development Oman(PDO), managing director Raoul Restucci used his expertise to transformthe company into an innovative upstream firm specialising in unconventionalhydrocarbons extraction. In 2014, the executive was named one of the 10most influential people in the Middle Eastern hydrocarbons industry byArabian Industry, an online Gulf-centric publication. Restucci has playeda key role in localising Oman’s hydrocarbons workforce, promoting thein-country value initiative. At the helm of Petroleum DevelopmentOman, Restucci has overseen the creation of super local communitycontractors that develop competitive Omani oilfield services companies.
CONTRACTOR OF THE YEAR
PROJECT OF THE YEAR
NEWCOMER OF THE YEAR
LOCAL COMPANY OF THE YEAR
TRAINING PROVIDER OF THE YEAR
THE
YEA
R IN
REV
IEW
OM
AN A
T A
GLA
NCE
9
OMAN AT A GLANCE
The Who’s Who of the Global Energy Industry THE OIL & GAS YEAR | OMAN 2015
POLITICS
Official name: Sultanate of Oman
Political system: monarchy
Head of state: H.M. Sultan Qaboos bin Said Al Said
Population: 4.16 million (2.35 million Omanis and 1.81 million expatriates)
Population growth rate: 2.07 percent
GEOGRAPHY
Area: 309,500 square kilometres
Capital city: Muscat
Natural resources: oil and gas, copper, asbestos, marble and limestone
Major languages: Arabic and English
ECONOMY
Currency: rial (OMR1:$2.5884)
GDP: $77.8 billion (2014)
Major trading partners: China, Japan, UAE, South Korea and India
Labour force: 968,800
Fiscal year: calendar year
ENERGY
Oil production: 943,000 barrels per day (2014)
Natural gas production: 35.7 bcm (1.26 tcf) (2014)
Reserves: 5.2 billion barrels (end-2014)
Sources: CIA World Factbook, NCSI, IMF, Ministry of Oil and Gas
STATEOF QATAROF QATARSTATEOF QATAR
KINGDOM OF SAUDI ARABIAKINGDOM OF SAUDI ARABIA
UNITED ARAB EMIRATESUNITED ARAB EMIRATESUNITED ARAB EMIRATES
KINGDOM OF SAUDI ARABIA
KINGDOM OF BAHRAINKINGDOM OF BAHRAIN ISLAMIC REPUBLIC OF IRANISLAMIC REPUBLIC OF IRAN ISLAMICISLAMICREPUBLIC OFREPUBLIC OF
The Who’s Who of the Global Energy IndustryTHE OIL & GAS YEAR | OMAN 2015
Source: Survey conducted by The Oil & Gas Year in Oman between January 2015 and May 2015
The Oman 2015 Investors Index
A rating of 69.1 in 2015 compared to the91.1 recorded by TOGY in 2014 highlightssome of the challenges that go hand in handwith a significant drop in global oil prices.While the Ministry of Oil and Gas conveyedthat the government would continue fundingthe industry, services providers are concernedabout the lack of projects and contracts.
The Oman Society for Petroleum Services,a non-profit organisation aiming to increaselocal participation and the industry’s Omani-sation rate, has reassured domestic servicesproviders that they will receive work equivalentto at least 10 percent of the value of projects.
MORE FDI: Oman is among the safest andmost stable countries. This is reflected by the
almost 90 percent of oil and gas executiveswho rated the political and economic stabilityof the domestic hydrocarbons industry aseither highly stable or stable.
This atmosphere has attracted major oilcompanies such as BP, Shell, Occidental Pe-troleum and the China National PetroleumCorporation. Nonetheless, challenges remainand this is underlined by the almost 55 percentof participants claiming that starting an oiland gas business in the sultanate is difficult.
However, while 60.6 percent of the CEOsinterviewed felt that Oman’s hydrocarbonsindustry is either very transparent or trans-parent, 39.4 percent of executives said theindustry was not transparent.
Oman has been gripped by a string ofgraft cases involving some of the senior per-sonnel of national oil companies and severalof the country’s largest services providers.The government responded to the crisis byhanding long sentences to those convictedand tightening regulatory measures to preventsuch incidents from reoccurring.
PROBUSINESS, BUT RESTRICTIVE: Around66.7 percent of interviewees described gov-ernment policies as pro-business, but restrictive.Both suppliers and producers have complainedabout the bureaucracy in the industry.
Raoul Restucci, managing director of ma-jority-nationalised Petroleum DevelopmentOman, and Ministry of Oil and Gas Under-secretary H.E. Salim bin Nasser Al Aufi have
both called for greater co-operation betweenhydrocarbons extractors and domestic servicesproviders, especially as oil prices are unlikelyto rebound to above $100 per barrel in 2016.
ABOUT THE INDEX: The TOGY Investors Indexis designed to measure confidence among oiland gas investors as expressed in their level ofspending in any given market.
The index is a figure based on the responseof 33 oil and gas executives in the Omani market.The survey consists of five questions in whichparticipants are asked to provide positive or neg-ative responses. A reading above 50 percent onthe index represents a positive perception amongoil and gas industry investors, while a readingbelow 50 indicates a more pessimistic outlook.
9.09%
54.6%
30.3%
Very easy
Easy
6.06 %
Difficult
Extremelydifficult
How would you rate the ease ofdoing business in this country?
Very easy 6.06 %Easy 30.3%Difficult 54.6%Extremely difficult 9.09 %
How would you rate the level oftransparency in this oil and gasmarket?
Very transparent 12.1 %Transparent 48.5 %Not transparent 39.4%Corrupt 0%
0 20 40 60 80 100
Abu Dhabi (2015)
Kuwait (2014)
Iraq (2014)
Saudi Arabia (2014)
Qatar (2014)
Oman (2015)
95
93
90.2
88.5
88.4
69.1
BY MARKET
How would you describe thepolicies of this government vis-à-vis the oil and gas industry?
Pro-business 18.2%Pro-business, but restrictive 66.7%Anti-business, but accommodating 12.1%Anti-business 3.03%
How would you rate the ease ofstarting an oil and gas businessin this market?
Why do UK-headquartered companies viewOman as an attractive place to do business?It is an exciting and dynamic market that manycorporations are competing to invest in. It isperceived as a stable country with an incrediblevision for the development of its infrastructureand its oil and gas industry.
UK companies also have a historical presencein Oman, understand how the country is changingand want to play a part in its continued devel-opment. The government of Oman is facing aperiod of low oil prices but the Ministry of Oiland Gas is taking the necessary steps to increasethe industry’s profitability. The challenges arebeing discussed with honesty.
The government is also conscious of theneed to diversify the hydrocarbons-dependenteconomy, and the necessity of creating a highlyskilled local workforce. The energy industry inthe country is still dominant compared withother industries such as finance and retail, andUK companies can help strengthen non-oil andgas sectors by entering the market.
The UK embassy helped about 500 UK com-panies doing business in Oman in 2014. It didthis by providing in-country expertise andbusiness guides, sign posting to relevant localpartners, facilitating meetings, arranging visitprogrammes and providing networking oppor-tunities. There are also 10 FTSE 100 companiesthat have an active presence in the sultanate.
How are UK companies helping to developsectors in Oman’s energy industry?BP Oman, the super-major’s local subsidiary, hasa 60-percent stake in block 61 and will help thecountry gain expertise in the production of tightgas. The state-owned Oman Oil Company Ex-ploration & Production has a 40-percent interestas a non-operator and will be involved in theblock’s Khazzan tight gas project. This will leadto the transfer of technology from the internationaloperator to the national oil company.
Shell’s in-country subsidiary, Shell Develop-ment Oman (SDO), is a 34-percent shareholderin Petroleum Development Oman. The companyis assisting the majority-nationalised operator inincreasing its output at block 6. SDO has beenable to add value to Petroleum DevelopmentOman through both innovation and training.
Foreign companies entering the market needto commit to creating jobs for Omanis. BothSDO and BP Oman train Omanis to be capableof executing complex oil and gas projects.
BP Oman signed a memorandum of under-standing to build a greenfield acetic acid plantat the Port of Duqm special economic zone.
UK company Babcock International, whichrecently acquired the National Training Institute,is playing a significant role in vocational oil andgas training. The company is training 100 Omanisto become technicians for BP Oman.
Can these benefits be seen in the economybeyond the oil and gas industry?Enhancements in the oil and gas industry musthave a knock-on effect on the wider economy.Shell’s Intilaaqah programme, for instance, aimsto increase entrepreneurship among Omanis,and to shift the economy away from oil and gas.
Areas of the economy such as downstream,tourism, fisheries and minerals should all benefitand mature with the help of the revenues accu-mulated from the upstream sector.
Overall, I want the UK to be a leading partnerin Oman’s broader economic development byoffering technical advice, sharing experienceand investment. Although there is a strong UK-Omani relationship, over the past 44 years thesultanate has strengthened ties with China, India,Brazil, European nations and the US.
I want the UK to be active and to play aleading role in Oman, and we are happy tocompete for that. Competition benefits Oman.
Does the Omanisation initiative deter foreigncompanies from investing in the sultanate? The Omanisation initiative is absolutely essentialfor the future of the country, its stability andprosperity. However, the quotas are to an extenta burden on private investors.
There are two major issues: Some privateenterprises are hiring expatriates when theyshould be focusing more on recruiting from thelocal pool of talent, and Omanis must reducetheir job and salary expectations.
Omanis increasingly understand that theywill have to take opportunities available to themin a diversified economy. The government can-not provide public-sector jobs to everybody.
The Who’s Who of the Global Energy Industry THE OIL & GAS YEAR | OMAN 2015
THE
YEA
R IN
REV
IEW
11
INTE
RVIE
W
INTERVIEW
The UK is Oman’s biggest foreign investor and one of its top trading partners,with exports of UK goods to Oman doubling between 2007 and 2014. JonathanWilks, UK ambassador to Oman, talks to TOGY about the business opportunitiesavailable for UK companies in the sultanate and the will to increasecollaboration already established between the two nations.
Mutual benefits
Jonathan WILKSUK Ambassador to Oman
IN FIGURES
Value of UK exports to Oman in 2014
£551 millionValue of UK imports from Oman in 2014
£227 million
Some privateenterprises are hiring
expatriates whenthey should be
focusing more onrecruiting from thelocal pool of talent,
and Omanis mustreduce their job
and salaryexpectations.
THE YEA
R IN REV
IEWTH
E YEAR IN EN
ERGY
12
THE YEAR IN ENERGY
The Who’s Who of the Global Energy IndustryTHE OIL & GAS YEAR | OMAN 2015
08 US companyGlassPoint receives $53million from Oman'sState General ReserveFund, Shell and existingpartners for solar steamgenerators to reducenatural gas consumptionat oilfields by up to 80percent.
09 H.E. Ahmed bin Saleh Al Maimani,undersecretary at theMinistry of Commerceand Industry, calls for anincrease in offshoreproduction during theOffshore DevelopmentOman conference.
27 PetroleumDevelopment Oman(PDO) is asked to raiseproduction from a peakcapacity of 550,000 to 600,000 to reach anationwide target of950,000 barrels of oil per day in 2014.
20 Omani oil ministerH.E. Mohammed AlRuhmy expresses hisfrustration with theOPEC production ceilingof 30 million barrels ofoil per day , arguing thatit is harming GCCcountries and creatingvolatility in oil prices.
26 Ministry of Oil andGas Undersecretary H.E.Salim bin Nasser Al Aufiannounces that Oman’sproduction target for2015 will rise to 980,000barrels per day andrequests that oilproducers review theiroperation costs in lightof falling oil prices.
01 BP Oman awards twomajor contracts for theKhazzan Project: a $400-million contract to KCADeutag for theconstruction andoperation of fivenewbuild onshore rigsand $330 million toAbraj Energy Service tosupply three drilling rigs.
04 Oman Oil Companysigns a $1.85-billiontwo-part loanagreement for generalbusiness purposes withmore than 15 banks.
28 The Ministry ofFinance gives Oman OilRefineries andPetroleum IndustriesCompany preliminaryapproval for an initialpublic offering by 2018following thecompletion of the $3.6-billion Liwa plasticsplant at Sohar.
29 PDO awards anengineering,procurement andconstruction contract tothe Spanish jointventure of OHL Industrialand engineering group SENER for themodernisation of theSaih Nihayda Gas Plantand the Saih RawlCentral Processing Plant.
19 Chevron Explorationand ProductionNetherlands entered ashare-sale agreementwith Petrogas E&P, partof MB Holding group, for its 11 North Seaoffshore blocks.
05 Oman’s Ministry ofOil and Gas inviteshydrocarbons companiesfor a new bidding roundon five oil and gasblocks. Acreages includeoffshore blocks 18, 59and onshore blocks 43A, 54 and 58.
AUG OCT NOV DEC JANSEP
2014
19 Oman Oil CompanyExploration &Production opens $1.3-billion tight gasprocessing plant at the Abu Tubul field.
17 The commencementof commercial tight gasand condensates exportsfrom block 60 isannounced by Oman OilCompany Exploration & Production.
2015
2015
MAR APR JUN JULFEB
THE
YEA
R IN
REV
IEW
13
THE YEAR IN ENERGY
The Who’s Who of the Global Energy Industry THE OIL & GAS YEAR | OMAN 2015
THE
YEAR
IN E
NER
GY
30 Oman TradingInternational says it willinvest in facilities to storefuel in Mozambique,Tanzania or Kenya tosupply markets in Africa’sinterior.
13 Total quits deepwaterblock 41 after failing tofind commercialreserves.
21 The Shahd oilfieldenters the productionstage, increasing oiloutput in the CC EnergyDevelopment-operatedblocks 3 and 4, whichaveraged 30,000 barrelsof oil per day in March.
09 Irish exploration andproduction firm Circle Oilannounces that it willquit the onshore Shisr-1well in block 49following drillingdifficulties.
07 Dave Campbell, BPOman chief operatingofficer, announces thatthe company expects todrill 16 wells in theKhazzan tight gas fieldand have nine rigs activeat the development bythe close of 2015.
23 Oman Power andWater Procurementawards Mitsui & Co,ACWA Power and DhofarInternationalDevelopment andInvestment Holding acontract to develop the$620-million, 445-MW,natural gas-fired,combined-cycle Salalah-2 power plant.
29 Indonesia’s EnergyMinister Sudirman Saidconfirms Omaniinvestment of $7 billionto develop the nation’sdownstream sectorincluding apetrochemicals plant,refinery and oil storagefacilities.
30 Oman and Iranhold talks on buildinga pipeline betweenIran’s Rudan and thePort of Sohar. Thecountries have a $60-million agreement forthe supply of 28 mcm(989 mcf) per day ofIranian gas to Oman.
09 Oman and Indonesiaplan to create a jointbusiness council by 2016to facilitate bilateraltrade between the twocountries, which willresult in moreinvestment in thenations’ oil and gasindustry.
09 Yusuf Al Ojaili isappointed head ofcountry and president by BP Oman.
16 Oman’s firstdownstream summit,Oman Refining andPetrochemicalsExhibition andConference, is launched to highlightopportunities in thepetrochemicals sector.
14 UK constructioncompany Carillion’sOmani joint venture willbuild accommodationfor BP’s Khazzan tightgas project. The contractis worth around $125million.
15 Oman Oil CompanyExploration &Production announcedplans to drill twoexploration wells in theeast of the country atthe Sharqiya structure.
12 The Supreme Courtoverturns the 23-yearprison sentence handeddown to former CEO ofOman Oil CompanyAhmed Al Wahaibi foraccepting bribes, abuseof office and moneylaundering.
11 Petrofac is awarded a$900-millionengineering andprocurement contract byPDO to develop the YibalKhuff gasfield.
11 Petrogas Kahil, theOmani subsidiary ofPetrogas E&P, announcesthat it will invest $40million in exploringonshore block 55 insoutheastern Oman.
MAY
08 GlassPoint revealsplans to build the $600-million Miraah plant,which will producesteam for injection atthe Amal West field.
15 The power of pragmatism16 Live and learn
Musallam AL MANDHARIActing CEOOMAN SOCIETY FOR PETROLEUM SERVICES
17 Seoul positionKIM DaesikSouth Korean Ambassador to Oman
DIPLOMACY & POLITICS
DIP
LOM
ACY
& P
OLI
TICS
ARTI
CLE
15
The Who’s Who of the Global Energy Industry THE OIL & GAS YEAR | OMAN 2015
Oman projects a voice for calm and stability in atumultuous region. Its diplomatic initiatives evincean independent and pragmatic foreign policy.
Recently, the sultanate has taken a neutral ap-proach to the 2015 conflict in neighbouring Yemen,for instance. It is the only GCC member countrythat declined to join the Saudi Arabia-led militarycampaign against the Houthi rebels.
H.M. Sultan Qaboos bin Said Al Said’s return toOman after eight months of medical treatment inGermany in March 2015 boosted market confidenceand quietened speculations about a post-Qaboosera. The monarch has played a pivotal role in Oman’sdevelopment since taking power in 1970.
THE IRAN EDGE: Oman maintains close diplomaticties with Iran, its neighbour to the north. With itsrelations with the West and membership in theGCC, the sultanate is able to act as a bridge betweenIran and regional and international administrations.In November 2014, Muscat hosted nuclear talksbetween Iran and the US, which laid the groundworkfor ongoing negotiations on a nuclear deal.
Iran and Oman are planning a 200-kilometre,$1-billion subsea gas pipeline from the province ofHormozgan to Sohar. An Iranian consultant hasbeen selected to conduct feasibility studies for theproject, which will be the first-ever hydrocarbonspipeline between Iran and a GCC country.
In March 2014, the two governments reached a25-year gas supply agreement valued at $60 billion.Under the deal, total of 10 bcm (353 bcf) of gas peryear will flow from Iran to the sultanate.
IN THE GCC, OUT OF OPEC: With average oil pro-duction in 2014 at 943,000 barrels of oil per day,Oman is the most prolific Middle Eastern producerthat is not a member of OPEC. As expected, the
2014-2015 slide in global oil prices has dealt a blowto the country’s finances. Oman derives 83 percentof its income from the oil and gas industry, and be-cause of the price drop, it has predicted a budgetshortfall of OR1.5 billion ($3.88 billion) for 2015.
OPEC’s lack of will to address the price slumphas prompted criticism from Omani officials. At aconference in early 2015, Minister of Oil and GasH.E. Mohammad bin Hamad Al Rumhy said thecartel had put its market share before revenue. At aJune 2015 meeting, OPEC elected to keep its pro-duction ceiling at 30 million barrels of oil per day,signalling its intention to let the low price stand.
BRANCH OUT: With lower oil revenue expectedfor the medium term, Oman’s drive to diversifyits economy, which is already underway, hastaken on a new sense of urgency.
The government has been working to es-tablish Oman as a logistics hub. In early 2015,throughput at the Port of Salalah rose to anaverage of 1 million tonnes per month, an in-crease over 2014’s 860,000 tonnes per month.
The country’s new deepwater port at Duqmwill also contribute to Oman’s logistics capacity.With these facilities taking on more industrialcargo, the port of Muscat will be freed up to
support government efforts to boost tourism.
TRADE TIES: Most of Oman’s exports are crude oilor hydrocarbons products. The country’s top exportdestinations are in Asia, with China leading thepack, followed by Japan and South Korea.
The UK contributes about one-third of all foreigndirect investment in Oman, making it the largestsource of investment from abroad. The US is anotherimportant trading partner for Oman. Since 2009, afree-trade agreement has been in effect. Oman’s ex-ports to the US were around $1 billion in 2013, and$1.5 billion went from the US to Oman.
Indonesia is emerging as an important tradepartner for Oman. Trade between the two countrieswas valued at around $438 million in 2014, a 2.9-percent increase over 2010. By the end of 2015,Oman and Indonesia plan to set up a joint businesscouncil to facilitate trade between the countries.
With attention to diversifying its economy andincreasing trade, supported by a pragmatic foreignpolicy, Oman is positioning itself to circumvent theeconomic and political storms its neighbours face.
FIGURESIN MARCH2014, OMANAND IRANAGREED ON A$60-billionGAS SUPPLYDEAL
A PLANNEDSUBSEAPIPELINE WILLTRANSPORT10 bcmOF GAS PERYEAR FROMIRAN TO THESULTANATE
TRADEBETWEENOMAN ANDINDONESIAROSE TO $438millionIN 2014
IN
ARTICLE
Oman pursues a quiet brand of diplomacy. The country has carved out a calm niche in anincreasingly loud neighbourhood, and its positive relations with Iran have yielded a large-scalegas supply deal. Further abroad, Oman maintains mutually beneficial economic and diplomaticties with the likes of the US, the UK and China and has new trade openings with Indonesia.
The power of pragmatism
As Oman pursues a pragmatic foreignpolicy, it is maintaining and growingtrade ties with a diverse array ofcountries, including Iran, the US,Indonesia and Saudi Arabia.
What role are in-country value initiativesplaying in Oman’s oil and gas industry?In-country value initiatives were implementedto generate jobs and ensure a sustainable in-crease of domestic spending on projects.
The Ministry of Oil and Gas created a path-way so that in-country value will be taken se-riously by operators, producers and contractors,which are expected to provide contracts tolocal services companies and create opportu-nities to develop local manufacturing expertise.Companies in the upstream sector are workingto identify areas that can be further localised.
What can companies do differently to meetthe required Omanisation rate? Greater collaboration is needed between OPALand the Ministry of Manpower to identify whichpositions can be Omanised in the oil and gasindustry. Vocational training courses can thenbe developed to train and churn out Omaniworkers for positions that are in demand.
Some international firms such as Shell De-velopment Oman contribute large funds aspart of their corporate social responsibility totrain Omanis. A compulsory training levy basedon profits would be a better option to ensurea sustainable availability of funds as well as tointensify the training of the local workforce.
To what extent is PDO’s scheme to createsuper local community contractors (SLCCs)an answer to developing Omani companies?The concept of SLCCs is only one of the policiesthe government supported to assist local com-munities living in concession areas. This initiative
has functioned very well and we are beginningto see the benefits. It has provided jobs for cit-izens living near oil and gas fields.
The government is contributing to the de-velopment of small and medium-sized enter-prises by providing startups with loans via theAl Rafd Fund at preferable rates. Some regula-tions will be forthcoming to make available atleast 10 percent of contract value in governmenttenders for such businesses.
Will low crude prices slow down projects?Low oil prices are not a new phenomenon,particularly in the Middle East. Based on pastcycles of price fluctuation, this is just anotherwave that oil and gas companies and the gov-ernment will have to ride out.
Projects that have yet to begin might bepostponed, and ongoing ones will either beput on hold or reduced in scope. Companiesin the oil and gas industry are already familiarwith the challenges that are brought on bylow oil prices. Some projections during the1980s and 1990s, an era of low crude oil prices,suggested that crude would be as low as $10per barrel. The price of oil has stabilised farabove that level and should rise gradually.
Greater collaborationis needed between OPALand the Ministry ofManpower to identifywhich positions can beOmanised.
DIPLO
MA
CY & PO
LITICSIN
TERVIEW
The Who’s Who of the Global Energy IndustryTHE OIL & GAS YEAR | OMAN 2015
16
INTERVIEW
The role of Oman Society for Petroleum Services (OPAL) is to help members sharebest practices. OPAL’s acting CEO, Musallam Al Mandhari, talks to TOGY aboutgovernment initiatives that assist communities affected by oil and gas operations,as well as the challenges faced by companies attempting to increase local content.
Live and learn
Musallam AL MANDHARIActing CEOOPAL
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Exploration and production
companies
Construction Services providers
Manufacturing
Source: Oman Society for Petroleum Services
Projected 2020 demand for employees inselected sectors of the oil and gas industry
EMPLOYMENTIN
About OPALOPAL plays a direct role in trainingOmani nationals for the future em-ployment in the oil and gas industry.The institution works closely with theMinistry of Oil and Gas, the Ministryof Manpower and private enterprisesto ensure that nationals benefit fromthe oil and gas industry. The organi-sation also focuses on the Omanisa-tion and the health, safety and envi-ronment compliance record of oil andgas companies operating in Oman.
DIP
LOM
ACY
& P
OLI
TICS
MAR
KET
ANAL
YSIS
17
MARKET ANALYSIS
The Who’s Who of the Global Energy Industry THE OIL & GAS YEAR | OMAN 2015
Oman and South Korea celebrated 40 years of diplomatic relations in 2014. Co-operation between the two countries is mainly energy-related, as South Koreaimports both oil and gas from the sultanate. An agreement was reached in January2015 to extend the supply of hydrocarbons from the Gulf nation to its partner.
Seoul position
Since the launch of diplomatic relationsbetween Oman and South Korea, ties be-tween the two countries have been strength-ened by the need for energy co-operation.
South Korea relies on imports to meet97 percent of its energy needs. Oman is acrucial partner, accounting for 13 percent ofSouth Korea’s LNG imports. It also contributes2 percent of South Korea’s oil imports. Thistrade is based on a 25-year purchase agreementthat came into effect in 2000.
To South Korean Ambassador to OmanKim Daesik, the fall in oil prices will notalter his country’s will to trade on a long-term basis. “When there is some turbulencein oil and gas markets, long-term contractsare still considered as a much better optionto access stable production of LNG,” he said.
DURABLE RELATIONS: South Korea wouldlike to increase the share of its hydrocarbonsimports from Oman when production in-creases, Kim told TOGY.
Oman’s Ministry of Oil and Gas and up-stream companies have intensified the searchfor new finds both onshore and offshore.The Khazzan tight gas project aims to raisethe country’s daily production by 28.3 mcm(1 bcf) of gas and 25,000 barrels of gas con-densate from 2017 onwards.
The project is expected to make up 30percent of Oman’s gas supply by 2020, ulti-mately boosting its export potential to partnerssuch as South Korea and China.
LAND OF OPPORTUNITY: Beyond Oman’ssecurity and stability, recent developmentshave made the country a more attractivedestination for foreign investment.
The creation of special economic zonesin Duqm, Sohar and Salalah has incentivisedforeign companies to enter the market.
South Korean companies such as HyundaiEngineering, Daewoo Shipbuilding and MarineEngineering, and LG International have ex-panded their presence in the country by en-tering joint ventures with state enterprisessuch as the Oman Oil Company.
Hyundai Engineering and Constructionwas awarded a $480-million contract for the
engineering, procurement and constructionof the Musandam Gas Plant in December2011. The plant is expected to be commis-sioned in the third quarter of 2015.
In the Port of Duqm, Daewoo Shipbuildingand Marine Engineering has participated inbuilding and managing a $1.5-billion shipyard.
Meanwhile, South Korea’s LG Internationalhas agreed on a joint-venture deal with OmanOil Company to develop an industrial chem-icals project at the Port of Sohar.
The companies will produce 1.1 milliontonnes of purified terephthalic acid and500,000 tonnes of polyethylene terephthalateper year. The $850-million project is expectedto come on line by the end of 2016.
In addition to petrochemicals projects,Oman’s national railway development is anarea where South Korea is primed to con-tribute. “South Korea’s petrochemicals andrailway sectors are extremely advanced.Related co-operation between the two coun-tries is likely to materialise,” Kim said.
As Oman plans to continue long-termhydrocarbons projects across the value chainin spite of the global oil price slump, SouthKorean companies are poised to support.
KIM DaesikSouth Korean Ambassador to Oman
4.56
211
Japan
Others
4.9India
33.9Taiwan
15.1Thailand
13.8
China
3.34Singapore
6.08South Korea
Source: National Centre for Statistics and Information
Oman’s crude oil exports by destination, 2014 (million barrels)
TRADEIN
When there issome turbulence inoil and gas markets,long-term contracts
are still consideredas a much betteroption to access
