Moving up the value chain

Oman Gas Company (OGC) aims to move up in the energy value chain by becoming a significant downstream player and further strengthen its midstream operations with minimal reliance on government support and funding. OGC’s Acting CEO Abdulaziz bin Said Al Mujaibi talks more about it in a detailed conversation with Akshay Bhatnagar and Kavita Nair-Fondekar

Congratulations to you on the 15th anniversary of Oman Gas Company’s successful journey. You have been an integral member of most part of OGC’s impressive track record. As you look back, how does it feel? 

It feels very satisfying! We have come a long way and there is a lot more that we could do as we continue to move forward in our journey.

To give you a perspective on my association with OGC, I was working in Petroleum Development Oman (PDO) as the pipelines and operations engineer when I left them in 2003 and joined Canadian Energy Services, a company that looked after the operations of OGC at that time. I was with them for a short time of around three months as a regional manager and then I was given the responsibility of operations manager. We continued as Canadian Energy Services till 2004. In January 2005, the contract expired and about 90 per cent of the staff who were with the Canadian Energy Services shifted to OGC. And I officially joined OGC on January 1, 2005.

I worked with OGC as operations manager for 2-3 years and then I was promoted as the General Manager – Operations, a position I held till 2014, when it was decided that I would move from operations to the supply chain.

We underwent a restructuring at that time. From three directorates, we moved to five directorates, each one headed by a general manager. I took up the GM-Supplies position.

So you can say that I am one of the oldest in the company. I have seen the company grow, seen it face multiple challenges; build up the systems, processes and procedures. We came up from having around 24 or less customers and around 1,000 kilometres of pipelines. At the moment, we have approximately 2,500 kilometres of pipelines and we are continuing to expand. In the next few years, we will be installing few hundreds of kilometres of pipelines of oil and gas.

I remember, we had a very low percentage of Omanisation before and now we have reached over 92 per cent. And that’s something we are very proud of. I think we have grown well while meeting all of the government’s expectations. That is what Oman Gas Company is all about.

We have a big contract of gas availability of 99.998 per cent for 10 years or more, and I don’t think things like these happen by chance. It took a lot of efforts and dedicated people working day and night to make that happen.

How critical is the role of OGC in Oman’s economy and in particular, the oil & gas sector?

I would say that OGC is the only company that is transporting gas with the exception of one single line that PDO operates from Harweel to Sur apart from their internal gas pipeline network. Around 50 per cent of the gas produced in Oman is transported by OGC. We have been a major contributor in helping to power the country as we supply gas to all the power stations which in turn transport power to a lot of areas with domestic and commercial requirements, factories and refineries.

We also supply gas to the industrial side, to the aluminum smelter, steel manufacturers, refineries, methanol and urea plants, among others. At the moment, we supply gas to around 36 customers in over 46 locations as some customers have multiple locations. So we are very much a part and parcel of the growth and economy of the country. We are part of the body structure and co-exist with all other arms and entities to support the country and its economy in its sustained growth.

What have been the key historical milestones for the company?

There are so many of them. Earlier, the gas grids were only in the northern part of the Sultanate. Between 2003 and 2004, we managed to put up a gas grid all the way to Salalah and another one to Sohar. We put 300 kilometres pipeline of 32’’ to Sohar and 24” pipeline with a length of 670 kilometres to Salalah.

We are very proud of this achievement. Another key milestone we have achieved is putting compressor stations. We have put three compressor stations in the country — in Al Buraimi, Fahud and Nimr.

Yet another milestone is getting the first import of gas. We started the first export of gas within the GCC countries when we were supplying gas for three-and-a-half years to the UAE through the borders in Buraimi. We have then transformed the station as an import station as we have been importing gas through the Dolphin project all the way from Qatar.

OGC also received the Ministry of Manpower’s Award for the Best Omanisation as we achieved 92 per cent, which is the highest in the oil & gas sector. It is an achievement we are all proud of as it forms part of our duties to the Sultanate and its citizens.

What’s the new vision and strategy for the company?

A lot of ideas have been discussed with the shareholders and the government and we are definitely looking for OGC to grow. We have been actively helping the country and helping the government in various projects. We have initiated many projects including the Musandam project (for our sister company, Oman Oil Company Exploration & Production), which most people do not know, and the LPG project in Salalah, which is moving ahead with full steam. We are at the moment in the FEED design stage and hopefully by next year the EPC stage will start (for the LPG project in Salalah).

We are exploring the options of downstream of the LPG itself and there a few more options too. We are talking to our shareholders and exploring some of the promising areas where OGC can get involved. Hopefully, they will be finalized in the coming months.

OGC has taken up new projects like the Al Duqm pipeline, Salalah LPG and supporting Orpic’s NGL extraction project at Fahud. What is the significance of these projects in the benefit to the economy and the society?

The above three and many of our other projects are extremely essential projects. If we consider the LPG project, LPG is very essential to the country. This downstream is an area that we have been talking about for quite sometime. We are glad to have now managed to achieve it and we look forward to bettering it.

You can consider this as a kind of a pilot project. Once we successfully complete this, we could look at other options and may be put up similar stations or similar plants, maybe on a smaller scale as more gas is being distributed through the country and try to get the benefits of the heavier components in the gas. These are present in significant amounts and will add to the economy and hence, it is very important for us.

The Al Duqm pipeline is important for us but it is more important for the government and for the country. The government has invested a great deal in Duqm area and there are a lot of projects coming there. The first one that we know is coming up is the big refinery. Other factories and power plants are also expected to come up.

We are extremely interested in the other side, about 100 kilometers away from Duqm, which is Ras Al Markaz where a crude oil storage terminal is being built there by our sister company. That is why these kinds of projects are very important for us. They will facilitate in boosting the country’s economy and help in driving the country forward.

The oil & gas market as well as global economy is going through a volatile phase. How do you foresee these developments impacting the oil & gas sector in Oman?

My answer to this question is a personal view and need not necessarily reflect the opinion of OGC or our parent company. See, these fluctuations come in cycles and have happened in the past. The country will survive the current downturn as it has done in the past when things were even worse.  We have not slowed down anything and we have not stopped any major projects. We have been told that there is a possibility to re-phase certain phases of projects or some projects, which are not very important and can wait and we have been told that we can re-plan as required. But we haven’t been forced to do that. That indicates that the government is going ahead. I don’t think the government will be accepting any new projects unless there is something we need urgently.

Companies like ours will have to reduce our dependence on government support. We need to propel our growth in new ways, put in our equity and take loans, and go ahead with our business. This is our approach in OGC. We are hoping to have better flexibility to go to the market and do a better job with full responsibility. We are looking at various opportunities and options for the same. We are talking to sister companies who have some plants operated by contracts and we are in negotiations with them to see how we can help them in the coming years as we have been in operations for so many years and are very experienced.

You are in negotiations with the government for a new tariff system. Can you elaborate on that?

Yes, we are talking for a certain arrangement with the government for a new tariff system. We expect it to be sorted out in a year’s time. If it is approved, we will be able to run the facilities for the government, finance these projects and charge a certain fee for providing our services.

What role is OGC expected to play in the Oman-Iran gas deal?

This question should be asked to the government. I can only say that we are prepared to play any suitable role that our shareholders ask us to play whether it is in this project or any other initiative, which is of strategic interest to the Sultanate.

On the In Country Value (ICV) front, what is the overall contribution of OGC especially in areas of direct and indirect job creation, talent development and supporting local companies/entrepreneurs?

In promoting ICV, it is always important to support small and medium companies. This has always been in our thought frame and we have made successful attempts in this direction even before it became big news and people talked of it. We have succeeded in our attempts to a great extent.

We continue to be an active member of the ICV committee chaired by the Undersecretary of Ministry of Oil and Gas. We have discussed various options and have also agreed upon some of them. There have been certain ICV documents in which we need further inputs, say in our major oil contracts to maintain the right balance.

Do you think focus on ICV leads to higher costs?

Not really. We have been trying to convey to everyone that ICV doesn’t necessarily mean that it will cost more. Most people continue to believe that if it is ICV, it is going to cost more. We have proven this through a certain contract of a pipeline requirement where we sourced the pipes from outside and got them coated here in Oman by a local company. This worked out cheaper for us and this initiative that we took is progressing as we speak. We have brought this initiative to the table and explained to the government that when we do ICV, it does not mean always that we have to pay more money.

However, ICV is work in progress as we need to continue to look at the terms and conditions to make it a robust endeavour. At the moment, I think of it as an experiment. As we go along, it will be more mature and will benefit the country more and I am sure that more companies including the international companies will also accept it. That is a natural approach and it is accepted all over the world. We hope we can manage to do this with the other oil & gas companies and use resources within the country that will be sustainable and mutually beneficial.

How’s ICV contribution expected to increase in the coming years as you move ahead with your expansion plans?

It is very difficult to quantify it at this stage. Whatever percentages we are investing in the ICV activities, we are hoping for maximum results. That’s the way we are framing our contracts. We demand a certain level of ICV that is mandatory but we do not mark the companies that are competing based merely on that. We ask them to give us their best. The better their output, the better is their marking. The better the marking, the better are their chances in winning the contracts.

For instance in the LPG project too, that is the approach we are taking. We define their scope of minimum requirement. Take for example, the international companies. They have worked in various parts of the world on multiple ICV projects and they have a rich experience on this front from which we could learn. At times, we are surprised by their innovative approaches and we certainly do not want to limit ourselves. We do not want to create barriers that will kill the initiatives of these companies and their willingness to help us as a country and to be part of the team.

What are the learnings in your opinion from the previous challenges faced by the country in terms of oil price oscillations? How should the ecosystem respond to the challenge in order to remain resilient without compromising on the long-term goals of the sector as well as the country?

It’s a tricky one. There is no silver bullet for it. There could be multiple answers to this question.

My personal view is that the country has its own contingency plans and certain protocols in place. Though we have relied on oil & gas for our economy, the country is trying hard to diversify its sources of income and I think this is something we are learning the hard way and the country is trying hard to set right as soon as we recover from this current price slide.

We are reassured by the government’s approach as far as OGC is concerned. The government has put measures in place to control the expenditure and they have certainly not pushed the panic button yet.

They have always communicated to the companies to be careful in spending the money wisely and prioritizing project schedules. I don’t believe the government has any intention of stopping any of the major projects yet. Things are progressing well though there may be some delays at times. I think we are in good shape and this is a cycle that we will go through and we will survive.

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