A game-changing approach to utilities in Oman

Oman

Abdullah Al Hashimi, managing director of the Centralized Utilities Company (Marafiq), talks to The Energy Year about the company’s game-changing approach to utility provision in Oman and the key projects it has developed in the Special Economic Zone at Duqm (SEZAD). Marafiq is a joint venture owned by OQ – a subsidiary of Oman Investment Authority – and Gulf Energy Development Corporation of Thailand.

This interview is featured in The Energy Year Oman 2023

Can you walk us through the game-changing approach Marafiq has brought to Oman’s utilities segment?
We are a fully integrated utility company. We understood the need for a one-stop-shop provider in Oman for electricity, gas, water, steam and waste management from other countries’ experiences, such as European ones and Singapore.
We have been the first in the Sultanate of Oman to realise that the international trend was moving towards outsourcing utilities to a specialised utility provider and that this concept was slowly moving to the GCC region too. Outsourcing electricity from a greenfield refinery – as is occurring in Duqm – was a completely new concept in the region. As a matter of fact, in Oman, both of the country’s refineries, Sohar and Mina Al Fahal, have their own power generation.
Oman has had a fragmented approach to the utilities supply for industrial areas, with multiple providers involved. Our starting point was thus to develop an operating model to provide these services to the industrial clusters, identifying Duqm as our target.

Why did you select Duqm as your first area of operations and what have been the major projects so far developed there by Marafiq?
In 2014, Marafiq began as the sole utility supplier for Duqm, having signed an agreement with the Public Authority for Special Economic Zones and Free Zones (OPAZ) that grants it exclusive rights to generate, transmit, operate, own, distribute and supply a suite of utilities in SEZAD over a 25-year period.
We selected Duqm because it was a greenfield site, in line with our scope of being a business-focused operating company. Compared to a brownfield where you will need to do a lot of investments and convince already existing industries to outsource their utilities supply, we assessed that it was more strategic to start the process in a still undeveloped site and structure our services in a way that could proceed hand in hand with the growth of the area.
The area was a virgin ground for both businesses and investors and thus an ideal place to set up a centralised utility company that could serve and help them to optimise their costs. In 2021, we started the early power and water supply via our Duqm Integrated Power and Water Project (DIPWP) to the OQ8 Refinery, which required utilities for its testing and commissioning before moving to the core refining operations. Likewise, we began providing electricity to the Ras Markaz oil storage terminal, which is 80 kilometres away from the generation hub, via our 132-kV power transmission system.
This is all to support the different projects in SEZAD. The plant is crucial to help the OQ8 Refinery and other energy and industrial projects to secure the power they need.
In short, we proved ourselves in Duqm, bringing economies of scale to the industries operating there and ensuring their security of supply.

How would you assess the evolution of your activities in Duqm?
It was challenging when we kicked off in Duqm because the refinery is unique in the country’s landscape as it is not connected to the national grid. Being in a remote area, somewhat isolated in terms of logistics, made it more difficult to attract talent and deal with the supply chain. Then, the pandemic hit, and when you operate in a context where multi-billion-dollar projects are involved, there are many details to take care of.
However, we are optimistic about the future, seeing the demand for water and electricity from OQ8 growing.
With the refinery, we have a supply agreement based on the design and detailed engineering studies conducted at the very beginning of the project, so we will provide the refinery with the required amount as per their required contracted capacity. Overall, DIPWP has an installed capacity of 326 MW and 36,000 cubic metres of water per day.
In addition, we have an important seawater intake, with a capacity of 1.5 million cubic metres per day for the extraction of seawater as well as a seawater outfall disposal facility with a capacity of 1 million cubic metres per day. For the construction of these facilities, we managed to attract and partner with international engineering firms.

What would you identify as Marafiq’s key competitive advantages?
When you position utilities under one umbrella, you achieve economies of scale which will provide you with a competitive tariff offer and several related benefits. Besides this, there is our competency: we are a company specialised in utilities, taking the burden of the commitment and the investments off the shoulders of those players that want to set up a business and will need energy to power their activities and services to run their operations more efficiently. Then, we have also built solid connections with the whole value chain, which is a key asset for our sector.
We are expanding our activities and growing, having also started a potable water plant and tanker filling station to supply Duqm with drinking water; having begun in 2022 to supply electricity to SEZAD via another power plant; and finally, having developed a master plan for waste management to treat both domestic and industrial waste, for which we are in discussions with the regulator at the moment.
Overall, if we take into consideration all the initiatives we have been involved in, Marafiq has invested USD 600 million in Duqm.

Are you considering extending your activities beyond Duqm?
Our ambitions and aims are not limited to Duqm. Marafiq is meant to become Oman’s utility provider, especially for the industrial zones. Our focus is not the domestic customers because the sector is already well structured in terms of the utility provider for those. On the other hand, we feel that the industrial one is lacking an integrated approach and what we achieved in Duqm has shown that a centralised provider is the way forward.
In light of this, we are targeting heavy industry. Khazaen – with whom we already signed an MoU – and Madayn are small and we might partner with smaller companies to provide services there because the demand is not that great. When we talk about heavy industry, we refer to Sohar and Salalah, because we see them as places where you can really unfold the full value of centralised utilities.
Thanks also to the support of our foreign shareholder – Gulf Energy Development, a leading power and water utility company based in Thailand – we feel that nothing is stopping us from expanding and that is why we are already exploring opportunities to invest outside Duqm, with some interesting business cases in our portfolio.

What is the company’s standpoint when it comes to sustainability and the key initiatives you are carrying out to be more environmentally friendly?
Sustainability for our activities plays a paramount role. Originally, SEZAD was powered by a diesel power plant, so we replaced that inefficient and expensive facility with a gas one that is more efficient and environmentally friendly, aiming to reduce the annual CO2 emissions to 90,000 tonnes, equivalent to the emissions of about 20,000 cars.
It was a challenging project, not technically, but given our commitment to a timeframe of delivering the project in six months, from the engineering to the commissioning. We launched it in January 2022, but the commissioning activities began in November 2021. This facility represents an example of a multi-million project delivered on time and that contributes significantly to the greener agenda promoted by the government of Oman.
Moreover, it is not just a matter of sustainability, as the gas-powered plant provides more reliability and security of the supply as well as a lower cost of generation. Diesel costs far more than natural gas, so the cost of generation, which was subsidised by the government, was reduced big time thanks to this project.

Can you give us some insights on your strategy to become Oman’s utilities provider?
We want to position ourselves as a value-adding player, and our strategy revolves around clear governance and rules, and not competing with the other utility sector players, but instead complementing what they are doing.
Besides this, our aim is to provide a diverse energy mix as we do not want to continue with the conventional method of generating electricity. That is why we are planning to shift more aggressively towards renewables and we are looking at different solutions to produce water in a much cheaper way. We are preparing ourselves to launch a pilot renewables project in Duqm this year and considering exciting initiatives to enlarge our energy mix to produce power involving solar, wind and battery solutions.

What is the company’s commitment to SMEs and in-country value (ICV) promotion?
In our journey, we have allocated a very significant portion of our total investment to ICV. Our intention now is to increase the capabilities of SMEs to then involve them in operation and maintenance activities. It’s not just a matter of giving them work, but more about a long-term perspective: we are trying to develop them because they are lacking specific competencies to compete. We have started by simplifying the requirements for them to provide their services, helping local companies in Duqm on the procedures to submit proposals. We will move forward by outsourcing certain activities to them, such as equipment and manpower supply, non-crucial maintenance and cleaning works.
Moreover, we are active within academia as well. In November 2022, we signed an MoU with German University of Technology in Oman (GUtech) to explore renewable energy project opportunities, including in water technology. We are eager to support these research initiatives as they will bring extra value to both our projects and our staff’s knowledge and skills. This is another of our main targets: to train our employees in different disciplines and enhance their competency.

How do you assess Marafiq’s journey so far and where do you see the company in the future?
I think that Marafiq’s journey has shown the benefits that a centralised utilities entity can bring to the table, and I believe this is the way forward for industrial hubs. We have proven ourselves, not only with our projects but also by our relationship with a key global player such as OQ. For the future, I see Marafiq being the service provider of choice in Duqm and extending our range to the country’s other industrial clusters.

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