TOGY talks to
Full capacity in OmanSeptember 18, 2018
Harib Al Kitani, CEO of Oman LNG, talks to TOGY about the impact of new gas production from Khazzan, the outlook for 2019 and upgrades to the company’s power generation assets. Oman LNG is the country’s sole global exporter of LNG, operating a three-train plant with a capacity of 10.4 million tonnes per year in Qalhat, Sur.
• On new supply from Khazzan: “We have the luxury of long-term agreements, some of which are almost 25 years in duration. These contracts continue unabated and we receive a full supply from the government for them. Our plant previously had about 20% spare capacity. Now we are running at full capacity since Khazzan production came on line. The excess volume that was filled by Khazzan gas was bought by BP Singapore.”
• On key export markets: “We are continuing to look at Asian markets, such as China, Japan and South Korea. Exporting is a dynamic process. One market is down, one is up, one market opens, one market closes – so we are constantly busy looking at where to send our cargoes.”
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How has the increase in gas supplies from the Khazzan field affected your activities?
Oman LNG has been very successful in the market from the onset. We have the luxury of long-term agreements, some of which are almost 25 years in duration. These contracts continue unabated and we receive a full supply from the government for them. Our plant previously had about 20% spare capacity. We have been running at full capacity since Khazzan production came on line. The excess volume that was filled by Khazzan gas was bought by BP Singapore.
Which key export markets are you now looking at?
We are continuing to look at Asian markets, such as China, Japan and South Korea. Exporting is a dynamic process. One market is down, one is up, one market opens, one market closes – so we are constantly busy looking at where to send our cargoes.
What is your outlook for 2019 given the current oil prices?
Our profitability is mostly dependent on the oil price. The higher the oil price, the higher the LNG price and the higher the profit for the company. The oil price has improved, of course, so we are expecting this year to be better than last year because of this increase.
Which internal variables are you looking at to increase the current margins?
Our major focus is not only the market but how we control our internal costs. So we look at all cost optimisation options, all opportunities for cost savings with value added in. We look at our processes and how to make them efficient. We have projects such as cost optimisation review, in which we try to optimise all of our contracts in conjunction with our contractors. There are projects that we can roll back during our planned shutdowns instead of waiting two or three years for an opportunity. We do it then to increase our plant efficiency.
We embark on lean projects and initiatives. This means a continuous improvement in which we look at our processes and try to make them lean. When you do this, you save a lot of time, as well as creating efficiency and value for the company. This has been undertaken diligently for the last few years and it has been very successful.
In what way do upgrades to your power generation assets raise your bottom line?
Oman LNG is operating as an island: We don’t depend on anything from outside. We produce our own electricity and water. To be efficient and to save the gas that we are burning, we started a power project to look at the latest technologies and the one we chose was gas engine technology. This technology will replace our existing open-cycle generators that are not energy efficient. The project will not interrupt the operation of the plant.
We found the best technology with MAN, and KBR will be our consultant. We are investing money and saving the gas, which is liquefied and sold. At the same time, we are reducing our carbon footprint.
What initiatives do you have to enhance the development of in-country value (ICV)?
We have many initiatives. We work with our contractors to increase the ICV content of whatever contract we award, and through this empower them. We train them on how to work with us, on safety and on our tools. We even train some of their people so they will have more capacity and capability to work with us. For instance, we have worked with our tugboat provider, who has now reached 100% Omanisation. We are working with GE to train Omanis as part of ICV.
All of our contracts involve ICV as well. We work closely with the Ministry of Oil and Gas on the initiative, and it’s working very well.
What is your role in promoting the development of value-added industries?
Oman LNG is a national flagship company. We cannot expand unless the government gives us more gas. And as Omanis in an Omani company, we want to see successes in all other areas. We encourage industries to develop, to create jobs for Omani nationals, to create diversity in our economy and to bring technology to the country.
What variables should be considered to increase efficiencies from both the supply and demand sides?
The government needs to think about this and push for further diversification, which is also key for industries. If we don’t pursue diversification, we will be stuck in terms of employment, technology and so forth. In some countries, the cost of solar is subsidised, for example. The government should consider these types of initiatives, as this is very important.
On the other side, efficiency is not being pushed as much as it should be. It could save a lot of energy. We are wasting energy across all sectors. A way of thinking that promotes energy efficiency must be transferred to the individual level.
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- From the field