Key opportunities for engineering services in Oman

Oman

Hamoud Al Tobi, CEO of Galfar Engineering & Contracting, talks to The Energy Year about key opportunities for engineering services in Oman and the company’s plans for participation in the green hydrogen segment. Galfar Engineering & Contracting is a multidisciplinary engineering and construction company.

Following the pandemic, what is your assessment of the major opportunities for engineering services in Oman?
Navigating Covid has been difficult for all businesses as there were fewer projects on offer and it was tough for companies to keep afloat. However, it was also an opportunity to look at your own organisation and assess what needed to be either changed or restructured and what were the priorities.
Now, following the pandemic and with the strengthening of the global oil prices, there is a positive momentum in the energy industry. Oman’s upstream sector is something we look at with great optimism, given the dynamics arising from the appetite of E&P operators to maximise production in order to reap the benefits of higher oil prices.
This leads to more oil wells being drilled, more flowlines and pipelines being constructed, more facilities to engineer and construct, and thus more opportunities for us, as Galfar, to be more involved in projects in the conventional oil and gas sector. We want to make sure that we seize a reasonable share of this growth sparked by the oil prices.

What role has the company played in Oman’s development?
Galfar celebrated its 50th anniversary in 2022 and it has always been very active in Oman, operating as a partner in the country’s development. We are the largest employer of a national workforce in the private sector in Oman and our track record includes the execution of more than 1,000 projects in various sectors, with a 100% completion rate.
Throughout the past five decades, Galfar has constructed more than 8,000 kilometres of flowlines and pipelines for the oil and gas industry, built more than 4,000 kilometres of roads for the country and constructed the majority of the water networks and civil infrastructures.

What is your current involvement in oil and gas projects?
Besides participating in multiple oil and gas tenders, we are executing some critical EPC projects in Oman, for example a 48-inch gas pipeline segregation contract worth more than USD 100 million, awarded by OQ. Moreover, we are also delivering projects for PDO, such as the off-plot mechanical works in the Qarn Alam concession, where we are constructing various remote manifolds, flowlines and pipelines.

Considering the increasingly competitive business environment in Oman’s EPC segment, what are the main initiatives adopted by Galfar to solidify its position as a sector leader?
Galfar has worked as main contractor in many conventional construction projects, where we take the drawings and turn them into reality. However, over the past two years we have initiated a transformation strategy that has been set as a target to upgrade our engineering capabilities.
In EPC, we already have solid construction and procurement segments, but we identified some gaps in the engineering segment on which we have been working in order to be able to take on full-fledged and high-level EPC projects.

What is your approach in terms of business models to support the company’s transformation?
We are working to diversify our business model to include projects procured under a public-private partnership (PPP) and design-build-own-operate-maintain (DBOOM) schemes. More specifically, the reason why we are very keen to get into them is the long-term engagement. In conventional EPC projects, we are talking about three to five years. But when it comes to DBOOM schemes, we are talking about 10-20 years of engagement. As a business focused on long-term sustainability, we find that very attractive. We’ve already progressed in some of these projects within oil and gas and we are looking for further opportunities.

What are the main challenges in starting to operate under these schemes in the energy industry?
It is the access to affordable financing, given that you bring in elements for which you have to invest. Being a turnkey procurement engineering solutions provider means that you have to finance the project during the design and build phases, and then, you have to operate and maintain it. In the past, our financial position was not that healthy. However, thanks to our corporate transformation and the improvements in the country’s credit rating, the outlook is more stable.

Can you describe Galfar’s relationship with local supply chain players and the support the company is providing to Local Community Contractors?
Galfar is one of the largest supporters of the local supply chain in Oman, issuing work orders of between USD 200 million and USD 260 million in total every year to both well-established local subcontractors and suppliers and emerging SMEs. We deal with more than 1,500 local suppliers, subcontractors and service providers in order to support the delivery of our projects. In some cases, we also take extra steps, by supporting them to get their services or products qualified in front of the main client by providing technical know-how and project management Support as well as working as a facilitator by improving their quality and safety management systems.
We believe that it’s one of our corporate social responsibilities to promote in-country value efforts by ensuring that we allocate significant parts of our work to the local supply chain to contribute to strengthening local contractors’ capabilities and getting them more involved in bigger projects.

What is Galfar’s position when it comes to the energy transition?
We are very keen and watchful of what’s happening in the wider energy transition. To give you an example, in mid-2020 we launched a new organisational structure with updated mandates for each business unit in Galfar and the “oil and gas” division turned into the “energy & industrial” division.
Besides this, we are very proud to be involved in the Sustainable City Yiti project awarded by the Sustainable Development & Investment Company for a total value of more than USD 200 million. We’ll be in charge of building their infrastructure, as well as residential, commercial and office units. It is our first experience in delivering services for such an ambitious sustainable project and it is also the first of its kind in Oman, promoting a 360-degree green lifestyle.

What are the company’s aspirations within Oman’s renewables segment?
Projects like Yiti align perfectly with the company’s plans to be a major player in the country’s shift towards more sustainability. The government aims to achieve a 30% share of power generation from renewables by 2030, which means that there is going to be an increasing demand for solar and wind power plants to be designed and constructed. Our aspiration is to be the preferred EPC contractor in the country for delivering these renewable power plants.
Moreover, we are also forging our own path as Galfar by making our facilities greener across the sultanate. Being more involved in renewables will also help us to diversify our existing portfolio of projects, grow our business and support future turnover.

Following the October 2022 launch of Hydrom, what are Galfar’s endeavours to penetrate the green hydrogen segment and what will be its competitive advantage?
We are watchful of what’s happening in the green hydrogen market and aware of the progressive steps the country is taking to develop hydrogen projects, understanding that it will bring a lot of EPC opportunities.
At the moment, we are in a very advanced stage for participating in the construction of some green hydrogen and ammonia facilities and our interest will not be limited to the design and construction, but to a full engagement in line with a DBOOM scheme.
Our advantages will be our know-how regarding the local market and access to the various supply chains, as well as our reputation as a reliable contractor.

Saudi Arabia has announced USD 1 trillion of EPC projects in the coming years. How do you plan to expand in the region?
Galfar is already a known name, a regional brand. There are very exciting things happening in the region and we are exploring several opportunities seriously, prioritising the Saudi market, where we are targeting a percentage of that USD 1 trillion of projects.
We’ve already taken some steps such as registrations and licensing processes, and we have also participated recently in the Saudi Infrastructure Expo, where we have presented Galfar in the Saudi market. We are currently having meetings with potential JV partners from Saudi Arabia who are very interested in working with us, especially in the framework of public-private partnerships.

What is your strategy to increase your turnover in the future?
We launched our turnaround strategy in 2020, with six strategic priorities designed to make us more efficient in the way we deliver projects, to strengthen our financial position as a company in terms of liquidity and equity positions, and also to diversify and bring in innovations in the construction industry. Our transformation strategy is an enabler for us to achieve the turnover that we are targeting over the next few years.
Besides this, we maintain a very strong order book of confirmed projects in the pipeline – around USD 1.3 billion at present. Finally, we have identified opportunities in the Omani market for the next three years amounting to approximately USD 5.4 billion.

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