Oman Gas Company’s new mandateOctober 23, 2018
Sultan Al Burtmani, acting executive managing director of Oman Gas Company (OGC), talks to TOGY about integrating the gas network with upstream and downstream projects and how the company will be restructured as it expands. OGC is the energy infrastructure vertical of Oman Oil Company (OOC).
• On integration of the network: “We want to consolidate the whole gas network under one dedicated technical system operator, or TSO. This entity will operate the whole gas network and integrate it with the processing facilities in the long term. One of our key aims is to ensure that the infrastructure is ready, not only to maintain a reliable and uninterrupted supply of natural gas to consumers, but at the same time to maximise the value generation from this resource.”
• On OGC’s consolidation: “This is happening now. We have already finalised the financing, consolidations and integrations. Especially because we are legally transferring the assets from Oman Oil Company to Oman Gas Company, we are restructuring the whole capital structure related to the holding, and we will be rebranding OGC in line with Oman Oil Company within the next few years. The reorganisation review is happening this year. We will require another year to integrate all of this under one name. Globally, you see similar models, such as Enbridge in Canada or Engie in France.”
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What is your main objective in fully integrating the gas network?
We want to consolidate the whole gas network under one dedicated technical system operator, or TSO. This entity will operate the whole gas network and integrate it with the processing facilities in the long term.
One of our key aims is to ensure that the infrastructure is ready, not only to maintain a reliable and uninterrupted supply of natural gas to consumers, but at the same time to maximise the value generation from this resource.
How are increasing gas supplies shaping your plans and operations?
One consideration is infrastructure, in having enough capacity to handle all of this growth and supply, assuming that there is a growing demand, either locally or through LNG. We start with a seven-year capacity plan for the gas network, created properly through consultations with all relevant stakeholders and by looking at our existing assets. The aim is that the infrastructure will match the supply.
A second consideration is quality. Before we control pressure, we control volume. But then we start looking at the quality of the gas. If it is coming from a different place, it could be of a different quality. Now that we have an extraction facility, we need to ensure that as there is more supply, we are working closely with MOG [the Ministry of Oil and Gas] to allocate gas in the most value-maximising manner, and hence provide the greatest benefit to Oman as a whole.
In the coming years, we will see another 500-600 kilometres of pipelines added to OGC’s national gas transmission network, mainly catering to the new industrial hub in Duqm, as well as to meeting demand growth in the Sohar area. This represents significant growth and will take the total length of our gas network to well over 3,000 kilometres.
What type of power projects are you planning in the Duqm area given its aggressive industrial expansion?
In Duqm, we will be building a 320-MW power plant to start with, dedicated to the Duqm Refinery. Plus, we are exploring the option of expanding the capacity of the power supply there. Meanwhile we are seeking further growth linked to power demand in the Duqm zone, either for captive clients or potentially for Tanweer. We have discussed with Tanweer the lower cost of producing gas-fuelled power as compared to consuming diesel.
The idea is to grow these pocket businesses within the gas sector and then they can take their share. For now, we are focusing on project growth.
Are you looking at renewables, given their increased significance for power generation?
In power, OGC’s focus has been on investing and developing conventional and renewable power generation assets. Recently, its 120-MW Musandam Power Project successfully started operations and OGC is now working on an initial public offering due by the end of this year. Our second major conventional power project will be implemented in the Duqm SEZ by our subsidiary Marafiq.
We are working to get into the renewable energy market, as it is linked with our gas operations. For the renewables sector, we are working to either establish a utility company or promote the concept of having a national power company but then giving some sort of equity for this type of project to grow.
All power companies worldwide begin at home. They were given some form of government support to get their first projects running, and later on took them over.
We presented this renewables idea to the Financial Affairs and Energy Resources Council. We are aligned in our commitment to grow this segment. Meanwhile, we are working with various international partners to bid for renewable energy projects floated by the Omani government and Petroleum Development Oman.
In the pursuit of a more integrated model for OGC’s energy business, what plans are being considered for supplying power to the upstream sector?
Along with different upstream companies, we are reviewing the potential of developing power concepts through an infrastructure company – in other words, providing power as a utility to these companies.
For this type of project we want to use renewable energy, in which case we could free natural gas to be rerouted to the network for other industry segments. Rather than each upstream company building the infrastructure to meet its own power requirements in different fields, we, allowing for some kind of centralisation, can provide the power.
What plans are being considered within the logistics segment of the market?
Oil logistics is important for the whole industry, for both crude oil and refined products. At the moment, our subsidiary OTTCO [Oman Tank Terminal Company] will be operating the new liquid terminal under construction at Duqm Port. Likewise, we are supporting the development of part of the crude oil park at Ras Markaz, which could be developed as Oman’s second oil export terminal in the long run. Our objective to create Duqm as oil logistics hub.
We are also exploring, along with the Ministry of Transport, how we can have a good business for oil logistics in Salalah. Having different ports in Oman could attract different areas of industry and investment. Plus, Salalah has the local oil logistics infrastructure, which is the pipeline.
The government is seeking options for segregating condensates, heavy oil, etc. The whole idea is to extract more value by having a proper national oil infrastructure.
We are curious to see how we can consolidate all of the terminals on a national level. Now there is Al Jefnain terminal, owned by Orpic in partnership with CLH.
There are a lot of players in the market that we could consolidate, potentially creating an independent oil logistics company in the long run to support the government’s approach of liberalising the oil market.
In which areas do you expect to see growth linked to the ports?
All of the growth that we are seeing now is in the Duqm area. We know that we need to think about another gas pipeline to Duqm. Assuming that there is a good supply of gas, then most of the industry will be in Duqm.
Plus, we are expanding our network, constructing another pipeline connecting Fahud and Sohar. We have also started to review an expansion of the pipeline to Salalah, on which work will begin in 2019-2020.
How closely are you collaborating with new logistics entity ASYAD?
We are working closely with them because we have the same initiative of developing the oil logistics within the country. We work in all of the ports – Sohar, Duqm and Salalah – with the idea that oil logistics is linked to trade and all the facilitation required within the port. You can attract different traders to come and store their goods within the port.
Within shipping we work closely with OSC [Oman Shipping Company] to create a value chain for any new downstream projects sponsored by Oman Oil Company.
Which segments will provide you with the most growth in revenue?
The most growth will come from regulating the gas network, at least for the next two years. Once the Salalah LPG project starts, hopefully related projects, such as oil infrastructure and power, will contribute to our revenue. We are planning to build a business model for processing facilities, which could add more revenue to our gas business.
What measures are being taken to grow in-country value (ICV)?
ICV is driven as a national objective. There is now a dedicated team within the OOC group working with it and with the target that we need to achieve in each vertical. In each contract we want to have a focused target for how much needs to be done as ICV. This means SME development, training and local community development within each project.
As much as we can, we are working closely with SMEs – in engineering, project execution or other aspects, as a direct and not a subcontracted part of the job. We see a positive impact and a good response in every potential contract or bid that we place in the online tender portal as far as the local community is concerned.
In each major project, we develop some form of interactive approach between the contractors and the local community in that specific area. This ensures locals have access to all potential jobs coming from the main contractor.
What is the timeline for consolidating the different pillars under OGC?
This is happening now. We have already finalised the financing, consolidations and integrations. Especially because we are legally transferring the assets from Oman Oil Company to Oman Gas Company, we are restructuring the whole capital structure related to the holding, and we will be rebranding OGC in line with Oman Oil Company within the next few years.
The reorganisation review is happening this year. We will require another year to integrate all of this under one name. Globally, you see similar models, such as Enbridge in Canada or Engie in France.
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