OQ: a vehicle to drive investment in Oman

Oman

Talal Al Awfi, group CEO of OQ SAOC, the parent company of the OQ Group, talks to The Energy Year about the evolving market dynamics in Oman and the OQ Group’s key role in the domestic business environment, as well as the latest on the Group’s refinery and other downstream developments. The OQ Group is a global integrated energy group headquartered in Muscat, Oman.

This interview is featured in The Energy Year Oman 2023

What role does OQ play in the domestic business environment?
The OQ Group is a key enabler of the country’s economic growth. We have recently announced our full-year 2022 financial results, reporting the highest net profit in the Group’s history – around USD 3.9 billion – driven by higher production volumes, favourable prices in both our upstream and downstream businesses, and a strong performance from our trading arm.
As the largest integrated energy group in Oman, the OQ Group has an inherent responsibility to attract investors, especially in the energy industry. Most of the expectations and aspirations outlined in Oman Vision 2040 apply to an integrated energy group, like OQ, and that is why we see ourselves as a vehicle to drive and lead investments in the sultanate.
The OQ Group is the largest investor in the domestic energy industry. In the downstream segment, specifically, OQ is the sole refiner in Oman, making us a key player in the sector’s development. In terms of our investment portfolio, the downstream segment represents 60% of our total global assets. In the alternative energy segment, we are leading the way in Oman with a number of large-scale projects in green hydrogen, as well as renewable energy.

How do you assess the evolving market dynamics in Oman and in the region?
Oman is focusing significantly on privatisation, which is key. The country has been one of the earliest in the Gulf region to go down this path, especially in the power sector. The whole region is now looking actively at privatisations, with many businesses either launching or considering IPOs.
I believe that IPOs represent a natural progression to expand our activities. OQ is consistently moving in this direction, with the successful IPO of our oilfield services business, Abraj Energy Services SAOG, as a clear example. Furthermore, we are considering several Group companies at this moment either for potential divestments through private placements or IPOs. Our priority is to focus on helping to improve the Muscat Stock Exchange (MSX) and I believe that the listing of Abraj Energy has contributed by displaying the interest of foreign investors in Omani companies.
I am very optimistic about the future of the domestic market, and I think privatisation is the way to go, enhancing the performance of the companies by helping them to stay closer to the international markets’ movements, and further optimising business frameworks. The private sector is the top contributor and the main mover in all markets. This is the reality when you look at the most successful economies worldwide.

Can you offer some updates on where the OQ8 refinery stands?
We have faced significant challenges in recent times; however, I am highly optimistic that by the end of 2023, we will witness the complete start-up of OQ8, with the aim of achieving first export by early 2024. The OQ8 refinery represents a key asset for the country’s development, with an expected capacity to process 230,000 barrels of crude per day. Although at the beginning the majority will be exported to international markets, a main objective will be to utilise some of the refined products, especially naphtha and LPG, in the domestic downstream sector.
Overall, we are investing significantly to further develop the downstream sector, as shown by the joint development agreement we signed at the end of 2022 with SABIC and Kuwait Petroleum International (KPI) to study the possibility of building a petrochemical plant in the Special Economic Zone at Duqm (SEZAD). The key idea behind all these projects is to maximise in-country value, and one way is by expanding further in the value chain by utilising the products produced domestically.

What are the other major developments promoted by OQ in the downstream sector, particularly in Duqm?
The OQ8 refinery can play a major role in transforming Oman into a regional hub for petrochemical products, as well as serving as a gravitational point around which the industrial segment in Duqm can develop. Oman has invested significantly in that area, aiming to generate a chain of investments that will attract more foreign direct investment (FDI) and capitalise on it.
As far as our activities are concerned, we are very confident about the significant potential in the Ras Markaz terminal project. In December 2022, OQ completed the construction works of the crude oil storage terminal, which already has sufficient capacity to meet and support the requirements of OQ8, following its connection with the refinery via an 80-kilometre pipeline. The terminal has already received three shipments of crude with a total volume of 4 million barrels. Now, we have more than 5 million barrels of available storage for OQ8, but overall the platform can accommodate 26.7 million barrels, making it the largest oil storage and export project in the Middle East region.
Stored oil can be used for several purposes, from blending to trading, and we want to explore each one because there is no limit on land, Duqm being a vast area that is still under development. Besides, particularly with its capacity for expansion, the Ras Markaz terminal ticks all the boxes to be a successful, strategic asset, having world-class infrastructure behind it and an advantageous geographical location away from the Strait of Hormuz.

What key initiatives have the government and OQ put forward to realise Oman’s sustainability goals?
We are looking at alternative energy as a significant opportunity. Oman is positioned among the top countries in the world for solar radiation, with ample access to wind energy too. We are working on how to harness and capitalise on this potential to make it a reality. We are working with oil and gas players, as well as industry, to help decarbonise their operation, as well as ours, by providing them with renewable energy.
In addition, renewables are the basis to produce green hydrogen and green ammonia. In line with efforts by the government and the Ministry of Energy and Minerals (MEM), we have been aggressively trying to promote, via international partnerships, the development of three mega green hydrogen projects: Hyport Duqm, SalalaH2 and Green Energy Oman.
When it comes to breaking down the green energy value chain into its different segments, we see that – based on the data we have – the upstream is there, with a real potential capacity of generating quality green energy by relying on wind and solar, and to produce among the most competitively priced kilowatt hours.
The biggest challenge with green hydrogen relates to the electrolysis capacity, not only in terms of technology but also in how to align it and make it ready for large-scale production. This all comes down to how fast the technology develops.

How do you evaluate the journey Oman is undertaking when it comes to hydrogen and the role OQ will play in supporting these efforts?
Given the country’s plans to be a key exporter of hydrogen in the future, the Ministry of Energy and Minerals (MEM) is taking determined steps on sustainability, having set up platforms and entities, such as Hydrom, to orchestrate the national interest in developing green hydrogen developments. Towards this end, MEM has created a framework that is as clear as possible, especially for investors. Now it will be a matter of combining our progress with other countries’ initiatives to come up with solutions to create more competitive ways of producing green hydrogen and meet the global appetite for alternative energy sources.
As OQ, we truly believe that there is a significant opportunity to generate value from renewables that needs to be taken, and we are working to become greener. Finally, our role will be wider than being more sustainable for ourselves and our activities since it will also assist Group and non-Group businesses to transition from conventional to alternative energy. This is also one of the reasons why we have been appointed by the government as a national champion for the promotion of its clean energy transition agenda.

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