TOGY talks to
Strategic integration in OmanJuly 5, 2018
Tarik Mohammed Al Junaidi, CEO of Oman Shipping Company, talks to TOGY about how a new strategy of integration can advance Oman’s logistics sector, as well as opportunities in LNG and the drive to expand Oman’s regional connectivity. Majority-owned by Oman’s Ministry of Finance, OSC provides shipping and logistics services for crude, chemicals, dry bulk, LNG and container lines.
• On the spot market for LNG: “In 2005, we never thought of the concept of spot LNG vessels. Now, there is a huge percentage of vessels in the market purely on speculation and loaded mainly for spot. That is going to continue and even increase because new energy production is appearing in new areas of the world and people will use less crude and more LNG because of the benefits of its cleanliness.”
• On OSC’s plans: “Moving forward, we are trying to see how we can increase Oman’s connectivity to the region, having more direct routes to the country. That is also under study with ASYAD and we are trying to see what we can do.”
Most TOGY interviews are published exclusively on our business intelligence platform, TOGYiN, but you can find the full interview with Tarik Mohammed Al Junaidi below.
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How have OSC and the industry been adapting to support the government’s strategy of transforming Oman into an international logistics hub?
In the end, it is about how you create value in the bigger picture. It is about strategically organising all the different companies. In the past, government-owned companies would work independently and would not consider the other companies – how we can add or share value between each other.
Now, we have a new shareholder. Their legal name is Oman Global Logistics but they are branded under the name of ASYAD. The Ministry of Finance developed ASYAD to strategically manage the stakeholding companies they have in the area of logistics.
In 2017 and 2018, our biggest target is to align our strategy with that of ASYAD. We are hoping that we will have a clear direction by Q3 of this year . From there, we will see exactly how and how fast we are going to grow. The idea is to work together to create value rather than having each company working independently.
This strategy gives us a completely new way forward, not only concentrating on maritime shipping but looking further along the supply chain. Some of the companies under ASYAD could facilitate this, working in alignment with us.
How is the logistics sector working towards achieving greater integration and synergy to capitalise on upcoming opportunities?
Oman Global Logistics has 17 companies, of which three are Oman Shipping: Oman Shipping and its subsidiaries, Oman Ship Management and Oman Chartered Company. Oman Shipping Company is the mother company, while Oman Ship Management is for technical aspects and Oman Chartered Company is for commercial aspects.
Also part of the Oman Global Logistics portfolio are the ports, Duqm, Salalah and Sohar. In another area of logistics there is Mwasalat, Oman Port, Oman Dry Dock and the freezones.
How do we take all of these companies that are related either directly or indirectly and extract maximum value by identifying synergies? What we come up with from this strategic study will be interesting in terms of how it will change us and make us think more outside the box instead of doing traditional shipping. We might look deeper into providing customers with one-time solutions instead of customers needing to go to different agents and clients.
What is the relevance of the ongoing development of Khazzan and the LNG sector to the maritime business?
LNG is receiving a lot of attention as a fuel for the transition to cleaner energy. Ten years ago, this was controlled by the producers and final users. There might have been a facilitator, but many of these contracts were done on a long-term basis and whatever was produced in a certain place would go to the final user. Now, the dynamics are completely changed. There are many traders in this business, so you do not really know where the LNG goes. It could be traded two or three times while the vessel is sailing.
This is similar to what we have seen happening on the crude side. There is a spot market for LNG. In 2005, we never thought of the concept of spot LNG vessels. Now, there is a huge percentage of vessels in the market purely on speculation and loaded mainly for spot. That is going to continue and even increase because new energy production is appearing in new areas of the world and people will use less crude and more LNG because of the benefits of its cleanliness.
Given the changing market dynamics, what other oil and gas-related business lines are you focusing on?
LNG used to be the main driver for our business. We started with six LNG vessels as we got into shipping. That was 100% of our commercial activities, but then we realised that we did not have that much opportunity to expand into LNG, mainly because of the committed volumes here in Oman, so we started to diversify into other types of vessels.
Today, we have about 50 vessels under our control at any time. These vessels rage from LNG vessels to product tankers and bulk carriers.
Following the launch of the Oman Express in 2016, what other linking initiatives are you considering?
Moving forward, we are trying to see how we can increase Oman’s connectivity to the region, having more direct routes to the country. That is also under study with ASYAD and we are trying to see what we can do.
In line with current developments in the oil and gas industry, what is the near-term outlook for OSC and the logistics sector?
We are coming to a crossroads where we have new shareholders and we have to make sure that our strategies are aligned. The idea is to think bigger and identify value within the ASYAD group and beyond.
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