The outlook for Oman’s oil and gas industry

Oman

Abdullah Said Al Shuely, CEO of Al Haditha Petroleum Services, talks to The Energy Year about the continued success of the country’s oil and gas industry and challenges in meeting Omanisation requirements. Al Haditha is a super local community contractor (SLCC) that provides oilfield services in PDO’s northern concession area, Daleel Petroleum, Occidental Oman and CCED.

Can you give us an overview of Al Haditha Petroleum Services’ operations?
The work we do is related to construction services to support major oil and gas companies in Oman. We perform service contracts that involve construction or replacement of flowlines. These are the lines which evacuate hydrocarbon fluid from the wells to the gathering or remote manifold stations.
As for 2019 performance, the year was completed successfully with many achievements. We completed the year with no Lost Time Injury (LTI), resulting in an accumulated seven years of operation without an LTI in some areas. We saw a growth in our activity levels of around 30%. Our efficiency drive delivered good results in reducing around 20% of our overhead resources. Key processes have been optimised and our contracts with our suppliers and service providers restructured. This resulted in executing more scope and huge savings compared to previous years.
With such achievements, we were able to win a strategic contract from Daleel. The scope is the construction of 16” PE lined, 32 kilometres and laid between PDO and Daleel concession areas. It is far above our routine scope and can be classified within pipeline group.
The outlook for 2020 is even better. We have adequate scope in our hands and PDO is planning to upgrade us into constructing new flowlines. This activity will mean growing our skills in other areas such as earthworks for well pad construction, electrical, instrumentation communication and commissioning of flowlines. We expect to almost our resources. This will give us the opportunity to develop in the coordination and management of a multi-skilled workforce with an extended subcontractors base. This move will give us a big boost to our profile.
When our clients are keen to develop us, we make sure we can respond positively. We are geared up to invest in new hardware, equipment and people; we are prepared. It’s important that we grab opportunities where we can. We are always reviewing our investment portfolio and plans based on different scenarios.

Are you confident in the continued success of Oman’s hydrocarbons industry?
There is no doubt that the oil and gas industry will continue in Oman as far as reserves last. While hydrocarbons will become more challenging to extract, I see an increase in the value creation in the sector’s model within Oman. We used to export more of our crude. Now we create more value by converting that crude into something else. The construction of refineries and a petrochemicals industry was a great move for the country.

Is it challenging to receive funding to support construction activities in Oman?
If you are in a business that is making money, there are many ways to get funds. We are set up by government directives alongside oil and gas companies. PDO gave us a lot of financial support when we started. Since most of our contracts come from PDO, which is a reputable company, there should not be any issue getting loans from banks. It helps when we get new contracts. If we perform, there should be no issues getting funding.

How skilled is local talent for the construction sector in Oman?
One of our main challenges – albeit a positive one – is Omanisation on technical roles to support the construction of oil and gas facilities. It is a requirement for SLCCs. Our target is higher than the one set by major construction companies. The reason it is a challenge is due to the working environment. A lot of youngsters do not want to be sitting under the sun while welding and pulling up heavy equipment. It is often 50 degrees Celsius during summer. We recruited about 20 Omani welders, but the majority could not stay with us. We have around 10 now.
Another challenge involves retaining qualified staff. Many workers flee to other companies once they are qualified. In Al Haditha, we have made the strategic decision that we cannot stop qualified staff from pursuing better opportunities elsewhere, but we cannot stop training as well. We believe that by doing this, we will be helping Oman to build required capabilities, which is good for the nation.

What level of training is available through third-party institutions in Oman?
Training provided by the NTI [National Training Institute], in general, is basic. In the oil and gas companies, there are a number of different standards and qualifications we need to meet. So once we have semi-qualified, inexperienced Omanis, we will invest in training them to qualify for specific standards. Clients require that we are certified to an international standard, which requires extra training. In the case of welders, it takes one year to train to a qualified standard. The qualification standards are stringent and involve third-party consultants and clients. Employees must go through induction or specific training to know how things are done at any particular company.

How is the company working to become more competitive in the construction sector?
The construction industry supporting oil and gas activities is very competitive. As an SLCC, we cannot take big steps like moving from flowline construction to larger services where we compete with Larsen & Toubro or Galfar because it would require massive investment. We are growing slowly according to our size, but aggressively. There is always the right balance we have to strike.

How is PDO supporting your company’s development?
PDO is the pioneer of Al Haditha, and they have been so supportive in providing us the guidance, the work and above all, the advice. They are the ones who are opening up new scope for us on the construction of flowlines. Initially, during the setting up of the SLLC, they assisted us with financing and investing, which is a huge help. We must make sure that we are competitive; we must grab opportunity with both hands.
We support PDO in their northern operations. PDO is assigning us an area in this region. Our strategy is to build capabilities. Once we are at a certain stage, PDO envisions that in two to four years we will be able to compete with any entity for larger-scope projects. We have their commendation.

What steps are you taking to enhance efficiency across your operations?
At the beginning of last year, we struggled in terms of delivery time. Clients must protect their business, and they were a bit hesitant to continue releasing work to us. However, by mid-year, we pulled ourselves together and redeveloped our strategic recovery plan, which focused on reducing or stopping the major source of financial drain, reducing OH costs, getting agreement on rate revisions to some of the contracts and enhancing subcontractor, equipment and vehicle utilisation.
I am very pleased to say that the recovery strategies worked and started to pay dividends within a short period.
We introduced efficiencies across the entire company structure and reduced office manpower by almost 23% by deploying workers or letting them go. We realigned everyone in the organisation, even supporting subcontractors. Within no time, we regained the trust and support of our clients on all fronts. There are now more jobs on offer.
We do as much as we can in our fabrication shops to reduce doing work onsite. New technology can also help us increase efficiency. There are some limitations regarding mobilisation of such technology and how easy it is to deploy on the field. We are currently in discussions with a few interested technology owners.

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