Number of local community shareholders in company1,617
Value of 10-year hoist services contract for PDO$90 million
Rate of Omanisation92 percent
Oman’s local industry strategyApril 30, 2015
Hamoud Al Tobi, CEO of Al Shawamikh Oil Services, tells TOGY that super local community contractors (SLCCs) need focused support as much as possible over their 10-year incubation period to establish technically solid and financially capable competitive entities. Al Shawamikh is an SLCC providing integrated services including drilling, well intervention, technical support, engineering, maintenance and logistics services.
To what extent has the development of SLCCs impacted work culture in Oman?
Some of the challenges associated with the super local community contractors (SLCC) were related to Omani culture and society. Sometimes board selection and composition was emphasised over business development. This is one of the obstacles that SLCCs faced when they were first set up.
Fortunately, this has been overcome to a large extent through improved dialogue with the shareholder communities and guidance from the relevant authorities, especially the Ministry of Commerce and Industry. Nowadays, Al Shawamikh has a fully functional and stable governance framework in addition to developed organisational capabilities.
This wasn’t the case as early as 2011 when these local companies started from scratch and were building their staff competencies, safety and quality systems, and management processes.
Two factors contributed to this successful development: the existence of a ministerial committee to facilitate implementation of the government-granted incubation period and support from major local operating companies such as Petroleum Development Oman (PDO) and Occidental Oman (OXY) through technical expertise, coaching and direct business opportunities.
Of course, the objective is not only to increase the number of Omanis in the labour pool but also to cultivate the local workforce to become more efficient and productive. The extraction of hydrocarbons in Oman is much more complex than that in neighbouring countries.
This is why local companies need to focus on increased productivity including an efficient working culture to maintain a competitive edge. The country’s labour regulations also need to be geared towards supporting this.
How does an SLCC contribute to developing smaller local community contractors (LCCs)?
The original SLCC approach had the intention of bringing smaller LCCs under a common umbrella, but this has not happened yet. One idea is to enable smaller LCCs to merge into SLCCs. This creates stronger entities better able to take on challenges in the market.
The oilfield services sector in Oman is becoming very competitive and is often saturated with many local providers for the same service. The merging approach will help minimise internal local competition and ameliorate potential conflicts. I think the original strategy should be pursued.
How can major companies such as PDO and BP support Oman’s SLCCs?
SLCCs are integral to efforts by major operators to increase in-country value. PDO has helped strengthen Al Shawamikh and other SLCCs by providing technology, equipment and direct business opportunities.
OXY has offered similar support. These companies are aware that entering a competitive market is difficult for any company, particularly one lacking funds or an experienced workforce.
In 2012, PDO awarded Al Shawamikh a $90-million hoist services contract covering northern parts of block 6. This contract was key for the company to establish itself as a renowned oil services company and grow.
How should SLCCs respond to low oil prices?
The drop in oil prices is concerning to Al Shawamikh as a young player with thousands of local shareholders. It brings in difficult times during which we need to innovate in how we deliver services, challenge some status quo practices and structure our cost in an efficient manner while not affecting the quality of the service provided.
Current market conditions force us to look deeper into our cost structure. For us, labour is the biggest factor in this cost. This is why we are looking into ways to maximise the productivity of our staff by optimising and restructuring their job descriptions so that they get to spend less time and effort on activities that don’t add value.