Trust and experience key in Oman

Oman

Said Al-Adawi, co-founder and CEO of local operator Intaj, talks to TOGW about the prospects for start-ups in Oman and the government’s role in providing opportunities for new companies. Established in 2011, Intaj is the newest exploration and production firm in Oman. The company also has an oilfield services arm that specialises in coiled tubing.

What is the greatest challenge a new upstream company faces?

The biggest challenges local companies’ face are usually related to funding. Even though the government supports in-country value and hopes to develop Omani firms, banks does not seem to be aggressive enough to rise to the challenge. The Ministry of Oil and Gas does not get heavily involved in the business activities of exploration and production firms. Exploration and production sharing agreements are normally in place to govern such relationships.

The second challenge is attracting the right expertise. While there are many methods of raising capital, it is a lengthy process to attain skilled and experienced personnel. The labour market in Oman is extremely competitive when compared to other countries in the Gulf. Many of the major oil and gas companies have had a strong presence in Oman for decades. The Ministry of Oil and Gas offers open blocks to oil producers with sufficient experience through international bidding processes.

We need the operational experience to be recognised as an operator, and brand ourselves for future ventures. Co-operation through joint ventures with companies such as Medco Arabia, the local subsidiary of Indonesia’s MedcoEnergi, is necessary for achieving this objective.

Intaj will be able to independently bid for blocks after building upon this experience. We are very happy with the joint venture with Medco and we see it as good catalyst for building up experience for future projects with minimal financial and operational risk.

Do national oil companies question the capabilities of local service providers?

The government, including the Ministry of Oil and Gas, has had some bad experiences with local services companies, though it has also some good experiences, as well. It is not that the government does not trust Omani-headquartered companies, both on the service and exploration side.

In fact, government agencies, state-owned Petroleum Development Oman and Occidental of Oman, the local subsidiary of the US’ Occidental Petroleum, have allowed dozens of local services providers to test their products with them.

This is an opportunity that is unavailable in many other oil and gas markets in the region, where it can take a newly formed local company many years to work with a major operator. Thanks to the In-Country Value Development Programme for small and medium-sized enterprises, as well as other government initiatives that support start-ups, many new oil and gas companies have been established in recent years. Of course, these companies need the assistance of the government and potential clients.

How competitive is the coiled tubing sector?

In regards to the oilfield services industry in Oman, the price of services are suppressed because the cost of oil and gas production in the country is very high. Our priority is to introduce supplies and services to the market to boost the efficiency and productivity of the operator. This is especially vital in the current oil and gas price crisis.

The design of the coiled tubing technology provided by Intaj is unconventional. To stay ahead of the competition, we are planning to introduce a new unit by mid-2015. A new company such as ours that provides coiled tubing services has to be aggressive to compete with the likes of Oman’s Gulf Energy and MB Petroleum Services or international majors such as Halliburton, Weatherford, and Schlumberger.

What are the geological characteristics of Block 56?

Block 56 is an onshore block located in southeast Oman. Petroleum Development Oman, Petrogas, a subsidiary of MB Petroleum Services, and Ireland’s Circle Oil all have operating interests in the vicinity of block 56. Intaj and Medco will be primarily searching for shallow and deep oil. An extensive 2D-seismic survey has been conducted by Petroleum Development Oman and much information has been gathered.

Also, 300 square kilometres of 3D-seismic information has been obtained. We will not acquire more 3D seismic until the project enters its second phase. Drilling activities will commence in 2016.

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