Trans­form­ing to En­ergy In­fra­struc­ture heavy­weight

Oman Gas Com­pany (OGC) is pre­par­ing to take on a more ro­bust man­date at the helm of the En­ergy In­fra­struc­ture ver­ti­cal of the re­struc­tured Oman Oil Group

Oil and Gas - - CONTENT -

For long the na­tion’s gas trans­porta­tion util­ity, Oman Gas Com­pany (OGC) is be­ing primed for an am­bi­tious role within the re­struc­tured Oman Oil Com­pany’s (OOC) vi­sion to serve as one of the prime movers of the Sul­tanate’s eco­nomic growth.

A roadmap adopted by the wholly gov­ern­ment-owned in­vest­ment group’s Board of Di­rec­tors en­vi­sions a dra­mat­i­cally in­vig­o­rated re­mit for the util­ity, en­com­pass­ing not only re­spon­si­bil­ity for the Group’s mid­stream gas in­fra­struc­ture, but oil and power in­fra­struc­ture busi­ness streams as well.

“It’s a far-reach­ing man­date that will place OGC on a growth tra­jec­tory with po­ten­tially global am­bi­tions,” said Sul­tan Hamad Al Burt­mani, Act­ing Ex­ec­u­tive Man­ag­ing Di­rec­tor of OGC. “OGC will head the Group’s En­ergy In­fra­struc­ture busi­nesses dis­trib­uted across three main streams – Gas, Oil, and Power.” Our goal is to emerge as the undis­puted leader in the gas in­fra­struc­ture busi­ness in the re­gion.”

In­deed, OGC has al­ready taken the first

OGC will head the Group’s En­ergy In­fra­struc­ture busi­nesses dis­trib­uted across three main streams – Gas, Oil, and Power. Our goal is to emerge as the undis­puted leader in the gas in­fra­struc­ture busi­ness in the re­gion

steps in its evo­lu­tion into a glob­ally renowned en­ergy in­fra­struc­ture util­ity. Re­cently, the com­pany hosted high­pro­file of­fi­cials and vis­it­ing ex­ec­u­tives at a sig­noff cer­e­mony to pave the way for the es­tab­lish­ment of Oman’s first Liq­ue­fied Petroleum Gas (LPG) ex­trac­tion plant in Salalah. The $820 mil­lion project, to be lo­cated at Salalah Free Zone, will be owned and op­er­ated by Salalah LPG SFZCO, a 100 per cent sub­sidiary of OGC.

The LPG project ex­em­pli­fies OGC’s newly in­vig­o­rated strat­egy to max­imise value cre­ation from Oman’s hy­dro­car­bon re­sources at the mid­stream end of the value chain, says the Act­ing EMD.

“One of our key re­spon­si­bil­i­ties is to en­sure that the req­ui­site in­fra­struc­ture is in place not only to en­sure re­li­able and un­in­ter­rupted nat­u­ral gas sup­ply to con­sumers wher­ever they are in the coun­try, but also to sup­port the op­ti­mi­sa­tion of value gen­er­a­tion from this re­source. The LPG plant will ex­tract valu­able propane, bu­tane and con­den­sate el­e­ments from rich gas to pro­duce LPG for lo­cal and in­ter­na­tional mar­kets – a task man­dated to OGC to im­ple­ment and man­age,” Al Burt­mani ex­plained.

DRIV­ING GROWTH

As the cho­sen plat­form to drive the growth of Oman Oil Com­pany’s En­ergy In­fra­struc­ture Ver­ti­cal, OGC will as­sume broad re­spon­si­bil­ity for a wide swathe of the Group’s in­fra­struc­ture busi­nesses – present and fu­ture. These busi­nesses, says the Act­ing EMD, are cat­e­gorised into three ‘pil­lars’ cen­tring on the Group’s Gas, Oil and Power in­fra­struc­ture ac­tiv­i­ties.

Not sur­pris­ingly, the Gas pil­lar has a mus­cu­lar man­date, span­ning the trans­mis­sion, pro­cess­ing and dis­tri­bu­tion as­pects of the gas busi­ness. “The pri­mary fo­cus with re­gard to our gas in­fra­struc­ture busi­ness stream is to de­velop, ex­pand, mod­ernise and con­sol­i­date the coun­try­wide gas trans­porta­tion net­work. In­cluded in this scope is in­fra­struc­ture that will be re­quired when im­ports of gas from overseas sources be­come a re­al­ity,” says Al Burt­mani.

In line with its fun­da­men­tal ob­jec­tive to be­come the back­bone of the Omani gas in­dus­try, OGC is weigh­ing a ma­jor re­vamp of its struc­ture into a reg­u­lated util­ity,” says the Act­ing EMD. “Our goal is to con­sol­i­date our gas trans­mis­sion net­work as­sets into an in­te­grated gas trans­mis­sion op­er­a­tor, and then dis­cuss with the gov­ern­ment our con­ver­sion into a reg­u­lated busi­ness, sim­i­lar to how en­ergy in­fra­struc­ture util­i­ties op­er­ate in Europe. This will re­sult into im­ple­ment­ing a new rev­enue model known as the Reg­u­lated As­set Base (RAB), which is a frame­work used for set­ting the al­lowed rev­enue and tar­iffs for gas trans­porta­tion ser­vices, and hence give OGC the room to ef­fi­ciently op­er­ate gas net­work un­der one en­tity.

OGC is im­ple­ment­ing a slew of gas pipe­line projects that will add around 600 km of new pipe­line ca­pac­ity to the com­pany’s sprawl­ing, coun­try­wide gas net­work. Ac­cord­ing to Al Burt­mani, new gas pipe­lines are un­der con­struc­tion in the north and south­east of the Sul­tanate to help sup­port the grow­ing en­ergy re­quire­ments of ex­ist­ing and emerg­ing in­dus­trial hubs.

“In an­other few years, we will see an­other 500 – 600 km of pipe­lines added to OGC’s gas net­work, cater­ing to the new in­dus­trial hub in Duqm, as well as to meet de­mand growth in the So­har area,” Al Burt­mani says. “This will take the to­tal length of our gas net­work to well over 3,000 km,” he stated.

Op­por­tu­ni­ties to grow its mid­stream gas in­fra­struc­ture busi­ness abound with the Salalah LPG ex­trac­tion project now un­der its belt, OGC has set its

eyes on an­other ex­cit­ing port­fo­lio of ini­tia­tives that will con­sol­i­date its role as the pre­em­i­nent gas op­er­a­tor in the Sul­tanate. This was re­cently ma­te­ri­al­ized af­ter sign­ing an agree­ment with Oman Oil Re­finer­ies and Petroleum In­dus­tries Com­pany “Or­pic” to op­er­ate and main­tain the Nat­u­ral Gas Liq­uid Ex­trac­tion “NGLE” plant lo­cated in Fahud which is the up­stream of Or­pic’s mam­moth Liwa Plas­tics In­dus­trial Com­plex (LPIC) project in So­har Port. A roughly 300km pipe­line con­nect­ing the Fahud NGLE plant with the So­har com­plex will be op­er­ated and man­aged by OGC as well. This op­por­tu­nity will de­velop OGC’s Op­er­a­tions & Main­te­nance (O&M) ca­pa­bil­i­ties on a world scale Oil & Gas process fa­cil­i­ties and lever­age that into fu­ture projects.

Equally promis­ing is the growth po­ten­tial of OGC’s Oil In­fra­struc­ture busi­ness. Brought within the purview of this stream are the fol­low­ing sub­sidiaries and in­vest­ments of the Group: Oman Oil Mar­ket­ing Com­pany (OOMC), Oil­tank­ing Od­f­jell Ter­mi­nals (So­har), Oman Tank Ter­mi­nal Com­pany (OTTCO), and Oman Ship­ping Com­pany SAOC.

“We are also work­ing closely with Oman Oil and other stake­hold­ers to con­sol­i­date our oil-re­lated in­fra­struc­ture as­set un­der one Omani oil lo­gis­tics com­pany. The goal here is to op­er­ate the liq­uid jet­ties in So­har, Duqm and Salalah un­der one Omani brand, while lev­er­ag­ing our ca­pa­bil­i­ties to ex­pand the oil lo­gis­tics busi­ness.”

Set to play a high-pro­file role along this path is OTTCO, which is be­hind the Omani gov­ern­ment’s am­bi­tious plan to de­velop a mega Crude Oil Stor­age Park at Ras Markaz not far from the equally world-scale Spe­cial Eco­nomic Zone (SEZ) at Duqm. OTTCO re­cently signed a usufruct agree­ment with the SEZ Au­thor­ity at Duqm (SEZAD) ef­fec­tively ac­quir­ing the ex­clu­sive con­ces­sion to de­velop crude stor­age fa­cil­i­ties at the Ras Markaz hub.

OGC’s vi­sion for the Ras Markaz com­plex is strate­gic and long-term, ac­cord­ing to Al Burt­mani. “Our first cus­tomer will be Duqm Re­fin­ery, which is build­ing a green­field 230,000 bar­rels per day ca­pac­ity re­fin­ery at the SEZ, but we will also be look­ing into ex­pand­ing the busi­ness by of­fer­ing strate­gic crude oil stor­age ca­pac­ity to other clients – lo­cal and in­ter­na­tional. There is also a goal to build a crude pipe­line that links the Main Oil Line with Ras Markaz – ini­tia­tives that will be pur­sued as part of the Oil In­fra­struc­ture pil­lar of the OGCled ver­ti­cal.”

Fi­nally, there is the Power In­fra­struc­ture pil­lar – a busi­ness stream that prom­ises to be just as ex­cit­ing as OGC’s Gas and Oil pil­lars. Al­ready, the first in­vest­ment of this busi­ness stream has en­tered ser­vice with Mu­san­dam Power Com­pany re­cently brought its dual-fuel power gen­er­a­tion plant into com­mer­cial op­er­a­tion at Ti­bat in Mu­san­dam Gov­er­norate. The 120 MW fa­cil­ity will be pri­mar­ily pow­ered by nat­u­ral gas – a first in the gov­er­norate – sup­plied by a nearby gas plant owned and op­er­ated by Oman Oil Com­pany

E&P (OOCEP); a sis­ter firm of OGC. At the same time, the Cen­tralised Util­i­ties Com­pany (Marafiq) is gear­ing up to de­liver an es­ti­mated 300 MW power plant to serve the en­ergy re­quire­ments of Duqm Re­fin­ery and other projects planned at the SEZ, ac­cord­ing to the Act­ing EMD. In long term, the Power In­fra­struc­ture pil­lar will look at in­vest­ment in power gen­er­a­tion schemes based on con­ven­tional fu­els and re­new­ables, he says. The com­pany’s cap­i­tal ex­pen­di­ture in this strate­gi­cal shift is about $3 bil­lion, which trans­lates how OGC’s trans­mis­sion into a dy­namic En­ergy In­fra­struc­ture Group is well and truly un­der­way with trans­for­ma­tion pro­grammes be­ing iden­ti­fied and com­menced to get our peo­ple and sys­tems ready for this promis­ing di­ver­sion.

Un­der­pin­ning this tran­si­tion are three pri­mary ob­jec­tives: To build on its ca­pa­bil­i­ties as the na­tion’s gas trans­mis­sion net­work op­er­a­tor, Di­ver­sity into the en­ergy mar­kets busi­ness, and fi­nally, Ex­plore part­ner­ships with lead­ing in­ter­na­tional play­ers to de­velop the Group’s pres­ence re­gion­ally and in­ter­na­tion­ally, Al Burt­mani adds.

OGC’s vi­sion for the Ras Markaz com­plex is strate­gic and long-term.Our first cus­tomer will be Duqm Re­fin­ery, which is build­ing a green­field 230,000 bar­rels per day ca­pac­ity re­fin­ery at the SEZ, but we will also be look­ing into ex­pand­ing the busi­ness by of­fer­ing strate­gic crude oil stor­age ca­pac­ity to other clients – lo­cal and in­ter­na­tional

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