Opal mag no 6 march 2018 by Oman Establishment for Press, Publishing & Advertising (OEPPA), Business Development Department

March 2018

CONTENTS

Issue No. 6 March 2018

QUARTERLY NEWS JOURNAL OF OMAN'S OIL AND GAS SECTOR

48 PDO signs pacts worth $800m to Omanise hoist fleet

4 Editor's word 6 Market Highlights

50 OPAL gears up for the next stage of its evolution

16 Staying the Course 2.0 Despite an uptick in international crude prices, continued volatility and uncertainty in global oil markets means that Oman’s Oil & Gas sector has little choice but to stay the course

With its current mandate set to end later this year, OPAL has embarked on the formulation of a new three-year roadmap that will seek to ensure that the growth of the Oil & Gas industry

21 Total reserves: Oil 4.74 bn; Gas 24.96 TCF

54 Best Practice Awards recognise industry excellence

22 A new gas bonanza for Oman

64 OM.HUB

24 The 50K Jobs' Challenge Complementing PDO’s singular reputation as the nation’s pre-eminent oil and gas producer is its equally formidable commitment to securing employment for Omanis jobseekers

30 Global gas processors congregate in Muscat

— Unleashing the power of entrepreneurship

66 Omani firms receive RO 66m worth of BP Oman contracts 67 Major LCC marks milestone 68 BP Energy Outlook 2018:

GPA, established in 1921 in the US, creates industry standards around technology and procedures for processing natural gas

32 All systems go for Duqm Refinery construction The Duqm Refinery mega project will ultimately lead towards transforming Duqm area into one of the most important hubs

36 Fuel logistics is now a reality Orpic Logistics Company, a joint venture between Orpic and Spanish firm Compañía Logística de Hidrocarburos (CLH), formally inaugurated the Muscat-Suhar Product Pipeline (MSPP)

A high-tech hub for 38 petro-technical learning The region’s newest Institute for Oil and Gas (instOG) has been inaugurated

40 A Milestone in solar powered EOR

Energy demand grows as fuel mix continues to diversify

74 OUTLOOK: Brent oil prices to average $50 to $70 through 2023L

78 S&P Global Platts 80 A CCS gold rush? 82 Falling power generation costs of renewables are remarkable 88 Scaling Up Renewable Energy Investment in Emerging Markets 92 United Engineering Services: Exemplifying In-Country Value Development

The first four blocks of the landmark Miraah solar plant were formally inaugurated at a ceremony held at the project’s Amal oilfield location

Impressum

Chief Executive Officer Communication Executive Manager (Magazine Executive Editor) Design and Marketing Specialist Communication & Event Officer

Musallam bin Rashid Al Mandhry Abdullah bin Salim Al Harthy

P. O. Box 493 / Postal Code 133 Sultanate of Oman Tel. (968) 24 605 700 Fax. (968) 24 604 255

www.opaloman.org info@opaloman.org opalmag@opaloman.org

Nenad Valentik Azza bint Hamad Al Hilaliya

Acting CEO - OEPPA and Editor in Chief (Oman Arabic Daily) Editor in Chief (Oman Daily Observer) Magazine Editor HoD Business Development Department Business Development Department

Saif bin Saud Al Mahrouqi Abdullah bin Salim Al Shueili Conrad Prabhu Fatima bint Mohammed Al Gheilaniya Prem Varghese Karen Jane Stephen Abdulaziz bin Shehab Al Shukaili

EDITOR'S WORD

❱❱ Mr. Abdullah Al Harthy, Communication Executive Manager and Magazine Executive Editor

Dear Members and Readers, Prices of Omani crude, at the time of going to press, were back again in the mid-60s per barrel after a sharp dip in early February – a bounce that has indeed helped buoy spirits a bit. But any hopes that the upturn in prices will provide some respite to contractors and oilfield businesses pummeled by the downturn are premature, warns HE Salim Al Aufi, Under-Secretary of the Ministry of Oil & Gas. As he explains in the Lead Article, titled ‘Staying the Course 2.0’, the domestic oil and gas industry is “not out of the woods yet” despite the improvement in international prices. We need to continue to hold our ground until global supply and demand is suitably rebalanced – a prospect likely to material only by the end of this year or early in 2019. ‘Staying the Course’ was also the theme of our inaugural edition two years ago when the effects of the oil price bust were full blown. Two years on, we return to the same theme, albeit with the suffice, ‘2.0’, to remind us that all of the measures that were initiated in response to the slump then, should continue to remain in place, as the Under-Secretary has repeatedly and prudently counselled. Also in these pages, we document some of the key highpoints of the past quarter, notably efforts to progress the implementation of the $7 billion Duqm Refinery project, the unveiling of the Miraah solar plant of PDO, the launch of the Institute of Oil & Gas (instOG), and the commissioning by Orpic of its Muscat-Suhar Product Pipeline (MSPP) and Al Jifnain fuel storage depot. PDO’s National Objectives Programme – an unparalleled training and employment generating dynamo – is detailed in an exclusive interview with a high-level executive. Furthermore, with Oman taking tentative, but important, steps towards renewables, we look at trends in the wider Middle East region. The Editorial Team welcomes your feedback and suggestions on possible improvements to the magazine. Please write in at: opalmag@opaloman.org Sincerely

Abdullah Al Harthy Executive Editor

March 2018

At Gulf Energy we combine the experience of personnel, first class equipment with cutting edge technology and a strong emphasis on innovation, reliability, quality, integrity and customer service. This orientation towards customer needs and expectations is our means to position Gulf Energy as one of the most dynamic and fast growing innovative solutions provider in the Energy industry in the Middle East and North Africa (MENA) region. At Gulf Energy, we believe in developing the local capabilities with our local partners. Our In Country Value initiative does not stop at employing nationals, but involve formation of real partnerships through Joint Ventures and collaborations with top class international institutions to enrich and localize the know how and expertise. People are our main asset. Motivation and training are the main elements to promote Gulf Energy to be a leader in providing its Services, Technology and Solutions at highest standard of quality. Gulf Energy currently works with almost all of the major operators in Oman including Petroleum Development of Oman (PDO), Occidental Oman (OXY), PTT Exploration and Production Plc (PTTEP), MEDCO, Petrogas E & P and Daleel Petroleum.

www.gulfenergy-int.com

NEWS

Market highlights Snapshot of events, trends and developments chacterising the ebb and flow of activities across Oman’s pivotal oil and gas industry:

Local Wusta LCC wins $9m CCED contract Al Sawari International Investments SAOC, a Super Local Community Company (SLCC) with shareholders from the wilayats of Mahout and Duqm, has been awarded a contract valued at around $9 million to provide transportation and logistics services to CC Energy Development (CCED), a leading E&P firm operating in the Sultanate. The agreement was signed by Dr Salem bin Sulayem al Junaibi, Chairman of Al Sawari International Investment Company, with Walter Simpson, General Manager of CC Energy Development. Under the pact, CCED will utilize the services of Al Sawari International in the provision of logistics in its concession areas covering Blocks 3 and 4 over the next three years. Commenting on the agreement, Dr Salem al Junaibi, Chairman of Al Sawari International Investments SAOC, said the pact marks the commencement of its logistics operations in Wusta Governorate. Tasks to be implemented under the contract will be carried out mainly by qualified Omani resources, he noted. “The three-year contract will ensure some stability and growth for the company and will also enhance our experience in implementing logistics services contracts for major oil and gas companies in the Sultanate,” said Al Junaibi. Mahmoud bin Humaid al Jamaey, CEO of Al Sawari, added: “Al Sawari International Investments SAOC is a 100 per cent Omani company owned by Omani shareholders who are native to the wilayats of Mahout and Duqm in Wusta Governorate. The Company appointed a CEO in November 2017 and signed its first major contract last month. This is a big achievement for our company. As per the agreement, Al Sawari International will provide lifting and heavy equipment services at various sites at which CCED is operating,” he stated. [18 March 2018]

www.opaloman.org

Human Capital Development THE NATIONAL TRAINING FUND — OMAN’S NEW TRAINING INFRASTRUCTURE DEVELOPMENT FLAGSHIP — IS DRIVING THE SHIFT FROM THE LONG ENTRENCHED OMANISATION PHILOSOPHY BASED ON PERCENTAGES AND TARGETS TO ONE ADVOCATING STANDARDS-DRIVEN AND JOB-ORIENTED SKILLS DEVELOPMENT ACROSS ALL SECTORS OF THE ECONOMY

MARKET

PLUS

ANALYSIS

ARTICLES

INTERVIEWS

VIEWPOINT

' RS DE D A OR RE W

Dear readers, December 2017

THE VOICE OF THE OIL & GAS INDUSTRY

Your feedback is very important to us. Starting from the next issue, OPAL Oil & Gas will include a dedicated section where your thoughts on topics covered in this issue, as well as issues of relevance to the Oil & Gas business, will be featured. Please feel free to also send in your suggestions on how we can improve the overall content. Contact us by email or Twitter.

PROJECTS

Unlocking Wealth Upstream

New acreage offered by Oman as part of the 2016 Licensing Round has piqued the interest of leading international energy heavyweights.

A New Gas Bonanza for Oman

As natural gas output ramps up from BP’s Phase 1 Khazzan development, the Phase 2 Ghazeer development is being primed for implementation – investments that promise a new windfall in supplies for energy-deficient Oman.

Sustainable Business Models

A new report identifies key market “hotspots” that could generate up to 12.4 million new jobs in the MENA region.

opalmag@opaloman.org

@opal_oman

2018 Petrogas Rima LLC operates the Rima Satellites SmallMarch Fields in accordance with the Rima Satellites Small Fields Service Agreement dated 25th of February 2008, with Petroleum Development Oman LLC (PDO) and in conjunction with Oman Oil Company Exploration and Production LLC (OOCEP) as per a joint operating agreement dated 15th of June 2008.

Since Petrogas Rima took over in 2008, all commitments as per the agreement have been achieved through focused drilling, well reservoir management, application of appropriate technologies and Improved oil recovery. In the process, surpassing production targets every year since 2008 and achieves a high percentage of Omanization.

NEWS

GLASSPOINT SOLAR NAMES NEW CEO GlassPoint Solar, the leading supplier of solar energy to the oil and gas industry, announced the appointment of Steven Moss (pictured) as Chief Executive Officer. An industry veteran, Steven will lead GlassPoint’s growth plans, diversifying its project portfolio in new markets in the Middle East and North America and commercializing its next generation technologies. Managing global operations from Muscat, Moss will oversee GlassPoint’s expanding global business, including the landmark Miraah solar plant under development with Petroleum Development Oman (PDO) and the Belridge Solar project with Aera Energy in California, USA. Moss is a global executive with 30 years’ experience in the energy and aerospace sectors. He most recently served as the CEO of General Electric’s (GE) global Renewable Steam Plants business, where he oversaw the delivery of geothermal, biomass and solar thermal plant solutions around the world. Zaki Selim, GlassPoint Non-Executive Chairman said, “Steven brings a solid track record of building businesses across industrial markets, where he’s developed diverse product portfolios and turnkey power plants. He also brings extensive experience in the global renewables business, particularly on the design and construction of solar thermal projects. Steven’s versatile background will strengthen GlassPoint’s position as the leader in solar for oil and gas and accelerate our expansion to new markets across the globe.” [18 March 2018]

PDO FUNDS COMMUNITY INITIATIVES Petroleum Development Oman (PDO) has committed to support a raft of new initiatives to benefit communities and boost sustainable development across the Sultanate. The programme includes commitments in the key areas of health and safety, community infrastructure, employability training, charities, and animal welfare. At an official ceremony at PDO’s Muscat headquarters, 18 Memorandums of Understanding (MoUs) relating to the support were signed under the auspices of guest of honour, HE Dr Ahmed Mohammed Obaid Al Saidi, the Minister of Health. The package includes the funding of a new in-patient ward for the neurology department at Khoula Hospital and an echocardiography machine for Al Nahdha Hospital, both in the capital, to support thousands of patients, 50 adjustable beds for physiotherapy and rehabilitation treatment for elderly and disabled people, and a new ambulance for Al Mashash Health Centre in Masqshan. Among a range of infrastructure commitments, PDO is backing a new Food and Water Control Laboratory in Haima to cater for the research and analysis needs of Al Wusta Governorate, and the construction of a walkpath with outdoor sport equipment to help communities exercise outdoors in the public park in Dhank. [7 March 2018]

Hydrocarbon Finder signs pact for Islamic project financing Meethaq, the Islamic banking window of Bank Muscat, and Hydrocarbon Finder E&P LLC (HCF) signed an Islamic project financing facility for the development of oil and gas fields in Oman’s Block 7 operated by HCF. The facilities agreement was signed by Sulaiman al Harthy, deputy chief executive officer - Meethaq Islamic Banking, and Brig Gen (retd) Sulaiman al Adawi, chairman of S&T Group on behalf of HCF. Brig Gen Adawi said, “S&T has always believed in diversification through multiple business verticals in multiple geographies to mitigate the risks of concentration. As a part of this diversification strategy, the group ventured into the upstream oil and gas sector through Hydrocarbon Finder in 2015. The timing of entering into the sector in a low price environment meant that HCF is able to execute its development activities in a cost efficient manner. We are extremely happy with the support and commitment shown by Meethaq to HCF’s project and look forward to a long and mutually beneficial relationship with the bank.” HCF took over the operatorship of Block 7 in April 2016 under an exploration and production sharing agreement signed with the sultanate’s government. Since then, HCF undertook a low cost, high yield development programme to revive production from the discovered fields in the Block and more than doubled the production within a span of 18 months. Mohammed al Jahwari, CEO of HCF, said, “With the low oil price environment there is a renewed interest to develop matured fields using the latest available technology to minimise risks and maximise returns. HCF undertook this low cost development model by investigating and reinstating the integrity of existing wells followed by side-tracking of existing wells over the last 12 months. This has led to production contribution from previously unproduced reservoirs within existing fields of Block 7. This is to be followed by an exploration campaign targeting deeper horizons that have been producing in other parts of Oman.” [24 Feb 2018]

March 2018

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NEWS

CELEBRATING SUCCESS AT SUHAR REFINERY Colleagues working on the Suhar Refinery Improvement Project (SRIP) in Oman were delighted to represent Petrofac at a milestone event to celebrate the completion of the Suhar Refinery Improvement Project. The team were joined by representatives of Orpic, joint venture partner Daelim Industrial Co Ltd, and other partners. The ceremony marked the completion of the project’s overall performance test on 30 December 2017. Around 400 people attended the event, including Ahmed Saleh Al-Jahdhami, CEO of Orpic, and Christiaan van der Wouden, COO – both of whom presented a number of awards in recognition of outstanding contribution. Petrofac’s Project Director, Srikanth Nagaraj, was thrilled to be presented with an “Outstanding Achievement” award from Ahmed Saleh Al- Jahdhami, CEO of Orpic. He said: “This is a very proud moment marking the signing of the overall Performance test. The

Shell Oman’s aviation growth leads to sustainable jobs creation

Reinforcing its commitment to providing job opportunities for Omani youth, Shell Oman recruited 15 Omani job seekers to support its growth in the Shell Aviation business, with six female talents breaking into the industry as well. The Company started the year with the recruitment of 15 new Omani talents within its Aviation business in various operational, administrational and field roles. These new employment opportunities were backed by the Company’s success in accelerating its growth across various classes of businesses. Moreover, the recent signing of agreement for operating the fuel farm facilities at the new Muscat International Airport has played a significant role in creating these opportunities. Essam Al Busaidi, HR & Admin Manager, commented: “Shell Oman is known for its outstanding commitment to local talent development, Omanization policy, and diversity and inclusiveness, which have been remarkably showcased this time with six talented young Omani women joining the Aviation business in Muscat.” [15 Feb 2018]

event has been a wonderful opportunity to get together with some of the key partners who have worked so closely since we were awarded the contract in 2013.” Petrofac’s scope in delivering the project encompassed engineering, procurement, construction, start-up and commissioning services. The contract included building a state of the art refinery and as well as improvements at the existing Refinery. Now complete, it is anticipated that the facility will increase previous output by more than 70%. The project’s safety performance was exemplary, achieving more than 53 million man-hours without a lost time incident. The creation of In-Country Value (ICV) was a guiding principle throughout, involving the training and development of Omani nationals and the support of local supply chains. [20 Feb 2018]

BP SUPPORTED ENGINEERING VILLAGE OPENS THIRD CENTRE Engineering Village celebrated the opening of its third centre at Al Muzn Mall in Muscat. The ceremony was held under the patronage of HE Dr Humood bin Khalfan al Harthi, Undersecretary for Education and Curriculum in the Ministry of Education. It was attended by Yousuf bin Mohammed al Ojaili, BP Oman President, and government officials as well as professionals in the fields of engineering and technical education in Oman. Supported by BP Oman, the new centre aims to leverage the skills of students and young professionals interested in innovation and technology by offering several educational programmes, practical workshops and co-working spaces and collaborating with various institutions. Fahad al Siyabi, CEO of Engineering Village, said, “At Engineering Village, we believe that the best way to contribute to the future of Oman is through developing the skills of the next generation. We specifically focus on the fields of electronics, coding, programming, mechanics, microcontrollers, robotics, artificial intelligence (AI) and information and communications technology (ICT) because these are the main areas we need to be strong at if we are to compete in tomorrow’s world. This centre is another step in a long journey towards achieving these goals, and we are glad to have BP Oman as a strategic partner in this project. We have other two centres in Nizwa and Sohar.” He added, “Whether you are at the age of six or 60, a professional or simply pursuing a hobby, the centre has practical workshops for people of all ages and interests. The centre is open to the public seven days a week between 9am to 9pm including the weekends.” “We are delighted to support the establishment of this new platform which we believe will boost learning and growth opportunities in addition to empowering the community to be future-ready. Technology continues to move at a rapid pace and it is important to infuse crucial skills among students and young professionals. We believe this new centre will have a positive impact,” said Shamsa al Rawahi, BP Oman’s Social Investment Programme officer. [5 Feb 2018]

March 2018

NEWS

FIRST ELECTRIC VEHICLE CHARGING STATION AT SQU The first electric vehicle charging station in the Sultanate was formally inaugurated at Sultan Qaboos University on January 21, 2018, in cooperation with the Sustainable Energy Research Center at the University. Nama Group is sponsoring the construction of the maiden charging station as part of its sustainability strategy. This is in keeping with its commitments to keeping pace with global trends in the use of clean energy, as well as to nurture scientific research in the energy fields. The station is designed to carry out research on electric vehicles charging and to measure the efficiency of electricity chargers. The inauguration ceremony will be held under the auspices of Dr Rahma Ibrahim al Mahrooqi, Deputy Vice Chancellor for Postgraduate Studies & Research, with the presence of senior officials from public and private sector organisations, as well as representatives of Nama Group, Sultan Qaboos University, and other stakeholders. The launch of this station coincides with Global EVRT’s event, scheduled for January 18-22, 2018, which will include the Electric Vehicles Road Trip from UAE to Oman and back. The journey will start from Abu Dhabi to end in Dubai, passing the city of Sohar and stopping at several stations in Muscat. Omar Khalfan al Wahaibi, CEO of Nama Group, said: “Nama Group is keen on sponsoring the establishment of this station in line with the Group’s sustainability policy which coincides with the global trend to use electric cars. The aim of this project is to contribute in enabling the use of electrical energy in the Transportation Sector, reduce carbon emissions and strengthen the infrastructure of the economy. We would like to thank Sultan Qaboos University and all supporting and concerned bodies and commend all efforts exerted to launch this project.” [21 Jan 2018]

PDO inks pacts with Super LCCs

Petroleum Development Oman (PDO) signed contracts with two Super Local Community Contractors (SLCCs) as part of its In-Country Value (ICV) drive to boost Omani business and create increased employment opportunities for nationals. The Company extended a previous contract signed with Al Baraka Oilfield Services in 2013 to carry out replacement and maintenance services of flowlines in Bahja in the southern part of its concession area. The contract value was increased by more than RO 33 million to cover the three year extension. The renewed agreement will see Al Baraka execute work related to the Bahja Oﬀ-plot Delivery Contract (ODC). This will include engineering, procurement, construction, pre-commissioning and commissioning of various equipment such as oﬀ-plot man-

ifolds and flowlines, rig location well pads, overhead lines and sectional flowline replacements and removal. PDO also awarded a water drilling services contract to Al Shawamikh Oil Services, under which the contractor will provide all required management and supervision for well services including installation and maintenance activities. These services will be carried out mainly in North Oman as and when required by PDO with the potential to expand into South Oman. The deals were signed by PDO Managing Director Raoul Restucci and Sheikh Ghanim bin Dhahir Al Bathari, Chairman of Al Baraka Oilfield Services, and Sheikh Ahmed bin Saif Al Mahrooqi, Chairman of Al Shawamikh Oil Services, at an official ceremony at PDO’s Mina Al Fahal headquarters in Muscat. [7 Feb 2018]

March 2018

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NEWS

Shell Intilaaqah supports ‘Hirfati’ Programme

Shell Intilaaqah, Oman’s social investment arm of Shell LiveWire International, has partnered with the National Careers Guidance Centre of the Ministry of Education to support the Centre’s student programme “Hirfati” that trains aspiring Omani ceramicists and potters to reach their full artistic and career potential. The programme was successfully concluded in collaboration with the Public Authority for Craft Industries and the Directorate General of Education Al Dakhiliya Governorate. The training sessions were hosted by the Training and Production Center for Pottery and Ceramics, in Bahla with participation of 9th, 10th and 11th grade students from across the Governorate. A dedicated ceremony was held to recognize the standout artists under the patronage of HE Dr. Sheikh Khalifa bin Hamad Al Sa’adi, Governor of Al Dakhiliya. Najwa Al Kindi, Director of Shell Intilaaqah Oman, said, “Shell

Intilaaqah is committed to empowering Omani talent to create pathways for entrepreneurship within the business community across the Sultanate. ‘Hirfati’ is a theoretical and hands-on training programme that is geared to teach these aspiring artists new skillsets in arts and crafts and ultimately, use their gained knowledge to start, manage, and grow their own business. We are always keen to partner with organizations and initiatives that support creative people put their talents to the test and embark on an entrepreneurial endeavor.” The ‘Hirfati’ programme aimed to introduce participants to all aspects of making, firing, glazing and decorating of pottery and ceramics and to gain confidence in their creative output and creations. The programme included two components, theoretical and practical training. Sessions were conducted and supervised by accredited experts that introduced students to the ins-and-outs of ceramics and pottery, the deeply rooted connection of this industry with Oman’s rich heritage, and the key aspects to consider starting a successful business in this field. Key aspects covered in the programme included the latest techniques in arts and crafts, creative output in design, marketing as well as budget planning and promotion-related skillsets. Al Kindi, added, “This programme has brought a meaningful impact to communities in Al Dakhiliya Governorate, and we are excited to help implement it in other areas across Oman. We want these artists to be the business leaders of tomorrow, redefining not only Omani arts and crafts but infusing new life and originality in the local market.” Shell Intilaqah’s support to the ‘Hirfati’ programme is in line with its mandate to empower Omani entrepreneurs and Small and Medium Enterprises (SMEs) with the tools to succeed in their career aspirations. While Shell Intilaaqah usually targets talent between the age of 20 and 55 years old, this collaboration is geared towards starting with entrepreneurs at a younger age to help them shape up their ideas and creations into implementable businesses that can sustainably develop and grow. [25 Mar 2018]

Halliburton provides software grant to SQU Halliburton announced that it has awarded a multimillion dollar software grant to the colleges of science and engineering at Sultan Qaboos University. The grant provides access to leading industry software in geoscience, drilling and reservoir management so that students can gain practical experience to prepare for successful careers in the oil and gas industry, according to Halliburton. The software, provided by Halliburton Landmark, includes a number of programs related to earth science and petroleum engineering disciplines that provide an opportunity for students to apply scientific and theoretical principles learned in the classroom to real-world scenarios. By incorporating these technologies in their curriculum, students will gain exclusive access to programs that help engineers locate, extract and produce oil and gas. “Halliburton recognizes the importance for engineering students to have access to the latest tools to prepare them for successful careers. These software programs are used by companies in Oman and across the world and will give students first-hand knowledge of their use,” Zeinoun Klink, Halliburton’s eastern gulf region vice president, said. “We are proud of our collaboration with Sultan Qaboos University and confident that this grant will complement the strong oil and gas curriculum to help the faculty prepare the next generation of professionals.”[10 Jan 2018]

March 2018

LEAD STORY

March 2018

Staying the Course 2.0 Despite an uptick in international crude prices, continued volatility and uncertainty in global oil markets means that Oman’s Oil & Gas sector has little choice but to stay the course in its ongoing quest to become more efficient and resilient, says HE Salim bin Nasser Al Aufi, Under-Secretary of the Ministry of Oil & Gas

HE Salim bin Nasser al Aufy, Under-Secretary of the Ministry of Oil & Gas

nto the fourth year of the downturn unleashed by the oil price bust of 2014, Oil & Gas businesses in the Sultanate, having endured testing times – as well as the odd bankruptcy and the consequent layoffs – can now look forward to an industry on the mend. The million-dollar question however is WHEN! HE Salim bin Nasser Al Aufi, Under-Secretary of the Ministry of Oil & Gas, counsels prudence in any rush to roll back the gains made by the industry, notably in building efficiency, eliminating waste, boosting cost-competitiveness, and generally evolving into sustainable businesses. “We are not out of the woods yet in terms of the global supply and demand balance,” HE Al Aufi warns. “In my view, the next two years – 2018 and 2019 – will continue to be a challenging period primarily because current oil prices, while higher than the previous year, are still volatile. They are not at a level that makes you certain that the prices have stabilized at this level, or risen slightly as a short-term gain, but could slide going forward. Any balancing of the global oil market may only happen towards the end of 2018 or early in 2019. My guess is that 2019 is probably when we will see some sort of balancing, if ever.” In the circumstances, the hydrocarbon sector would do well to ‘stay the course’ in 2018, said the Under-Secretary, returning to a familiar theme that has been the hallmark of the industry’s response to the collapse in oil prices in 2014. However, this time around, there will hopefully be less of the “squeezing of margins” that has characterized business contracts amid the constrained oil price environment, he noted. So what’s in store for the industry during 2018 and beyond? “It’s going to be a wait-and-see-what-happens-to-the-market approach,” HE Al Aufi noted.

LEAD STORY

Hanging tough Given this prognosis, investments in new big-ticket Oil & Gas projects are unlikely in the immediate term, although ideas may be tossed about, he said. Contractors operating on paper-thin margins, or worse, may also have to banish any immediate hopes of renegotiating more favourable contractual terms.

COST-CUTTING MEASURES EMBRACED BY THE INDUSTRY IN THE WAKE OF THE OIL PRICE COLLAPSE HAVE CONTINUED TO DELIVER EFFICIENCY GAINS, ACCORDING TO THE UNDER-SECRETARY “Tight market conditions will likely persist during 2018,” he said. “But by the end of 2018, if we see a longer stabilization of oil prices, then probably we may start to see more of a buzz in 2019, in the form of more hiring, for instance, margin negotiations between contractors and operators, and more investments from operators particularly in projects that were shelved because of low oil prices and low margins.”

Still, any uptick in activities, should the oil price scenario brighten, is not anticipated to be substantial, the Under-Secretary cautioned. “We hadn’t actually reduced our activity levels in the years following the slump, viz 2015 onwards. So it’s not like we have a lot of activities sitting on the shelf waiting to be revived in 2019 and beyond. If anything, the pace of growth will be slow!” The official’s message to the industry, going forward, is clear: “Whatever gains that the contractors have made through collaborations, efficiency improvements, and so on, let’s hold on to them, because we are still not out of the woods yet. Contractors should not expect the operators to respond immediately to any potential margins uplift. If anything, they will probably try to stay with the status quo or even squeeze the contractors even further just to make sure they are driving all the waste out of the system. So, to all intents, everybody will be holding the course in 2018.”

New challenges

Cost-cutting measures embraced by the industry in the wake of the oil price col-

March 2018

lapse have continued to deliver efficiency gains, according to the Under-Secretary. Contractors are drilling wells at a faster pace and at far lower costs. Mechanised rigs operated by smaller crews are also threatening to supplant mechanical rigs that employ relatively higher numbers of staff. While these new trends are contributing to greater efficiency and lower non-productive time, on the flipside, they are resulting in surplus rig capacity and inevitable staff redundancies. Omanis laid off as a result are given opportunities to redeploy elsewhere within or outside the industry, he explained. “Efficiency gains made over the past three years in terms of renegotiating contracts, elimination of waste from the system, better collaboration between contractors and operators, and so on, were maintained in 2017. The contractors and operators are getting a bit of more comfortable working at levels where low margins are the norm,” Al Aufi pointed out. Lamentably, fierce competitive has forced the closure of some small companies, the Under-Secretary conceded. “Those that could not reduce their prices and initiate some sort of efficiency gains in their activities unfortunately were pushed out naturally by the market because others were able to offer discounts. Some firms offer discounts not necessarily because they are making money, but because they want to stay in business in the hope that a couple of years down the line there could be a turnaround in the market. Having enjoyed profitable years prior to the latest crisis, they feel it is okay to stay close to loss for a couple of years because the market will bounce back at some point.”

Project deliveries

On a brighter note, a number of big-ticket investments and strategic projects that were green-lighted for implementation in previous years, reached fruition during 2017, the Under-Secretary said. Notable was BP Oman’s Khazzan tightgas development in central Oman, which came on stream in September 2017 – three months ahead of schedule and at lower cost. Likewise, Orpic delivered its Sohar Refinery Improvement Project (SRIP), which was completed and commissioned late last year. In addition, a handful of new projects made headway in their development

during the past year. They include Orpic’s multibillion dollar Liwa Plastics petrochemicals complex in Sohar and the $7 billion Duqm Refinery project promoted by a joint venture of Oman Oil Company and Kuwait Petroleum International (KPI). Construction also commenced on Oman Gas Company’s Salalah LPG project in Salalah Free Zone, he said. On the upstream front, Oman’s success in attracting a number of new E&P players during the year was a testament to the Sultanate’s continuing appeal to international investors, HE Al Aufi said. Note-

ON THE UPSTREAM FRONT, OMAN’S SUCCESS IN ATTRACTING A NUMBER OF NEW E&P PLAYERS DURING THE YEAR WAS A TESTAMENT TO THE SULTANATE’S CONTINUING APPEAL TO INTERNATIONAL INVESTORS, HE AL AUFI SAID. NOTEWORTHY WAS THE EXAMPLE OF ITALIAN ENERGY ENI, WHICH HAS PARTNERED WITH OMAN OIL COMPANY AND QATAR PETROLEUM IN EXPLORING FOR HYDROCARBONS IN BLOCK 52 OFFSHORE OMAN worthy was the example of Italian energy ENI, which has partnered with Oman Oil Company and Qatar Petroleum in exploring for hydrocarbons in Block 52 offshore Oman. Also laudable was the start-up of the Miraah solar plant within PDO’s concession, representing a landmark effort to harness the sun’s energy in place of natural gas to generate steam for heavy oil production in Amal. Despite the uptick in oil prices, 2018 is unlikely to offer any respite from the challenges unleashed upon the industry in the wake of the oil price crash in 2014. Of persistent concern for the Ministry is the challenge of securing alternative openings for Omani oilfield workers retrenched by their employers struggling to stay afloat amid the downturn. A ‘redeployment programme’ currently in place has so far provided a safety net for nearly 4,200 nationals made redundant by the crisis. Layoff numbers are significantly down, with less than 100 Omanis currently in hand for redeployment, says HE Al Aufi. The programme has since been rejigged to exclude those being laid off because the projects they had signed up for have

LEAD STORY

been completed. Their retrenchment, per se, has less to do with the downturn than with the fact that their contracts have come to a natural end. Consequently, they will not be eligible to register under the Redeployment Programme.

A JOINT TEAM HAS BEEN ESTABLISHED WITH REPRESENTATIVES FROM THE MINISTRY OF OIL & GAS AND OPAL, AS WELL AS THE MINISTRY OF MANPOWER AND ITS TWO RECRUITMENT PLATFORMS, TO WORK PROACTIVELY WITH OILFIELD COMPANIES IN THE DELIVERY OF THE SECTOR’S JOB COMMITMENTS But sizable numbers of workers are expected to be released upon the completion of projects anticipated over the coming years. Many of these numbers will come from construction contractors laying off staff upon the completion of their contracts. Slated for completion and delivery over the next 2 - 3 years are the Rabab Harweel, Yibal Khuff, Salalah LPG and Liwa Plastics ventures. Channeling these workers into new projects planned in Sohar, Duqm and elsewhere will be key.

5,000 jobs

Notwithstanding the tight labour mar-

ket conditions prevailing in the sector, the Ministry along with OPAL have pledged to support the creation of 5,000 new openings for Omani jobseekers as the industry’s contribution to the overall 25,000-jobs’ goal announced by His Majesty the Sultan late last year. The task, while initially slow, is now gaining traction, according to HE Al Aufi. To this end, a joint team has been established with representatives from the Ministry of Oil & Gas and OPAL, as well as the Ministry of Manpower and its two recruitment platforms, to work proactively with oilfield companies in the delivery of the sector’s job commitments. “We are giving priority to the 5,000 jobs recruitment goal, while slowing down on redeployments for the time-being. The team has weekly interactions with the contracting community to try and understand their issues and concerns, while pushing them to progress their hiring processes a bit faster and thereby deliver on the targeted numbers. We hope to see the 5,000 jobs by the end of April, but understandably, it is a challenge!” Also set to make headway during 2018 is the implementation of new Oil & Gas regulations governing all facets of upstream hydrocarbon activities in the Sultanate. Besides strengthening the existing regulatory framework for the effective management of hydrocarbon investments in the Sultanate, the high-level, fit-for-purpose regulations will also contribute to the goal of boosting efficiency, safety and operational security in all areas of the industry’s upstream business. “Implementation of these guidelines is planned during 2018,” said the Under-Secretary. “The idea is to have an unofficial soft-launch of the regulations, thereby enabling oilfield companies to understand and assimilate the various provision, including non-compliance and reporting requirements. But actual enforcement of the regulations is planned once the Ministry of Legal Affairs has the opportunity to review and approve the document. Pending that decision, companies will have a head-start of between 6 – 12 months to get familiar with the regulations. Our target is to roll out the guidelines before the end of this year, but it could take a while longer.” Conrad Prabhu

March 2018

Total reserves: Oil 4.74 bn; Gas 24.96 TCF New gas finds have bolstered the Sultanate’s total gas reserves to 24.96 trillion cubic feet (TCF) as of end-2017, boosted by additional volumes uncovered primarily in the Khazzan and Ghazeer fields of Block 61 in central Oman, according to the Ministry of Oil & Gas. Not included in the tally is the “significant” find of 4.4 TCF announced by Petroleum Development Oman (PDO) at Mabrouk North-East in its Block 6 concession. Figures released by the Ministry at the Annual Media Briefing indicate that new gas discoveries with 4.97 TCF of new reserves were added to the national total in 2017, up from 3.81 TCF of new volumes reported in 2016. Oil and condensate reserves, on the other hand, totaled 4.740 billion barrels as of end 2017. But despite the addition of 355 million barrels of oil and condensate from exploration activities and revaluation of some producing fields, the tally for 2017 still dipped by 376 million barrels. The decline was attributed to the transfer of around 323 million barrels of reserves into recoverable reserves based on a recovery in prices. Giving details about the Oil & Gas sector’s performance in 2017, HE Salim bin Nasser al Aufi, Under-Secretary of the Ministry of Oil & Gas, said that oil and condensate production averaged 972K barrels per day in 2017, down from 1004K in 2016. The decline was in line with Oman’s commitment to a joint OPEC/non-OPEC pact reached in December 2016 to curb global production. The price of the the Oman Crude Oil Futures Contract, traded on the Dubai Mercantile Exchange (DME), averaged $51.29 in 2017, which was higher by $11.15 per barrel over the previous year’s average, said HE Al Aufi. The highest price of $55.59 per barrel was recorded in December 2017, while the lowest was $44.54 per barrel registered in January 2016. Prices have since ranged between $60 – 65 since the start of 2018, he said.

Gas output averaged 112 million cubic metres per day, comprising 88 million m3 of non-associated gas and 19 million m3 of associated gas. The daily average also included 5 million m3 of gas imported via the Dolphin system, he said. Oil and gas expenditure amounted to $11.4 billion in 2017, almost on par with the previous year’s tally of $11.3 billion, said HE Al Aufi. Around 72 per cent of this total spend occurred in the upstream sector, encompassing costs towards drilling, facilities, and so on. The remaining 28 per cent represented operating expenses. The share of the oil sector was $7.9 billion in 2017, mirroring the sector’s 2016 spend of $7.9 billion. Gas expenditure amounted to $3.5 billion, up from $3.4 billion in 2016.

UPDATE

Oil and gas expenditure amounted to $11.4 billion in 2017, almost on par with the previous year’s tally of $11.3 billion, said HE Al Aufi.

Of Oman’s total crude production of 355 million barrels in 2017, 83 per cent was exported to international markets, while the balance 17 per cent was processed locally by Orpic for the production of refined fuels and petroleum byproducts primarily for domestic consumption. China remained the biggest importer of Omani crude, lifting 77 per cent of total exports, followed by India with a 10 per cent share. Japan (4 per cent) and South

Korea (3 per cent) were notable importers too, he said. Of Oman’s total gas production of 41 billion cubic feet last year, 32 per cent was exported in the form of liquefied natural gas (LNG) by Oman LNG. The balance 68 per cent was consumed locally by the following sectors: Industry (36 per cent), Oil & Gas (33 per cent), Power / Water (30 per cent), and Manufacturing Parks of PEIE (2 per cent).

A new 4.4 TCF gas bonanza for Oman Petroleum Development Oman (PDO) has confirmed a “significant” gas find with estimated recoverable reserves of around 4.4 trillion cubic feet (TCF) and 112 million barrels of condensate in the northern part of its concession area. The announcement came at the annual Ministry of Oil and Gas Media Briefing in which the Company also reported on a string of achievements, including its best-ever safety performance, record investment in local companies and the creation of 14,146 job opportunities for Omanis in 2017. In total, five wells have recently been drilled in the field and all have encountered gas. One is already producing and another will be hooked up shortly. Work is also progressing on two further appraisal wells, with plans for the expansion of production infrastructure. Additional-

ly, exploration is continuing in nearby prospects. PDO Managing Director Raoul Restucci said: “This is an exciting find which will provide a boost for economic growth in Oman and help meet rising gas demand from residential, commercial and industrial customers. “Once again, our Exploration Directorate has performed admirably in challenging conditions to identify, discover and appraise a major hydrocarbon find which will make a substantial contribution to Oman’s sustainable development. This year, we are celebrating the 40th anniversary of PDO gas production and this is a fitting way to mark that milestone.” Exploratory drilling has taken place at depths of 5,000 metres. The Barik and Miqrat reservoirs tested at commercial flow rates of up to 1.2 million cubic metres

March 2018

per day after fracturing. The discovery follows PDO’s acquisition of high resolution 3D Wide Azimuth seismic data in the area in 2015. Further prospects are also being drilled. Mabrouk North East builds on the discovery made in March 2013, when PDO announced another significant find at Mabrouk Deep, some 40km west of Saih Rawl. Restucci added: “We have a very attractive portfolio which keeps us very active, with large seismic programmes and extensive exploration drilling.” The Company operates gas fields and processing plants exclusively on behalf of the Omani government. The average Government daily gas supply during 2017 was 76.64 million m3/d, lower than the initially targeted level of 83 million m3/d due to the start of BP’s Khazzan field. Throughout, PDO effectively met the gas demand for all its customers despite increased requirement quantities for Oman LNG. Notwithstanding a number of operational challenges in 2017, PDO also showed good compliance with government targets arising from the OPEC/non-OPEC agreement to limit oil production, while compensating at short notice for any shortfalls in total country supply. Average oil production was 582,196 barrels per day (bpd). As an example of the step change in efficiency, the Company’s Well Engineering Directorate carried out more than 21,000 well interventions, compared to 13,000 well entries in 2013 with the same rig and work-over hoist fleet. It also drilled 626 oil and gas production and exploration wells reducing the average well cost by 4 per cent and the rig move cost by 12 per cent compared to 2016 through better collaboration and rig sequence optimisation. Restucci said: “Contingent on OPEC constraints, we are maintaining momentum to be ready to deliver in excess of 650,000 bpd. The Company is more efficient than ever and we have raised performance across the key parts of our value chain.” PDO reported that the Rabab Harweel integrated project – the largest projects in its history with a reserve add of more than 500 million barrels of oil equivalent – is well ahead of plan and budget, and good progress is being made at its second mega project at Yibal Khuff, the most complex venture it has ever undertaken. A total of almost $800 million in capital expenditure savings have been secured on both.

CONTINGENT ON OPEC CONSTRAINTS, WE ARE MAINTAINING MOMENTUM TO BE READY TO DELIVER IN EXCESS OF 650,000 BPD. THE COMPANY IS MORE EFFICIENT THAN EVER AND WE HAVE RAISED PERFORMANCE ACROSS THE KEY PARTS OF OUR VALUE CHAIN, SAID RAOUL RESTUCCI The Company will continue to place a greater focus on renewables and energy and water management. The giant Miraah solar energy installation at Amal, which it is developing with partner GlassPoint Solar, is in daily operation and meeting its targets for steam output for use in thermal enhanced oil recovery. Construction is progressing on schedule with another eight blocks on track to be completed in early 2019, on top of the four which were commissioned in December 2017. PDO is also expanding its awarding-winning Nimr Water Treatment Plant which currently treats 115,000 m3/d of produced oilfield water using reed beds and, with partner Bauer Nimr, is making progress on a biosaline agriculture trial. Plant growth from a number of crops has been promising with the potential for commercial application, and the possibility of biomass and oil seed production.

INTERVIEW

Complementing PDOâ&#x20AC;&#x2122;s singular reputation as the nationâ&#x20AC;&#x2122;s pre-eminent oil and gas producer is its equally formidable commitment to securing employment for Omanis jobseekers within and beyond the oilfield industry

March 2018

INTERVIEW

uman capital development is as much a national priority for Petroleum Development Oman (PDO) as its core business of harnessing Oman’s hydrocarbon resources in support of the nation’s economic development. This is evident from the succession of agreements that are signed at regular intervals for the recruitment, training and upskilling of Omanis for jobs within and outside the Oil & Gas industry. Through partnerships with government and public sector stakeholders, as well as prospective employers, PDO has supported the training of thousands of Omanis annually for employment opportunities across a number of economic sectors. The initiative, dubbed ‘National Objectives’, is now snowballing into a strategic national endeavour fuelled by a mission to power Omanisation on an unprecedented scale in the public and private sectors. National Objectives was launched in 2011 in support of the Omani government’s efforts to diversify the economy as well as create employment opportunities for young Omanis. Now into its eighth year, the programme has garnered around 50,000 employment opportunities for nationals to date, with a further 30,000 positions on track for delivery over the next couple of years. Overseeing this ambitious initiative within PDO is Abdul-Amir Abdul-Hussein Al Ajmi, External Affairs and Value Creation Director. “Since 2011, PDO has been working with partners and stakeholders to secure jobs for nationals under the umbrella of our ‘National Objectives’ campaign. Of late, we have gone outside of our operational boundaries to find placements for Omanis jobseekers in non-oil areas of the economy as well. We are collaborating closely with various ministries, as well as like-minded organisations in the public and private sectors, to support His Majesty’s Government in the achievement of this strategic national goal,” Al Ajmi said. The initiative, he explained, is one of four pillars that together constitute PDO’s substantive and industry-leading In-Country Value (ICV) programme. These pillars comprise: (1) Localisation of goods and services (2) National Objectives (3) Development of Local Community Companies (LCCs), Super LCCs and SMEs, and (4) Social Investment (CSR). “As the lead agency for the delivery of PDO’s National Objectives Programme, the External Affairs and Value Creation Directorate is tasked with securing jobs for Omanis by ascertaining the requirements of prospective employers within and outside the Oil & Gas Industry,” said Al Ajmi. “Through this exercise, we identify the potential for direct hires, where the candidates already possess the requisite professional skills, as well as those who would need to undergo a period of training to bring them up to the competency levels required by their future employer. This latter category is called ‘Training for Employment (TFE)’, where Omanis are trained for specific jobs that await them at the end of their training period. Funding for this training is provided by PDO.” A sizable number of pledges come from contractors who are required, under rigorous ICV guidelines, to achieve Omanisation commitments set by PDO and the government. “We sit with the contractors that have secured

March 2018

a contract with PDO, study their Omanisation plans for the duration of the contract, and identify the potential for recruitment of Omanis either as direct hires or via the TFE route.” Buoyed by the stupendous National Objectives’ success, PDO embarked on a new phase of the programme in 2017 with a pledge to secure employment for a further 50,000 nationals by 2020. However, this time around, the focus will include nonoil sectors such as hospitality, real estate, fashion and aviation. To achieve this target, PDO is working closely with the Ministry of Oil & Gas, National Training Fund (NTF), and the National Programme for Manpower Registration. “As part of this new commitment, PDO decided to don the role of a manpower supplier to help private companies achieve their Omanisation goals,” said Al Ajmi. “Rather than they approach a manpower supply company, we offered to not only play that part, but also to train nationals to meet their specific requirements. We have since succeeded in finding placements for thousands of Omani jobseekers outside of the industry.” Around 14,000 openings were secured for Omanis in 2017 alone, across a diverse array of trades, including tourism and hospitality, , scaffolding, vehicle maintenance, tailoring, digital media and so on. The goal for 2018 is 17,000 jobs – a target that PDO is confident of achieving – and 21,000 in 2019. The company already secured pledges from scores of private sector companies to absorb the numbers currently developing their competencies under the TFE programme. Underpinning the success of the National Objectives Programme is an evidence-based approach, says Al Ajmi. “We get data on the labour market primarily from the National Centre for Statistics & Information (NCSI), while we also work with the Ministry of Oil & Gas, Ministry of Manpower, and OPAL to identify areas where skillsets can be developed, based on market demand.” To ensure that the programme delivers confident, competent, industry-ready cadres, PDO ensures that training services providers are internationally accredited and well-equipped in terms of their faculty and training systems. OPAL, with the support of the Manpower Ministry, is also collaborating with PDO in ensuring that training institutes are suitably certified.

Notable examples of PDO’s partnerships with public and private companies in the execution of its National Objectives Programme: Security & Safety trades: In February this year, PDO sponsored the vocational training of 1,500 Omani jobseekers to work in the security industry. The on-the-job training will last for two months with suitable candidates learning vital security and safety skills. On successful completion of the programme, they will take up employment with Security and Safety Services (SSS) LLC as guards at government and company offices, and shopping malls. The training is aimed at Omani men and women aged 18 to 30 with a high school diploma or who have been educated to grade 11 as a minimum. A Memorandum of Understanding (MoU) underpinning the three-year initiative was signed by PDO and SSS on 18th February.

Mr. Abdul-Amir Al Ajmi, External Affairs and Value Creation Director.

INTERVIEW

In Numbers Around

14,000

2018 is

21,000

openings were secured for Omanis in 2017 alone, across a diverse array of trades, including tourism and hospitality, airport and aviation services, scaffolding, vehicle maintenance, tailoring, and so on. The goal for jobs.

Montessori teachers, HSE professionals, managers and technicians: In one of its biggest allocations to human capital development, PDO pledged $6 million in funding for training programmes administered by OPAL last December. More than 1,000 young Omanis are expected to benefit from this training partnership between PDO and OPAL over the roughly three-year-long timeframe of the agreement between the two organisations. Upon the successful completion of the training, ranging in length from 3 months to one year, the graduates will be absorbed by private sector oganisations operating within or outside the Oil & Gas industry. Placements will be co-ordinated by OPAL with the Ministry of Manpower. OPAL, for its part, will oversee the implementation of the project, making sure that the training providers and programmes are in line with National Vocational Qualification (NVQ) level international certifications or any other technical or non-technical qualifications. The initiative is targeted at young Omanis registered as jobseekers in a number of technical and non-technical professions. This includes kindergarten teachers, HSE professionals, technicians, managers, and fresh graduates eager for on-the-job train-

ing. Training programmes will be delivered in line with NVQ level international certifications or equivalent. Technical Trades: In November 2017, as many as 464 young Omanis were feted upon their graduation from PDO-sponsored training schemes to take up full-time employment in a wide variety of trades, including scaffolding, mechanics, pipe fitting, steel fixing, store keeping, metal sheet fabrication, and vehicle maintenance and repair. The trainees were the eighth batch to graduate from PDO’s National Objectives Programme. The batch also included 75 welders who have been trained to 6G level – the highest international standard, and 17 women, who will work in vehicle sales and digital media. The graduates underwent training lasting up to 24 months at six training institutes and have since taken up work with 27 different employers, including Galfar Engineering and Contracting, Oman Shapoorji, Suhail Bahwan Group, Trade Links and Services, Voltas Oman, and Moosa Abdul Rahman Hassan. The 75 Omani 6G welders will be the first to be assigned from the National Objectives Programme to the Company’s oil and gas mega project at Yibal Khuff. More than 200

50K New Employment Opportunities (by 2019 beyond Oil and Gas) Comunity Scholarships Training for Employment Plan 25,000

20,000

15,000

10,000

5,000

Direct Hires Redeployment nd Transferability

March 2018

have already been enlisted to its other mega project at Rabab Harweel. Oil and non-oil sector trades: Less than a month later, in December last year, PDO marked the graduation of 471 young Omanis who had qualified to work in a wide variety of trades, both in the oil and gas industry and other sectors. The successful trainees have since taken up positions as electricians, mechanics, pipe fitters, scaffolders, maintenance men, steel fixers, sheet metal workers, fabricators, lifting operators, warehouse staff, cooks, receptionists and waiters. The trainees were the ninth batch to graduate from PDO’s National Objectives Programme. The batch also includes 91 welders who have been trained to 6G level – the highest international standard and 13 women who will work in the hospitality industry. The graduates underwent training lasting up to 18 months at five training institutes and will work with 31 different employers, including Galfar, Arabian Industries, Oman Trading Establishment, ELCO, SNCC, Suhail Bahwan Automobiles, Al Falahy and the Kempinski hotel group. Some of those qualifying were in the first batch to graduate from Institute of Modern Science and Technical Training and the National Hospitality Institute. Other training providers were the National Training Institute, the Technical and Administrative Training Institute and RAY International Skills Development. Oil & Gas Commissioning Staff: In October 2017, PDO announced its support for the training of 50 Omani graduates to work as key commissioning staff in the oil and gas sector. The diploma and Bachelor degree holders, aged 18-23, are undergoing three years of classroom and field training before being given full-time jobs in the industry on successful completion of the programme. They have already begun the first six months of their training with Kentz Overseas Company LLC at its new Commissioning Academy in Muscat, in subjects such as electronics, control and automation, mechanics and operations. The trainees will then be attached to PDO commissioning teams in the Interior for 30 months to learn on the job about commissioning activities on mechanical equipment, instrumentation and utility, electrical power and control and automation systems. On passing the course, the recruits will gain

an internationally recognised oil and gas Offshore Petroleum Industry Training Organisation (OPITO) or Edexcel certificate, and take up full-time employment with Kentz (or other oil and gas companies in or outside Oman), which is a wholly owned subsidiary of SNC-Lavalin, one of the world’s leading engineering and construction groups. 7th Batch of Technical Trainees: In May 2017, 420 young Omanis graduated from PDO-sponsored training schemes, representing the seventh batch to graduate from the company’s National Objectives Programme. They were qualified to work in a wide variety of trades, including construction supervisors, welders, safety officers, electricians, scaffolders, pipe fitters, mechanics, metal sheet fabricators, heavy goods vehicle drivers and occupational health and safety technicians. The graduates underwent training lasting up to 18 months with the National Training Institute, the Institute of Technical Training Services, the Technical and Administrative Training Institute and the Dalma Training Institute. They have since begun work with 24 PDO contractors, both in the oil and gas sector and other industries, including Bahwan Engineering Company, Drake & Scull, Adhi Oman, Arabian Supply and Contractors, Power Tech, Al Turki Enterprises, Mud Industries, Oman Fiber Optic, Techno Gear Industries and Najed Al Ahliya. Airport and aviation staff: Earlier in June 2016, PDO and national carrier Oman Air joined forces to create 400 jobs for young Omanis at the new Muscat International Airport. The two companies signed a Memorandum of Understanding (MoU) committing PDO to support the training of the jobseekers in a variety of cabin and ground staff positions, along with the upskilling of a further 100 existing Oman Air customer service staff. The successful completion of the internationally accredited vocational courses will lead to guaranteed full-time positions with the national carrier in customer relations and ramp services. The courses include a mixture of technical and on-the-job training. Those who pass customer service and ramp service training will gain International Air Transport Association (IATA) diplomas and National Vocational Qualification (NVQ) certification.

NEWS

Global gas processors congregate in Muscat GPA, established in 1921 in the US, creates industry standards around technology and procedures for processing natural gas

he three-day event which was held from 6-8th March began under the auspices of HE Salim al Aufi, Undersecretary, Ministry of Oil & Gas. Oman LNG was the key sponsor of the event, which attracted a large number of high level executives and gas experts from the global gas industry. Deliberations focused on the theme, “Enhancing Safety, Integrity and Efficiency Gas Processing”, providing participants with a platform for debate and knowledge sharing on strategic options and solutions offered by natural gas suppliers and service providers in terms of sustainability of energy availability and its pivotal role in social and economic development. Technical workshops held before the event were an opportunity for government representatives and industry professionals to discuss technical enhancements and safety challenges when processing natural gas. In welcome remarks, Harib Al Kitani, Oman LNG CEO, said: “Over the course of the next few days, we look forward to learning from each other and sharing knowledge. With over 200 senior leaders, partners and experts in the gas industry here with us, we have an invaluable opportunity to discuss the role of natural gas today and in the near future. There is no doubt new insights and added-value will be brought to the global gas industry.” GPA, established in 1921 in the US, creates industry standards around technology and procedures for processing natural gas. Over the years it has expanded internationally and has four international Chapters; Europe, Venezuela, GCC, and Canada. Since its establishment in 1993, the GPA-GCC Chapter serves as a forum for the exchange of ideas, technology, and information to help benefit both the upstream and downstream Gas Processing industries, and their suppliers, with a view toward improving plant operations, and Health, Safety and Environmental (HSE) performance in the GCC countries. The global LNG market needs are expected to develop much faster than pipeline gas trade due to the flexible nature of LNG liquefied natural gas and its accessibility to various countries. Natural gas possesses a list of properties that combine to make it a more desired energy option such as its non-toxic nature, ability to float on water, being odourless and colourless, and lighter than air when burned. As the global energy industry turns to renewables, LNG is perfectly positioned to provide solutions for the mid to long term. Oman meets a critical three per cent of global LNG demand and its vol-

March 2018

umes are pivotal in keeping the balance of supply and demand. Oman LNG, which operates a three-train gas liquefaction plant at Qalhat in Sur, has so far delivered in excess of 2,400 LNG cargoes to markets around the world over its 17-year operational life – a success story that the majority government-owned company plans to sustain through the implementation of a major plant rejuvenation programme. According to Al Kitani, LNG consignments from the Qalhat complex have been shipped to markets as far afield as Puerto Rico in the United States, one of 15 countries that have lifted Omani LNG since shipments began in 2000. The CEO attributed the company’s continuing success primarily to its ability to stay competitive in a constantly changing energy landscape, as well its longstanding commitment to delivering LNG safely, efficiently and reliably. In his address, the CEO outlined efforts by the company to suitably reconfigure and upgrade its operations in order to receive gas streams from the newly launched BP Khazzan field in Block 61. Upgrades to key systems at the Qalhat complex, as well as the reconfiguration of its gas fractionation columns, have enabled the plant to receive a different mix of gas via the grid, he said. “With changes in the gas mix we are experiencing through the start-up of BP Khazzan gas, Oman LNG has demonstrated preparedness and agility in upgrading its operations to achieve higher utilisation,

OMAN MEETS A CRITICAL THREE PER CENT OF GLOBAL LNG DEMAND AND ITS VOLUMES ARE PIVOTAL IN KEEPING THE BALANCE OF SUPPLY AND DEMAND while also keeping efficiency in mind,” Al Kitani said. Part of BP Khazzan’s gas output is now being channelled to Oman LNG to plug a longstanding shortfall in supply that had left the company operating at only around 80 per cent of its 10.4 million tons per annum (mtpa) nameplate capacity. Significantly, Oman LNG has also embarked on a major “life extension” project designed to add more years to the operational life of its plant, said the CEO. Through a refurbishment and upgrade of key pieces of equipment and systems, the company aims to boost the plant’s operational life by a further 10 years, covering the 2025 – 2034 timeframe, he said.

FEATURE

All systems go for Duqm Refinery construction The Duqm Refinery mega project will ultimately lead towards transforming Duqm area into one of the most important hubs for encouraging and promoting energy related industries regionally as well as internationally

March 2018

t follows the signing of contracts, in February this year, with a number of EPC contractors for the execution of the grassroots refinery in the Special Economic Zone (SEZ) of Duqm. This was a follow up from the intention to award EPCs contracts announced by Duqm Refinery, a 50/50 joint venture between Oman Oil Company and Kuwait Petroleum International. The contracts signing was attended by HE Yahya bin Said Al Jabri, Chairman of the Special Economic Zone Authority at Duqm (SEZAD); Eng. Isam bin Saud Al Zadjali, Chief Executive Officer of Oman Oil Company; Eng. Nabil Borsieli, Chairman of Duqm Refinery and President of Kuwait Petroleum International; and Eng. Hilal Al Kharusi, Deputy Chairman of Duqm Refinery. Also present were diplomats representing the contractors’ countries of origin, senior officials from Oman Oil Company, Kuwait Petroleum International, the Refinery project, and the EPC contractors. Commenting on this occasion, Eng. Nabil Bourisli, the Chairman of Duqm Refinery, said; “This mega project will ultimately lead towards

FEATURE

WHEN OPERATIONAL BY 2022, DUQM REFINERY IS EXPECTED TO SYNERGIZE THE AREA OF DUQM AND MAKE IT A VIABLE AND STRATEGIC ENERGY HUB IN THE REGION transforming Duqm area into one of the most important hubs for encouraging and promoting energy related industries regionally as well as internationally.” He further added, “The project creates a great value proposition and can enhance prosperity for both countries.”

Eng. Hilal Al Kharusi, Deputy Chairman of Duqm Refinery, stated: “This is indeed a very important milestone for the project, it signifies the seriousness of the shareholders decision to proceed on the project. This project will boost the developments efforts in Duqm” He further added, “The financing of the project has reached an advanced stage and we aim to issue a notice to proceed to contractors very soon.” Duqm Refinery’s EPC scope of work was divided into three separate packages. The scope of EPC 1 included the process units

March 2018

Duqm Refinery’s EPC scope of work was divided into three separate packages. The scope of EPC 1 included the process units of the Refinery, while EPC 2 consisted of the utilities and offsite facilities. EPC 3 included the product export terminal in Duqm Port, the Duqm Refinery dedicated crude storage tanks in Ras Markaz and the 80 km interconnecting pipeline from these crude tanks to Duqm Refinery.

of the Refinery, while EPC 2 consisted of the utilities and offsite facilities. EPC 3 included the product export terminal in Duqm Port, the Duqm Refinery dedicated crude storage tanks in Ras Markaz and the 80 km interconnecting pipeline from these crude tanks to Duqm Refinery. The contractors for the three EPC packages are: EPC Package 1 (Process Units): Joint Venture of Técnidas Reunidas S.A. and Daewoo Engineering & Construction Co., Ltd EPC Package 2 (Utilities and Offsites): Joint Venture of Petrofac International Limited and Samsung Engineering Co Limited EPC Package 3 (Offsite Facilities): Joint Venture of Saipem SpA and CB&I. The initial mobilization of both Duqm Refinery and the contractor personnel is scheduled to commence in Q3 2018. Last August, Duqm Refinery appointed AMEC Foster Wheeler Engineering Consultancy LLC (AFW) as the Project Management Contractor (PMC) for the EPC phase. AFW’s scope of work includes PMC Services to be delivered as part of an Integrated Project Management team

(IPMT). Duqm Refinery and AFW will jointly establish the IPMT consisting of Duqm Refinery personnel and those of AFW to provide management, administration and supervision of Duqm Refinery contracts related to the project. The IPMT will monitor the EPC contractor’s performance and verify compliance with the EPC contracts, project specifications, project master schedule and project procedures in accordance with the standards set by the Duqm Refinery and ensure that the EPC contractors perform all work and services to meet their obligations. Amec Foster Wheeler designs, delivers and maintains strategic and complex assets for its customers across the global energy and related sectors. The company operates across the oil and gas industry from production through to refining, processing and distribution of derivative products and in the mining, power and process, pharmaceutical, environment and infrastructure markets. When operational by 2022, Duqm Refinery is expected to synergize the area of Duqm and make it a viable and strategic energy hub in the region.

LOGISTICS

Muscat-Suhar Product Pipeline & Al Jifnain Terminal

Fuel logistics is now a reality Orpic Logistics Company, a joint venture between Orpic and Spanish firm Compañía Logística de Hidrocarburos (CLH), formally inaugurated the Muscat-Suhar Product Pipeline (MSPP) and main fuel terminal in Al Jifnain

he inauguration was held on 21st March 2018 under the auspices of HE General Sultan bin Mohammed al Nu’amani, Minister of the Royal Office. The Muscat Suhar Product Pipeline (MSPP) is one of Orpic’s strategic growth projects implemented with an investment of around $336 million. It delivers more than 50 per cent of Oman’s fuel via a state-of-theart central fuel terminal and storage facility at Al Jifnain. In addition to

March 2018

meeting the future demand for fuels, the project will also reduce pollution resulting from lower truck movements in Muscat by 70 per cent. In welcome remarks, HE Sultan bin Salim al Habsi, Deputy Chairman of Orpic said, “We are proud to witness the inauguration of one of the three important strategic growth projects undertaken by Orpic - the Muscat - Suhar Product Pipeline (MSPP) and Al Jifnain Terminal. The project is in line with the government’s strategy for developing logistics solutions for oil products in the Sultanate to meet the rapidly growing domestic demand for fuels.” Ahmed bin Saleh al-Jahdhami, CEO – Orpic, said: “The Muscat - Suhar Products Pipeline and Al Jifnain Terminal project will contribute to the safe and efficient transportation and supply of fuels at far lower cost. In addition to the socio-economic and environment benefits associated with this investment, local Omani vendors and SMEs benefited from $149 million in local procurements, representing 44% of the total project cost.”

ted to develop the Omani economy and talent and we hope we can do more things together both in Oman and in the region,” said the CEO of CLH. The MSPP project features a 290km pipeline which is connected by three sections of the pipeline network including a 10” multi-product pipeline of 45 km length

THE MSPP PROJECT IS A SIGNIFICANT LANDMARK IN THE HISTORY OF OUR COMPANY AND WE BELIEVE IT WILL OPEN THE DOOR TO NEW OPPORTUNITIES

With around 170,000 m3 of storage capacity, the new terminal increases the nation’s storage capacity for refined products by 70%. This additional capacity enhances the security of fuel supply to the population. Helping take fuel distribution efficiency in the Sultanate to the next level, the MSPP and Al Jifnain terminal project is a joint venture partnership between Orpic and CLH. The latter has a formidable reputation in the European energy logistics industry going back 90 years. “The MSPP project is a significant landmark in the history of our company and we believe it will open the door to new opportunities. CLH is definitely commit-

from Mina Al Fahal Refinery to Al Jffnain Terminal. The second pipeline is an 18” multi-product pipeline of 220 km length from Suhar Refinery to Al Jifnain Terminal. The last one is a 10” dedicated pipeline for jet fuel of 25-km length from Al Jefnain terminal to the new Muscat International Airport. The dedicated airport pipeline will allow for jet fuel to be pumped directly to the new airport without requiring tanker trucks, thereby increasing the safety of jet fuel supply to the airport. Additionally, the new terminal is equipped with 16 loading bays with capacity to load up to 700 trucks per day with products to be transported across petrol stations. Furthermore, the new terminal is supplied by two multiproduct and bidirectional pipelines connected to Orpic’s Suhar and Muscat Refineries, which are the safest and most efficient transport media for oil products for medium distances.

In Numbers In addition to the socio-economic and environment benefits associated with this investment, local Omani vendors and SMEs benefited

from $149 million in local procurements, representing 44%

of the total project cost.

NEWS

Institute for Oil and Gas (instOG)

A high-tech hub for petro-technical learning Takatuf Oman, the Human Capital solutions provider wholly owned by Oman Oil Company (OOC), in partnership with Schlumberger Oman, inaugurated the region’s newest Institute for Oil and Gas (instOG)

he inauguration ceremony was held under the patronage of His Highness Sayyid Shihab bin Tariq Al Said, Adviser to His Majesty the Sultan and Chairman of The Research Council (TRC). The partnership of Takatuf (60 per cent) and Schlumberger Oman (40 per cent) together identified a substantial demand for skilled engineers and geoscientists in the energy sector. Accordingly, instOG is fully equipped with the industry’s latest technology, including drilling simulators and virtual reality technology that replicates the real work environment on site. instOG is located at Oman’s new hub for scientific and

March 2018

technological development, Innovation Park Muscat (IPM). “IPM was created with the aim of making research and innovation one of the pillars of the economy in the Sultanate. Today, with instOG opening, we accomplish an important milestone in our plan. We believe instOG will make a significant contribution to the development of human resources and capabilities, to employ scientific research and innovation in addressing the industry’s challenges and taking it a step further,” commented His Highness Sayyid (Dr) Fahd bin al Julanda Al Said, Assistant Secretary-General for Innovation Development at The Research Council. “Oman Oil Company facilitates the transfer of expertise and technology to build a knowledge-based economy through building strategic partnerships with petroleum industry leaders, and invests in training programs to raise the skills of the national workforce. Oman Oil group of companies contributes to achieving sustainable development goals in the area of human capital, as one of the main focus areas of the company,” said Eng Isam Al Zadjali, Chief Executive Officer of Oman Oil Company (OOC). Moreover, instOG is a unique training institute not only in Oman, but the region. It integrates state of the art simulation technology that enables immersive training and development to take place, replicating real world situations. Programmes are designed to cover the full range of upstream activities in the Oil and Gas industry, from subsurface to surface and production activities. “These integrated programmes and technology avoid the creation of silos around each discipline and promote a broader and integrated vision of the professionals on site, leading to improved performance,” added Eng Mohsin Al Hadhrami, Managing Director of Schlumberger Oman. In fact, the pedagogical goal of instOG is to have structured, long-term career development programmes for petro technical professionals in the disciplines of Geology, Geophysics, Petro Physics, Reservoir Engineering, Drilling and Wellsite Engineering, as well as Production Engineering. “These advanced courses aim to focus on mid-career oil and gas profes-

OMAN OIL COMPANY FACILITATES THE TRANSFER OF EXPERTISE AND TECHNOLOGY TO BUILD A KNOWLEDGE-BASED ECONOMY THROUGH BUILDING STRATEGIC PARTNERSHIPS WITH PETROLEUM INDUSTRY LEADERS, AND INVESTS IN TRAINING PROGRAMS TO RAISE THE SKILLS OF THE NATIONAL WORKFORCE sionals looking for an upskill and fresh university graduates of Engineering and Geo-Science looking for practical training that will significantly increase their autonomy once they join the labour market,” said Sheikh Ibrahim Al Harthi, Managing Director of Takatuf Oman. instOG was conceptualised to prepare Omani professionals for the industry’s high standards, where even the engineering, procurement and construction contract of instOG were significantly allotted to Omani companies to stimulate the development of ICV and actively encourage the country’s ambition to achieve its objectives. The institute will add further value by responding to Oman’s workforce development needs by offering innovative human capital solutions for the oil and gas sector. The Institute is spread over an area of about 12,000sqm, and includes a number of facilities including a technical training centre, lecture halls and workshops, besides simulation halls, libraries and a service building.

FEAUTURE

By Omar

Mawji

March 2018

The first four blocks of the landmark Miraah solar plant, jointly being developed by Petroleum Development Oman (PDO) and GlassPoint, were formally inaugurated at a ceremony held at the projectâ&#x20AC;&#x2122;s Amal oilfield location in the south of Oman

FEAUTURE

nder the patronage of His Excellency Salim bin Nasser Al Aufi, Undersecretary of the Ministry of Oil and Gas, Petroleum Development Oman (PDO) and GlassPoint Solar inaugurated the first four blocks of the giant Miraah solar plant in February. Miraah, located at the Amal oilfield in the south of the Sultanate, will be among the world’s largest solar projects when completed. Four blocks of the plant have now been constructed safely, on time and on budget with steam production integrated with the Amal network. The event also marked the official opening of the Miraah Visitor Centre with more than 200 guests in attendance, including representatives from both the public and private sectors. “Today marks an important milestone for Oman as it further cements its position as the regional leader in energy convergence, uniting renewable and conventional energy industries. Deploying solar on Oman’s oilfields to reduce the industry’s natural gas consumption has a significant and lasting economic benefit for the Sultanate,” HE Al Aufi said. Miraah will generate real In-Country Value (ICV) and create job opportunities for Omanis, largely from future supply chain development and gas savings directed to other industries. HE Al Aufi added, “The project, which stands to be among the largest solar projects in the world, has contributed to developing local Omani talent in the renewable energy field and created job opportunities for local companies. We look forward to exporting our knowledge and expertise to the rest of the world as other progressive oil and gas producers follow in PDO’s footsteps.” Miraah’s construction has progressed on schedule with 1.9 million safe man-hours completed without a Lost Time Incident since the project started in 2015. The first four blocks were commissioned successfully and the facility is now in daily operation delivering steam to the Amal oilfield. The four blocks have a total capacity of over 100 MWt and will deliver 660 tonnes of steam per day, providing significant gas savings. Once complete, the one gigawatt installation will consist of 36 blocks built in a sequence, which allows PDO to benefit from solar steam now and gradually ramp-up production over time to meet the Amal oilfield’s steam demand. The project is on track to deliver an additional eight blocks in early 2019. is a very proud day MIRAAH WILL GENERATE REAL IN-COUNTRY “This for PDO and our partners VALUE (ICV) AND CREATE JOB OPPORTUNITIES GlassPoint Solar. Miraah provides a simple yet inFOR OMANIS, LARGELY FROM FUTURE SUPPLY CHAIN novative solution that us to develop our DEVELOPMENT AND GAS SAVINGS DIRECTED TO OTHER allows heavy oil, while at the same time reducing enINDUSTRIES ergy consumption and costs,” said PDO Managing Director Raoul Restucci. “For PDO, Miraah represents an important step in our journey to become a fully-fledged energy company, as well as placing the Sultanate firmly on the global renewable energy map with this pioneering project,” he added. GlassPoint’s solar technology was specifically designed to harness the sun’s energy to generate the steam required for thermal enhanced oil recovery (EOR), seamlessly integrating into existing oilfield operations. The natural gas saved by using GlassPoint’s technology can be exported or directed toward higher-value applications such as power generation or industrial development, helping to diversify the economy. “Today, alongside our partner PDO, we are ushering in a new era for renewables here in the Sultanate and for the broader oil and gas industry,” said Ben Bierman, Chief Operating Officer and Acting CEO of Glas-

March 2018

sPoint. “The current climate of low oil prices and the transition to cleaner energy sources, validates the important work we have achieved together with Miraah. Oman is becoming an epicenter of excellence for using solar energy to power oilfield operations and overcome today’s energy challenges.” Unlike solar panels that generate electricity, GlassPoint’s solution uses large mirrors to concentrate sunlight and boil oilfield water directly into steam. The steam is used for the extraction of viscous or heavy oil as an alternative to steam generated from natural gas. GlassPoint’s innovation was to bring the mirrors and other system components indoors, using a greenhouse structure to protect from wind and sand, which is common in remote oilfields like Amal.

The greenhouse enables major cost and performance advantages compared to exposed solar designs, from reducing overall material usage to automated washing operations. GlassPoint’s partnership with PDO began over seven years ago when they built the first solar EOR project in the Middle East. The 7 MWt pilot project proved the effectiveness and cost efficiency of GlassPoint’s technology and led to significant learnings and design improvements. No other technology has been proven successfully for oil and gas operations. GlassPoint’s track record in Oman has led to the company’s expansion in new markets, including the recently announced project with oil and gas producer Aera Energy to build the largest solar plant in California, USA.

Under the patronage of His Excellency Salim bin Nasser Al Aufi, Undersecretary of the Ministry of Oil and Gas, Petroleum Development Oman (PDO) and GlassPoint Solar inaugurated the first four blocks of the giant Miraah solar plant in February.

FEAUTURE

A ‘Made in Oman’ solution Raoul Restucci, Managing Director - PDO

In Numbers Miraah will save

300,000 tons of CO2

emissions each year which is the equivalent of removing

63,000 cars from the road.

The inauguration of the Miraah Solar Project and the opening of the Visitor Centre is a very proud and important day for Petroleum Development Oman and our partners GlassPoint Solar. We have come a long way together and achieved a lot since the contract for the pilot project was awarded in 2011 through to the significant milestone that we have achieved today and this magnificent feat of engineering that we see before us here in the desert. I would like to take this opportunity to thank everyone at PDO, GlassPoint Solar and all the contractors who have worked on both the pilot and Miraah projects over the past seven years. In particular I would like to highlight the 1.9 mln safe Lost Time Injury free hours and delivering the project to schedule and budget. You should all be very proud of your efforts in constructing this pioneering, world class project. Congratulations and Thank You! GlassPoint’s innovation of bringing mirrors and other key components indoors to create steam using a greenhouse structure to protect from sand and winds, common in desert locations, is a brilliantly simple idea and provides us with a reliable and effective solution to a complex business challenge. For PDO it allows us to develop our heavy oil while at the same time reducing energy

consumption and cutting production costs. The natural gas that is no longer required to create the steam can be used for more productive and higher value uses, for example LNG export, power generation and industrial development. This provides long-term, sustainable economic benefits. There are also other important advantages that need to be highlighted. From an environmental perspective there will be a significant reduction in carbon dioxide emissions from not having to burn gas to generate steam. The facts are impressive… when fully completed Miraah will save 300,000 tons of CO2 emissions each year which is the equivalent of removing 63,000 cars from the road. There are also important macroeconomic benefits as what we see here today is a real “Made in Oman” solution. From the outset, one of PDO’s objectives has been to ensure that this is a project that benefits the Omani economy and its people as much as possible. We have striven to employ local contractors for the construction work on the site with many of them from this area, thereby giving neighbouring communities a genuine stake in this exciting initiative. We have also striven to use locally sourced materials wherever possible. PDO’s Miraah project team comprises of young Omani talent drawn from general engineering and technical backgrounds who have been quick to seize the opportunity to learn and gain experience in solar power, drawing on expertise from around the world. I would also like to commend GlassPoint on their In Country Value (ICV) focus by tripling their Omani workforce since Miraah was announced in 2015, establishing a permanent office in Muscat and training and developing local talent.

Win-win

Therefore Miraah represents a win-win and sustainable project for PDO, GlassPoint but also very importantly this country. The Solar steam plant places the Sultanate of Oman firmly on the global renewable energy map. Oman is blessed with sun virtually every day of the year and has one of the high-

March 2018

est solar energy densities in the world. Therefore solar renewable power represents an enormous opportunity for this country and I am confident the technology and expertise that we see before us today will help to position Oman as a leading centre of solar energy development and deployment excellence in the region. From Petroleum Development Oman’s perspective, we are determined to play our part in this exciting journey for the country. Last year we announced our intention to gradually transition to a fully-fledged energy Company. Miraah is very tangible example of this commitment and we are combining this with other initiatives such as solar power generation for PDO’s headquarters which will also feed into the national grid at peak times, establishing a 100 MW Solar PV farm in our concession area at Amin and measures to significantly reduce gas flaring as well as exploring new forms of renewable energy such as wind power. Further evidence of our commitment in this vital area can be seen in our recently launched high profile Estidama campaign focused on energy and the environment. This umbrella campaign includes industrial sized examples such as Miraah, the deployment of micro turbines, innovative energy saving initiatives at our installations through to supporting electric car charging stations and educating people how they can save energy in their homes. In taking full advantage of what renewable energy can offer Oman, we need to draw on support and expertise in all areas. It is for this reason that PDO has recently joined forces with bodies such as The Research Council, The National Field Research Centre for Environment Conservation (NFRC) and Riyada as well as academic institutions including SQU, Muscat and Sohar universities to share best practice, resolve problems and to create a forum to generate new sustainable energy ideas. In driving forward this exciting agenda and in the era of the fourth industrial revolution, we also need to fully embrace digitalisation which has a very important role in the future energy landscape. By

turning big data into smart data, this will provide greater energy efficiency and reliability as well as reducing production costs.

HOW BIG IS

Miraah?

Miraah will be one of the world’s largest solar plants On an oilfield in southern Oman, the solar facility will concentrate sunlight to generate steam used for oil production.

GIGAWATT OF PEAK THERMAL ENERGY

H20

6,000

km2

GENERATE 6,000 TONS OF STEAM PER DAY

SOLAR STEAM IS USED TO PRODUCE

Miraah will span a total area of 3 km2, including all its supporting infrastructure.

ROYAL OPERA HOUSES IN MUSCAT

FOOTBALL PITCHES

5.6

118

360

OIL

TRILLION BTUs OF NATURAL GAS SAVED EACH YEAR

Which can be used for higher value uses, powering the local economy

OMAN

x46

209,000 THAT’S ENOUGH GAS TO PROVIDE RESIDENTIAL ELECTRICITY FOR MORE THAN 209,000 PEOPLE IN OMAN

OR ENOUGH GAS TO FILL 46 LIQUEFIED NATURAL GAS (LNG) TANKERS OVER THE PROJECT’S LIFETIME

C02 EMISSIONS REDUCED

300,000 TONS OF CO2 EMISSIONS SAVED EACH YEAR

63,000 EQUIVALENT OF REMOVING 63,000 CARS OFF THE ROAD

This is just the beginning

The oil industry is the next major market for solar energy Visit www.glasspoint.com/miraah for more information

V2.0 201802

FEAUTURE

A landmark project for the global energy industry Ben Bierman, COO & Acting CEO of GlassPoint Solar

In Numbers Miraah will have a

total of blocks delivering over one gigawatt of peak thermal energy to generate

6,000

tons of steam per

day for Oman’s heavy oil production.

The official inauguration of this landmark project is a very important day for GlassPoint and PDO, but also for the global energy industry, and for the Sultanate of Oman. There are few other projects that so keenly demonstrate today’s energy transformation, bringing together solar and hydrocarbon energy production. We’re proud to be at heart of this transformation, but we wouldn’t be here today without the support of the Government of Oman, specifically the Ministry of Oil & Gas and the vision of our partners at Petroleum Development Oman. We’d also like to thank our shareholders, who believed in GlassPoint’s vision and funded our progress. Finally, we succeeded because of the whole enabling ecosystem we’ve found here in Oman. We have a network of capable suppliers and contractors, great infrastructure, and a well-educated workforce. This Omani ecosystem was key to our success. Raoul mentioned the award of the pilot project in 2011, but I want to remind all of you that it was PDO that developed the vision of Solar Thermal EOR and first reached out to GlassPoint back in 2009. We’re especially proud of keeping everyone safe. Safety will always be at the

center of what we do. The 1.9 million safe man-hours are certainly a result of setting the right priorities and continued vigilance by PDO, GlassPoint and our contractors. This safety record is also the result of a global effort to develop a design that could be built safely. We spent a lot of time thinking through every step of the construction process to minimize risk, and that effort has clearly paid off. Today we celebrate the successful commissioning of the first four blocks of the Miraah project on time and in line with budget. These blocks are fully integrated with the Amal steam network. We’re still ramping up, but at noon each day, these blocks are already supplying over 15% of the steam flowing into the reservoir. When complete, Miraah will have a total of 36 blocks delivering over one gigawatt of peak thermal energy to generate 6,000 tons of steam per day for Oman’s heavy oil production. It will be among the world’s largest solar plants of any kind. The significance of this project to Oman’s energy future, and the potential applications for this solution around the world, are confirmed by the hundreds of people that have already made the journey to see what we’ve built together. We’ve had executives from nearly every operating and planned steam flood in the world, dignitaries from the government of Oman, and from many other countries, University students, and the media. Over the years, we’ve done our best to accommodate these visitors, but with Miraah online, we knew we needed a better way for those visitors to experience the site. For decades, the Sultanate has distinguished itself as an innovator in the oil and gas sector, and now PDO stands at the forefront of solar powered oil production.

Thermal EOR

Unlike solar panels that generate electricity, GlassPoint’s solar technology was specifically designed to harness the sun’s energy to generate emissions-free

March 2018

steam required for thermal enhanced oil recovery. Our technology uses large mirrors placed inside robust greenhouses to concentrate sunlight and boil oilfield water directly into steam. These greenhouses protect the solar collectors from the harsh desert environment and reduce the overall cost of this innovative, yet very simple system. GlassPoint’s technology keeps rapidly evolving as we work to drive cost down, while increasing the amount of steam we can deliver. PDO has supported this intense R&D effort, and shown remarkable patience and understanding as we continue to make changes to introduce the latest research results into the project. As you may have concluded when I mentioned all the visitors we’ve had, Miraah has put Oman on the global solar energy map, creating new jobs and developing expertise in solar technology innovation, project deployment and manufacturing. Developing the Omani workforce and creating job opportunities for local contractors and small businesses is part of our joint commitment to In-Country Value. Looking forward, the project will continue to create Omani jobs throughout the supply chain, and by redirecting the gas savings to industrial use elsewhere. When we walk outside, you’ll be surrounded by the creations of Omani industry. Construction started with local community contractors doing all the civil works. As time went by, we’ve worked to qualify Omani suppliers for more and more elements of the project. For instance, the greenhouse and the mirror structures are all built from aluminum extrusions with precision machining. We no longer need to import these materials from Europe or Asia, we’re able to have them produced where they’ll be used, in Oman. We look forward to exporting materials from Oman to help us build solar steam generators wherever they’re needed. And it’s not just materials that Oman can share with the world. We are creating a center of excellence with solar experts right here in the Sultanate, and we look forward to working with you to export

that knowledge elsewhere as we expand to new markets and new regions.

Scaling up

We have a very busy and challenging, but equally rewarding, year ahead. We aim to complete the first 12 blocks of Miraah by early next year. We’re also preparing to scale our global operations to support new projects in Oman, California, Kuwait, and other countries. We recently announced a project with oil and gas producer Aera Energy in the USA, to build the largest solar plant in the state of California. That project will use both solar steam and solar electricity to power Aera’s oilfield operations. This growth has only been possible thanks to the opportunity given to us here in Oman, to create a track record of reliably delivering on our promises. We’ll also be working to enhance Oman’s role as a global leader in renewable technology. We want to drive the culture of innovation further and contribute to building a sustainable future. For that reason, we launched the GlassPoint Innovation Spur, a full-cycle incuba-

tion program designed to empower Omani entrepreneurs in deploying renewable energy and water management solutions. We’re partnering with The Research Council, Innovation Park Muscat, Riyada and Sharakah to provide mentorship, in addition to technical and business support, to help young innovators grow sustainable businesses.

GlassPoint’s partnership with PDO began over seven years ago when they built the first solar EOR project in the Middle East.

NEWS

PDO signs pacts worth $800m to Omanise hoist fleet Under contracts signed by PDO, five Omani firms – Abraj Energy Services, MB Petroleum Services, Cactus Premier Drilling Services, BaOmar Oil Field Services and Mideast Integrated Drilling & Well Services Company (Midwesco) – will provide work-over services on wells in PDO’s concession area, including modification, repair and maintenance, suspension and abandonment

March 2018

etroleum Development Oman (PDO) has Omanised its hoist fleet for the first time in its history after agreeing contracts with five local companies worth more than $800 million. The Company signed the 10-year deals at the Oil and Gas West Asia (OGWA) Exhibition and Conference at a special ceremony held under the auspices of Mohammed bin Al Zubair, His Majesty’s Adviser for Economic Planning Affairs. The five Omani firms – Abraj Energy Services, MB Petroleum Services, Cactus Premier Drilling Services, BaOmar Oil Field Services and Mideast Integrated Drilling & Well Services Company (Midwesco) – will provide work-over services on wells in PDO’s concession area, including modification, repair and maintenance, suspension and abandonment. PDO External Affairs and Value Creation Director Abdul-Amir al Ajmi said: “These contracts represent an important milestone for us as we deliver on our In-Country Value (ICV) commitments for the country. “For the first time in our history, our entire hoist fleet is fully owned and operated by Omani companies, underlining our effort to retain more of the wealth of the oil and gas industry in the Sultanate. “These long-term agreements are testament to our belief that Omani businesses have the ability and professionalism to support our Well Engineering Directorate so that it can continue to deliver well services safely, reliably, efficiently, on time and on budget. “At the same time, they offer a fantastic opportunity to build the capability and experience of Omani crews as we move to towards greater automation in our well engineering operations, as well as the opportunity to manufacture and assemble some of the awarded hoist units.” Under the terms of contracts, the five companies will support local small and medium enterprises (SMEs) and Local Community Contractors (LCCs). They will also make contributions to a fund to train and enhance the skills and capabilities of Omanis who work in the oil and gas sector and beyond. There are 35 mobile units in the PDO hoist fleet, which also includes crews from community-owned Super Local Community Contractors (SLCCs) Al Shawamikh and Al Baraka, Shaleem Petroleum Company and

THE FIVE OMANI FIRMS – ABRAJ ENERGY SERVICES, MB PETROLEUM SERVICES, CACTUS PREMIER DRILLING SERVICES, BAOMAR OIL FIELD SERVICES AND MIDEAST INTEGRATED DRILLING & WELL SERVICES COMPANY (MIDWESCO) – WILL PROVIDE WORKOVER SERVICES ON WELLS IN PDO’S CONCESSION AREA, INCLUDING MODIFICATION, REPAIR AND MAINTENANCE, SUSPENSION AND ABANDONMENT its own In-sourcing organisation, launched to boost operational performance and competency among Omani well engineers. The new hoist deals mean the Company has now completed 25 of the 53 ICV oil and gas industry opportunities which were unveiled in the ICV Blueprint Strategy document unveiled by the Ministry of Oil and Gas in 2013. These were identified as supply chain and service opportunities which could be delivered in the Sultanate, and PDO is leading on the implementation of 43 of them.

INTERVIEW

March 2018

With its current mandate set to end later this year, OPAL has embarked on the formulation of a new three-year roadmap that will seek to ensure that the growth of the Oil & Gas industry is in sync with strategic national objectives, such as Omanisation, human capital development, ICV, and so on

INTERVIEW

he task of steering the Oil & Gas industry through turbulent waters, roiled by the collapse of international oil prices in 2014, has been a daunting one for OPAL’s leadership. But on the positive side, it has been a huge learning experience as well, not least because OPAL is now suitably armed with the understanding and expertise necessary to tackle future crises of this kind when they potentially arise. Indeed, crisis preparedness is one of several new objectives being weighed by OPAL as part of its new mandate currently being drafted with the assistance of an industry expert. As part of its new mission statement, says CEO Musallam Al Mandhari, OPAL will strive to make the industry more resilient to future shocks, while also entrenching a commitment to nation-building. “We want our members to be proactive in their support for strategic national objectives, such as Human Capital Development, training and Omanisation, In-Country Value development, and so on. Rather than have quotas and programmes imposed on us, we aim to be the benchmark for others by aligning our growth objectives with the nation’s developmental strategies,” said Mr. Al Mandhari. The existing mandate, due to come to an end later this year, enshrines three core goals – To serve as the Voice of the Industry; Human Capital Development, and Standards Development. These objectives will remain an integral part of Society’s mission, he noted. The drafting of a new roadmap for OPAL comes at a challenging time for the industry, weighing down by the effects of the downturn, according to the CEO. “Our members’ expectations are growing; they want us to be more supportive and responsive to the stress-lines building up in the industry particularly as the slowdown begins to bite deeply. We don’t want to be seen to be simply an extension of the government in the implementation and enforcement of policies and national programmes. Of course, we are committed

March 2018

to delivering on the government’s national agenda, but we need to carefully balance this commitment with our principal role as the Voice of the Oil & Gas industry.” The new OPAL will be an amalgam of these distinctive yet complementary roles, says the CEO. On the one hand, as the voice of the industry, it will aim to address the needs and concerns of its members, while also championing efficiency, professionalism, best practice and quality standards. On the other, OPAL is keen to lead the way in driving human capital development through the implementation of Omanisation and training strategies in the Oil & Gas sector. Recently, this broad remit was enlarged to include a frontline role for OPAL in the delivery of 5,000 Oil & Gas jobs for young Omani jobseekers in response to His Majesty the Sultan’s call for the creation of 25,000 jobs by mid-2018. Going forward, OPAL envisions an ongoing role in driving Omanisation and job creation within the sector without any prodding from the government. “This added responsibility is a reflection of the challenges Oman is currently facing,” said Mr. Al Mandhari. “Of the 5,000 jobs pledged by the sector, 4,000 are being mobilized by OPAL, while the rest are being handled by the Ministry of Oil & Gas. But let’s face it, the demand for jobs will not end with this 25K job creation initiative, it will be an ongoing goal. Thus, instead of government directives to this end, our role will be to work with our members to produce a pipeline of jobs through sustained Omanisation and skills development.” Securing professionally rewarding and reasonably well-paid positions for the tens of thousands of jobless Omanis is a national and moral imperative, according to the CEO, given especially the presence of an estimated 1.8 million expatriates currently living and working in the country. “Our goal is to work proactively with our members to create employment opportunities for Omanis in the sector through sustained Omanisation and training. And in order to make sure we are ready with jobs for those entering the labour market every year, we must be suitably prepare to embrace Omanisation levels as high as 80 – 90 per cent. OPAL will be the trend-setter for other sectors to emulate.” Longer-term, OPAL envisions a role for itself that is similar to that of industry platforms established in advanced oil produc-

ing economies around the world. A notable example is the Alberta Energy Regulator (AER) in the Canadian province of Alberta – a non-government entity created by the local energy sector to regulate itself based on regulations and standards agreed by the industry itself. “This is the model we think Oman will embrace in the future where OPAL will be the regulator based on regulations and standards that we develop and implement ourselves. The government and the Ministry

WE DON’T WANT TO BE SEEN TO BE SIMPLY AN EXTENSION OF THE GOVERNMENT IN THE IMPLEMENTATION AND ENFORCEMENT OF POLICIES AND NATIONAL PROGRAMMES. OF COURSE, WE ARE COMMITTED TO DELIVERING ON THE GOVERNMENT’S NATIONAL AGENDA, BUT WE NEED TO CAREFULLY BALANCE THIS COMMITMENT WITH OUR PRINCIPAL ROLE AS THE VOICE OF THE OIL & GAS INDUSTRY will formulate policies and create the legislative framework in which we operate,” said Mr. Al Mandhari. This model, he further explained, will help balance the industry’s growth objectives with the need to support nation-building as a strategic goal. “For example, the industry will ensure that the training curriculum is in sync with the needs of the labour market. Consequently, Omanisation will not simply be a question of percentages, which has swelled the ranks of Omanis drivers and security guards in the sector, for example. A self-regulated industry will be concerned about driving meaningful employment too.” Also in line with its mandate as the focal point for the industry, OPAL plans to establish a centralized database that will document all instances of safety breaches reported across the industry. Once operational, operators and contractors will be required to submit information on safety mishaps – whether road or process-related – to this online system. As the first centralized system of its kind in the sector, it will allow for trends to be analysed, based on which new safety policies and initiatives can be proposed, the CEO added. Conrad Prabhu

OPAL EVENT

Best Practice Awards recognise industry excellence The Oman Society for Petroleum Services (OPAL) hosted the 2017 edition of its Best Practice Awards at the Crowne Plaza Muscat on 28 February 2018 â&#x20AC;&#x201C; a signature, annual event that recognizes innovation, excellence and best practice standards centering around areas of vital importance to the industry

March 2018

is Excellency Salim bin Nasser al Aufi, Under-Secretary of the Ministry of Oil & Gas, was the Guest of Honour at the event, which drew a large turnout of CEOs and high-level executives representing market players from across Oman’s hydrocarbon sector. There was also an insightful talk on innovation strategies for oil and gas companies, presented by Mr. Ahmed Abdulwahab, Founder and CEO Next Arabia, which is a boutique advisory firm that helps corporate companies, government institutions and startups to develop and implement innovative business models. As many as 20 entries submitted by a total of 11 companies were showcased at the well-attended event. These were classified into four broad categories: Human Capital Development, Technical and Operational Excellence, Health, Safety and Environment, and Small Business Development. Representatives from each of the contestants were given the opportunity to outline the innovative aspects of their initiatives while a panel of judges weighed each of the entries against an agreed set of evaluation criteria. The evening culminated with Best Practice Awards going to the following companies whose entries were held up as novel, cutting-edge and value-adding in respective categories and the winners are: • Human capital Development: Petroleum Development Oman LLC best practice in (PRISM Reporting System).

Congratulating the winners on their success, OPAL Chief Executive Officer Mr. Musallam al Mandhry lauded the participating companies for their enthusiasm and commended them on the high quality of their entries

OPAL EVENT

• Health, Safety and Development: Petroleum Development Oman LLC best practice in (The Pit Less Drilling Project). • Technical and Operational Excellence: Daleel Petroleum LLC best practice in (Drilling Fluid Optimization Project). • Small Business Development: Shell Development Oman LLC best practice in (Rapidly Increasing Energy Demands). The 2018 OPAL Best Practice Awards were sponsored by: Occidental Oman Inc, (Platinum Sponsor); Oman Expo

LLC, Oman Refineries and Petroleum Industries (Orpic), Oman Oil Company Exploration & Production LLC (OOCEP) and Consolidated Contractors Company (Gold Sponsors); and Global Enterprises Fleet Management Systems & Technology LLC and Shell Development Oman (Silver Sponsors). Congratulating the winners on their success, OPAL Chief Executive Officer Mr. Musallam al Mandhry lauded the participating companies for their enthusiasm and commended them on the high quality of their entries. He noted in particular the rising strength of interest in the

March 2018

Awards which garnered 20 entries this year, up from 12 in 2016. Al Mandhry also thanked the four-member jury comprising industry veterans Mr. Mohammed Al Kharusi (Intersearch Middle East), Mr. Mark Hobbs (Shaleem Petroleum), Mr. Khalid Ansari (Retired Partner – KPMG), and Mr. Moosa Al Hajri (Head of HSE in CCED), for extending their time and formidable credentials to the adjudication process. Competing for the coveted awards in the following categories were:

Human Resources

Orpic: HRS Talent Management Programme Summary: Orpic’s Human Resources Services is focused on providing employees with greater autonomy and flexibility to improve efficiency of day to day operations, significantly lowering overhead costs, and achieving reduced turnover. This strategic direction propelled us to move to a centralized administrative platform that will enable Orpic to manage our employee talent data with respect to staffing, learning, career and succession planning and administrative functions in a seamless and consolidated manner. The key achievements of the Orpic HR talent management transformation journey are: • Providing visibility for management & employee with respect to the employee Development Plan. • Lessening burden on managers and HR Administrators and provide autonomy and transparency to employees in managing their performance tasks, trainings and career plans. • Implementing a comprehensive recruiting solution providing visibility for business into the recruitment pipeline • Creating system driven strategic succession processes that reach deep into the organization, align with business needs, and drive better business outcomes by giving visibility in to the talent pool, bench strength and readiness for decision making. Orpic: New Reviewed Policies and More (EVPs) Summary: Orpic Employee Value Proposition (EVP) is what is offered by an

employer in exchange for the productivity and performance of the employee. Ultimately, it comes down to “the GIVE” and “the GET”. EVP is key driver of talent attraction, engagement and retention. Benefits of EVP are as follows: • Attract and Retain the Potential candidates/employees • Reduce the attrition rate • Increase the new hires commitment • Reduced labor costs through hiring Abraj Energy Services SAOC: ‘Almajlis’ Summary: Almajlis, created in June 2016, is the communication brand of Abraj, organizing the internal and external communication of the company, owning the portal, website, social media, branding and event management. Abraj Energy Services has 2000+ employees which constitute one of the main assets of the company. In order for the company to achieve and maintain the excellent services we provide, investing in this workforce is essential. To this end, Almajlis serves not only as an information dissemination facility, but it helps foster a sense of community between employees and the management with the following key objectives: • to cultivate a relationship of trust • to better understand company values • to boost productivity and purpose • to channel valuable feedback to managers • promote a corporate culture of open communication • to connect all the employees Consolidated Contractors Company LLC, Oman: Welding School to Train Omani Welders Summary: Starting with the graduate engineers, our end goal was to design and develop a system where objectives and strategies of the project are reached through performing and controlling activities in a systemized way in association with operational research; practical development; involvement in modern sciences; automation; and generation of innovative ideas. We tried to focus on person’s leadership competencies and influential skills and how these would be utilized to maximize quality of outputs while delivering on time with minimum costs.

OPAL EVENT

This approach with no doubt will add a lot to the Omani industry. It can be adopted by other projects in the field and ultimately will contribute to enhancing the skill of the local manpower. In the long run, the market will procure its own manpower locally without the need of getting expatriate manpower at a higher cost. Second, as the oil and gas sector is an important part of the Omani economy then there will be more demand on jobs of similar nature. As such, there will be more vacancies to cater for the Omani manpower. Last but not least, training and advancing workers will set them on the path of developing their own businesses in the future and this will profoundly enhance the oil and gas industry and the economic sector in general.

REPRESENTATIVES FROM EACH OF THE CONTESTANTS WERE GIVEN THE OPPORTUNITY TO OUTLINE THE INNOVATIVE ASPECTS OF THEIR INITIATIVES WHILE A PANEL OF JUDGES WEIGHED EACH OF THE ENTRIES AGAINST AN AGREED SET OF EVALUATION CRITERIA Petroleum Development Oman: Project PRISM Summary: PDO in partnership with IDG developed PRISM to create high performing teams and a work environment attractive to both nationals and expatriates. PDO’s employee engagement in 2011 raised many issues, with workers complaining about contractors’ failure to implement applicable Labour Law, HSE regulations, poor training, etc. Recognising the urgency of the situation, PDO developed the PRISM initiative extending to over 200+ contractors, surveying 30,000 workers every year for three years. Each contractor receives a report providing feedback from its own workers and identifying opportunities for growth, improvement and change. More than 30,000 direct and contracted workforce every year since 2015 got a chance to voice their concerns and opinions through the PRISM Surveys. 200+ CEO’s/Senior Management are getting feedback & coaching to improve the welfare of their workers.

Health, Safety and Environment Daleel Petroleum LLC: Gas Plant Project Summary: Due to the significant increase in associated gas production and limited gas processing capacity in Block 5 Daleel, ‘considerable’ amount of surplus gas being flared at a time where there is demand and necessity for gas within the Sultanate. ln 2015 DALEEL has recommended to install another new 20 MMSCFD capacity train to increase the processing capacity of the plant and to replace the current aging plant when the volume starts to decrease. • Reduced Green House Gases (C02-e) emissions by approximately 65%. The total quantity of C02-e emitted from Block 5 operations reduced from annual quantity of 559,415 tonnes to 191,907 tonnes and the quantity (kgs) of CO-e produced per barrel of oil be reduced from 31.6 to 10.8 per barrel. • Enhancing Oman’s economic and industrial growth consistent with the Sultanate’s Vision 2020, which sets targets for economic development in Gas and Oil. The LPG and NGL Condensate recovered will add to the economy of the country. • lmplementation of this project which extracts the heavy end liquids is intended to significantly reduce Environmental impact by reducing smoky flares. Furthermore surplus lean gas is treated and exported to Oman gas system through PDO facilities. The Oman Construction Company: HSE System Summary: Creating a unique HSE ecosystem which will improve performance, engagement and wellbeing of our employees and may also set example for the industry. Our new system is taking a less traveled and innovative route of behavioral transformation, empowerment, training, focus on leading indicators and graphical trend analysis as opposed to conventional HSE compliance which is heavily focused on adherence to procedures and policing. The overall aim is to increase the level of engagement in HSE by company employees, with focus on operational staff, Middle Management and Supervision; thus reducing the number of incidents and associated costs, whilst at the same time ensuring a safe working environment and creating a positive impact on company’s HSE reputation.

March 2018

The project is a system that allows TOCO to measure and manage the level of engagement in HSE from its employees and to take steps to improve their HSE performance through coaching & mentoring, rewards / recognition and disciplinary action as and when required. Our new system is taking a less traveled and innovative route of behavioral transformation, empowerment, training, focus on leading indicators and graphical trend analysis as opposed to conventional HSE compliance which is heavily focused on adherence to procedures and policing. Petroleum Development Oman: Pit Less Drilling Summary: In response to environmental challenge the team devised the pitless drilling concept which consists of a recirculation tab (RCT), located beneath the shale shakers and connected to a centrifuge which grinds the cuttings to make them finer and later separates them from

the fluid with the aid of a de-watering process. The dry cuttings (less than 5% moisture) are then re-used for different applications, including back filling old open pits. The clear fluid can be re-used for drilling subsequent well sections or other nearby wells. This initiative has reduced the overall water consumption by 60% through reuse of the treated water and it enabled the recovery of oil from cuttings, the reuse of chemicals and the utilization of excess cement for constructing cement blocks for use in various applications (in one well, more than 250 blocks were produced). The concept was applied in Oman for the first time in the Qarn Alam cluster where technical and commercial viability were proven on three wells. ARA Petroleum: My Safety Toolbag This project focuses principally on the first stage of the ARA Petroleum HSE Strategy,

The 2018 OPAL Best Practice Awards were sponsored by: Occidental Oman Inc, (Platinum Sponsor); Oman Expo LLC, Oman Refineries and Petroleum Industries (Orpic), Oman Oil Company Exploration & Production LLC (OOCEP) and Consolidated Contractors Company (Gold Sponsors); and Global Enterprises Fleet Management Systems & Technology LLC and Shell Development Oman (Silver Sponsors).

OPAL EVENT

CONGRATULATING THE WINNERS ON THEIR SUCCESS, OPAL CHIEF EXECUTIVE OFFICER MR. MUSALLAM AL MANDHRY LAUDED THE PARTICIPATING COMPANIES FOR THEIR ENTHUSIASM AND COMMENDED THEM ON THE HIGH QUALITY OF THEIR ENTRIES to re-learn the HSE fundamentals through the use of ‘My Safety Toolbag.’ The final deliverable consisted of a series of branded practical tools in a user-friendly format for our staff and contractors to implement immediately, all contained in a handy travel pouch, designed to be carried around on site. ‘My Safety Toolbag’ has brought together the essential HSE tools and delivered them as a single pack – in so doing, the following areas of value have been noted; • Avoided costs – by avoiding incidents and all the costs that go with them we clearly show a business case for having such an initiative launched. • Consistency – having employees from

many diverse backgrounds, it is critical to provide a uniform set of consistent HSE requirements with no confusion. • Reputation – a standardised, high-quality set of simple deliverables with training, shows we take this seriously. • Value for Money – all materials were produced at minimal cost, allowing a quick return on investment. The initiative is acknowledged to be in its infancy, however we have noted an uptick in the use of the tools, as well as more visibility and time spent talking about HSE issues as a direct result of increased awareness. Occidental Oman: The Electrical Submersible Pump (ESP)

Technical & Operational

Consolidated Contractors Company LLC, Oman: Advanced Work Packaging Summary: This technique was developed by the Construction Industry Institute in the United-States (CII) and the Construction Owners’ Association of Alberta in

March 2018

Canada (COAA). This technique aims to highlight open and closed work fronts, by checking “work pack” prerequisites, like material, Manpower, Safety… etc. The act of checking “work pack” prerequisites is called front end loading “FEL”. The lowest level of work package composed of single discipline is called installation work package IWP. CCC achieved innovation by being able to customize their in-house applications to perform a new technique that had not been implemented before, as site conditions changed, new reports were added. In addition , creating a complete mapping of construction sequence tags for some disciplines, i.e mapping of foundations tag, steel structural support, and Isometric, giving the ability to bring piping, steel and civil teams to speak the same language that each understands. Oman Oil Exploration & Production LLC (OOCEP): Schmoo Handling Project Summary: The project is related to the Musandam Gas Plant (MGP). One of the main processes in the plant is produced water treatment where water is sent back to the sea after being treated to the standards set by Ministry of Environment and Climate Affairs (MECA). The business purpose is to treat abnormal contaminants found in produced water like oil & grease, TSS and Salinity “Schmoo” is a generic name for contaminates originating from oil and gas wells and travels to downstream facilities. It rapidly forms a solid layer on pipes, HEx’s and columns. This causes choking, malfunctioning, issues in separation and heat transfer equipment and will eventually lead to off-spec product, plant shutdown and loss of production. The Schmoo is silent killer as far as plant uptime is concerned which goes unnoticed. In addition to the operational difficulties, “Schmoo” holds a high threat of contaminating sea water adjacent to the plant, if not treated quickly and efficiently. The location of the plant makes that risk even greater as the plant sits at an international border. In this project, quick fixes of operating parameters have been implemented to minimize the immediate risk of the Schmoo. For the long term, chemical dosage has been optimized and that resulted in a smooth operations and on-spec products.

Daleel Petroleum L.L.C.: Drilling Fluid Optimization Summary: Daleel Petroleum has been drilling in Block 5 since 2003. The drilling fluid design has developed and matured over the years to what was thought to be the technical limit balancing between performance and cost. lt seemed all the selected drilling fluid properties and chemicals are a must to have for trouble free drilling. However, when we started asking why they are required and try to understand the need behind the need, we were able to further distinguish between must to have and nice to have. Due to the number of variables in the drilling fluid design, we needed a systematic approach to ensure we reduce operating cost without harming performance. This is where we customized an approach based on lean management to eliminate or reduce chemicals and properties which led to significant reduction in drilling fluid cost while maintaining if not improving the drilling performance. ln Daleel, the drilling fluid cost averages 10% of the total tangible costs of the well construction. This project yielded $1.38 million in cost saving in 2016 and savings increased to $1.8 million in 2017. The drilling fluid cost per well has reduced by up to 24%. Since the adopted cost saving approach supports the concept of continuous improvement, we anticipate incremental changes to the drilling fluid design over the years which will further reduce the drilling fluid cost. Petroleum Development Oman: EJAAD Project Summary: The Oman Energy Forum 2015 had explored viable solutions to key energy challenges in Oman. The forum produced Oman Energy Master Plan 2040 that foresees key building blocks the energy sector has to do to better manage the future challenges within the sector. One of these building blocks was the need to stimulate R&D in Oman. The energy sector was seen as the master enabler to this for its financial and maturity considerations. Oman Energy Forum in 2016 has called on all stakeholders to narrow the gap between industry and academia to establish efficient R&D partnerships. The top recommendation of this forum was to

OPAL EVENT

His Excellency Salim bin Nasser al Aufi, Under-Secretary of the Ministry of Oil & Gas, was the Guest of Honour at the event, which drew a large turnout of CEOs and high-level executives representing market players from across Oman’s hydrocarbon sector.

produce a national energy protocol that stimulates the harmonious efforts within the sector to promote technology and innovation partnerships. This protocol was initially signed by the three founders (MOG, PDO and ed by some 40 stakeholders. EJAAD was then created to serve as a vehicle to link industry and academia to realise and monitor collaboration opportunities and helps marry the potential and excellence of the sultanate’s Industry and Academia to create a robust, profitable and sustainable energy future.

strategies for, execute, measure, report and publish various activities such as training and development of Omani nationals, community work, volunteering, charity donations, reduction of water usage, reduction of fuel consumption, carbon foot-print management, employee health and well-being programmes and safety improvement initiatives. Each of these actions contribute to the achievement of our KPI’s and ultimately take us to the five goals and creation of the four capitals.

The Oman Construction Company: SustainAbilities Project Summary: SustainAbilities originally launched in 2013, setting out an ambitious action plan for TOCO to 2020 on tackling environmental challenges and having positive social impact. Unlike a typical “CSR” initiatives, “SustainAbilities™ “has well-defined short term / long-term plans measured through KPIs, structured reporting through web-portals and more importantly tangible results which are published through annual reports. This programme takes the In-Country Value (ICV) initiative to the next level and stand out as an ideal for the industry to emulate. It is built around four capitals namely, Natural, Social, Knowledge and Financial. There are 48 targets, 15 goals, 5 outcomes with the ultimate intention of delivering our vision. Through this programme we develop

Occidental Oman: Real time heat index information System

Small Business Development

Shell Development Oman LLC: Rapidly increasing energy demands Summary: The “Solar into Schools” project was first implemented in 2016, in collaboration with the Ministry of Education, to install solar photovoltaic (PV) technology for the domestic consumption at public schools in the Sultanate. The project was designed as a fully-rounded initiative to contribute to both Oman’s energy and economy. This solar project focused on developing Omani SMEs where it sought out to create a platform for the growth and development of Solar SMEs, through which they can foster a competitive solar market in the Sultanate and build a platform for sustainable development. The project was instigated as part of

March 2018

Shell’s commitment to foster the development of the Small-Medium Enterprise sector in Oman. We ensured the provision of focused health and safety trainings for these SME’s and worked to embed a Goal Zero mindset, and stress the importance of having this mindset at the core of all their operations, to ensure a safe and robust delivery of this project. These positive practices can then be carried on and implemented by the SMEs and embedded within the core of their operations. The project also aims to raise awareness to energy problems and inspire Omani youngsters in the field of Energy Transition, in hopes to enthusiastically instill this in their education and inspire Omani entrepreneurship within the field of energy. More than 1000 persons have been impacted; not only did the project positively impact the Omani SMEs that worked on the project (capacity building, business edge and competitiveness, etc) but also the schools, their students and staff who benefited from the generated clean electricity from the solar systems. Oman Oil Exploration & Production LLC (OOCEP): Oil & Gas Book from Exploration to Production Summary: The “Oil & Gas from Exploration to Production” book was developed jointly with the Ministry of Education (MOE). The Book was launched under the auspices of HE Dr. Hamood Khalfan Al Harthy, Undersecretary of Ministry of Education for Education and Curriculum. The book which is written in Arabic is considered the first educational book on Oil & Gas in Oman targeting school students mainly from grade 10 and above. It took almost two years of preparation, translation, and editing with direct involves of volunteered staff from both OOCEP and MOE. The book contains 6 chapters providing information on Hydrocarbon Origin and generation, exploration, field appraisal, field development, crude oil marketing and a whole chapter in the health, safety and environment in the oil and gas field. Daleel Petroleum L.L.C: Water Source Locator (GeoFlow) project GeoFlow tool is a technology to characterize fluid flow across lateral sections. The technology is providing a solution

to the challenges faced in identifying location of water break-through in water-flooded carbonate reservoir. Such break-through is more critical in the presence of natural fracture in already relatively thin reservoirs (almost all of BLK-5 fields). Daleel Petroleum took a business risk with new local company with simple and relatively cost effective emerging technology and has seen success paid off that risk. This resulted in granting a two-year contract to the vendor with possible extension, thus deploying this emerging local technology in more than 10 wells in the years to come. Outside Block -5 (Potential impact): The success seen in deploying such cost-effective technology in Block -5, will sure be an analogue for utilization in North Oman, Natih and Shuaiba Reservoir by nearby operators such as PDO and Oxy. Oman LNG: Enhancing HSE Capability of Local Contractors (SMEs) Summary: Oman LNG took on the initiative in 2016 by adding an item to its Corporate Scorecard to Enhance HSE Capabilities of four of its local (Sur) contractors to meet Oman LNG expectations as part of its ICV programme. This initiative included assessing the effectiveness of selected contractors HSE MS in managing HSE risks, identifying the gaps, to develop improvement plan to bridge the gaps and agree the deliverables of implementation plan with respective contractor management. In 2017, Oman LNG has not only continued on this initiative but took it to another level by reaching out to local (Sur) SME’s contractors that do not have contracts with Oman LNG. These local SME’s were engaged using Oman LNG Development Foundation which covers its Corporate Social Responsibility Area. After 2 years of working on this initiative and engaging with 8 local SME Contractors, results of this initiative are very promising particularly with some of selected contractors which have improved substantially on their HSE Capability and are now competing more successfully with bigger contractors at Contract Pre-Award stages in Oman LNG as well as winning contracts. Occidental Oman: Al Khazain Development Program

PARTNERSHIP

OM.HUB â&#x20AC;&#x201D; Unleashing the power of entrepreneurship Helping drive entrepreneurship in the Sultanate is an exciting new platform which, unlike the plethora of initiatives of its kind that have proliferated in recent years, is unique because of its location in the Knowledge Oasis Muscat (KOM), the nationâ&#x20AC;&#x2122;s premier info tech park

The platform was formally launched in February at an event held under the patronage of His Excellency Dr. Ali bin Masoud Al Sunaidy, Minister of Commerce and Industry.

M.HUB, as the new platform is called, is the product of a partnership involving the National Business Centre (NBC), Oman Oil Company (OOC), Oman India Fertilizer Company (OMIFCO) and Oman Telecommunications Company (Omantel). It was formally launched in February at an event held under the patronage of His Excellency Dr. Ali bin Masoud Al Sunaidy, Minister of Commerce and Industry.

March 2018

The inauguration ceremony also witnessed the signing agreement of a cooperation programme between the four partners to manage and operate the entrepreneurship platform – OM.HUB. The platform aims to assist small and medium-size enterprises (SMEs) by creating a fully-equipped centre that aids in the creation and mentoring of entrepreneurs, from the incubation of an idea through to the establishment of a fully-fledged company. In addition, the centre will also host companies that are already established, thereby acting as a hub of support and growth. NBC is an initiative launched by PEIE to offer promising Omani entrepreneurs a platform to develop their business ideas and advance them into growing ventures. The centre offers a premier platform for Omani entrepreneurs by providing business development support and guidance, training and mentoring, access to markets and industry experts, and state-of-the-art and fully equipped office space, meeting rooms and presentation facilities. Commenting on the new initiative, Mr. Hilal bin Hamad Al Hasani, CEO of the Public Establishment for Industrial Estates (PEIE), stated that the OM.HUB will be set up on a 456 square metre area at KOM. The facility will be divided into a joint work area that can host 28 candidates. “OM.HUB is designed to provide the entrepreneurs with an apt environment that can merge lively and inspiring atmosphere in one of the most motivating spaces for the thriving of entrepreneurship and businesses in the Sultanate,” said Al Hasani. He added, “The location of OM.HUB in KOM places it within close proximity of the NBC incubator, ITA’s SAS incubator, Oman Investment Fund’s accelerator programme, two colleges, in addition to Sultan Qaboos University. Hence, the platform’s location will enhance collaboration and partnership between these bodies to support the scene of entrepreneurship in the Sultanate.” On his part Eng. Isam bin Saud Al Zadjali, CEO of Oman Oil, noted that Oman Oil Company always strives to achieve the principle of partnership between the public and private sectors in its various operations and activities. The project is

part of this strategy to support entrepreneurship in Oman, as well as encourage the young generation to enter the world of entrepreneurship, this would in return contribute to the advancement of our national economy. “OOC strives to encourage young entrepreneurs to play an effective role in creating a diversified economy, based on knowledge and innovation,” Al Zadjali

OM.HUB IS DESIGNED TO PROVIDE THE ENTREPRENEURS WITH AN APT ENVIRONMENT THAT CAN MERGE LIVELY AND INSPIRING ATMOSPHERE IN ONE OF THE MOST MOTIVATING SPACES FOR THE THRIVING OF ENTREPRENEURSHIP AND BUSINESSES IN THE SULTANATE said, adding, “Recognised as the first of its kind in the Sultanate, OM.HUB is well suited to the needs of entrepreneurs, as it is designed to crystallise ideas into growing business ventures.” Commenting on the launch of ‘OMHUB’ platform, Talal Al Mamari, CEO of Omantel said, “We are proud to work together with our partners to establish OM.HUB platform, which aims at supporting entrepreneurs and to be an innovation incubator that will contribute in feeding the market with new products and services and support the efforts being made to provide more jobs and self-employment opportunities for Omani youth.” OM.HUB will host the launch and implementation of the business development programme supported by Oman-India Fertiliser Company (OMIFCO). The success and sustainability of any entrepreneurship programme or platform requires a partnership between various sectors. Therefore, working with partners such as OOC, Omantel and OMIFCO towards achieving a mutual goal will eventually maximise the value added seen in the objectives of such platforms. OM.HUB aims to promote the principle of integration and cooperation to support entrepreneurship, rather than compete in this field. OM.HUB is currently hosting the Injaz programme and Oman Technology Fund’s accelerator programme, which aim to develop business ideas in the ICT sector.

ICV

Omani firms receive RO 66m worth of BP Oman contracts

The range of services provided by these contractors is broad and reflects the growing strength and capability of small and medium-sized Omani businesses servicing the energy sector.

ifteen Omani companies were recognised for their contribution to delivering gas to Oman through the Khazzan development at an In Country Value (ICV) networking event held at BP Oman’s Muscat headquarters in February 2018.

supply chain is a key commitment for the company. To facilitate this, a Vendor Development Plan was rolled out in 2017 to help identify and develop Omani businesses to international standards. BP Oman has also implemented use of the Joint Supplier Registration System (JSRS) to

The companies were awarded contracts by BP Oman with a total value of RO 66 million ($170 million) during the second half of 2017. The total In Country Value contribution of BP Oman’s third party spend in 2017 was over 40% by value, compared to 35% in 2016. The networking and recognition event gave the Omani companies the chance to meet and talk with one another, as well as hearing about the ongoing progress of the Khazzan development. The range of services provided by these contractors is broad and reflects the growing strength and capability of small and medium-sized Omani businesses servicing the energy sector. The main areas for awarded contracts were well pad construction, well sites and road maintenance and civil works, which together accounted for around 80% of the value awarded. However other sectors were well-represented ranging from occupational health to fire and rescue services, vehicle leasing to lubricants and drill bits. Building In Country Value into BP Oman’s

improve and enhance the participation of local suppliers in the tendering and selection process. This has resulted in 65 local community contractors being accepted onto the system. BP Oman has also ringfenced seven scopes of work for Omani companies, including radioactive tracer material and water well drilling. According to Khalid al Kindi, BP Oman’s Deputy General Manager and In Country Value Manager: “BP Oman is fully committed to growing our provision of In Country Value to Oman and the range of contracts awarded to Omani businesses over the last year is testament to that commitment. As is our Vendor Development Programme, where we have been able to award our first two-year contract to an Omani company – the first of what we hope will be many successes in helping to develop Omani companies to competitive, high-class standards. We are delighted to be making such significant contributions to building Oman’s future.”

March 2018

Major LCC marks milestone

OSCO (Al Sahari Oil Services), a Local Community Company with around 2205 Omani shareholders, celebrated five years of successful celebrations at Al Mouj Muscat last week. The Chief Guest was HE Dr Mohammed bin Hamad al Rumhy, Minister of Oil and Gas. Also present were a number of high profile dignitaries from the industry. On the occasion, SOSCO also unveiled two new slickline units to their clients. “Sahara Oil Services Company is one of the largest local community companies,” said Chairman Shaikh Ali Musallam al Kathiri. “It was established in 2012 to serve the people of the region of the oil concessions of Thamrait and Maqshan. The capital of the company is RO 4.750 million. The company is currently engaged in the field of oil wells maintenance services. SOSCO has three contracts assigned by PDO, OOC and Schlumberger, and is targeting more of the other major oil and gas companies in Oman.” Omanisation has risen to a commendable 90 per cent, the Chairman said. “Our Omani employees are not only working in the oilfield but also sit in key managerial positions throughout the company, both in the field and in the head office. Furthermore, we also have registered with us some 80 local, concession area employees which represents approximately 37 per cent of our total Omani workforce, coming from the operating area in the South of Oman.” SOSCO General Manager Craig Robert Glatley stated: “I am also extremely proud of the Company’s more recent progress, which has allowed for significant investment to be made in new hardware. This new equipment will help us deliver a more reliable, high standard of service, not only to PDO, but to the wider Oil & Gas community for the foreseeable future. The Purchase of these units will not only help the company grow for a prosperous future

The Chief Guest was HE Dr Mohammed bin Hamad al Rumhy, Minister of Oil and Gas.

but will also offer training & employment opportunities for Omanis. I am equally delighted to advise that SOSCO has diversified slightly from its usual activity by engaging in a collaborative business venture with other Super LCC’s. The Joint Venture encourages the collective efforts of the Super LCC’s in delivering enhanced infrastructure facilities to the Oil and Gas Industry. I am also very proud to have been instrumental in the successful delivery of the first project in Amadee 18/Mars project.” The event was organized by Novita Eventz, a leading event management company in Oman.

FEATURE

BP Energy Outlook 2018:

Energy demand grows as fuel mix continues to diversify The 2018 edition of BP’s Energy Outlook, published on 20 February 2018, considers the forces shaping the global energy transition out to 2040 and the key uncertainties surrounding that transition. The speed of the energy transition is uncertain and the new Outlook considers a range of scenarios

P’s strategy has to be resilient and adaptable to significant changes in the energy industry. This Outlook considers the possible implications of some of these changes and helps inform our long-term planning. We cannot predict where these changes will take us, but we can use this knowledge to get fit and ready to play our role in meeting the energy needs of tomorrow,” said Bob Dudley. “We are seeing growing competition between different energy sources, driven by abundant energy supplies, and continued improvements in energy efficiency. As the world learns to do more with less, demand for energy will be met by the most diverse fuels mix we have ever seen,” said Spencer Dale. Much of the narrative in the Outlook is based on the Evolving Transition scenario. This scenario, and the others considered in the Outlook, are not predictions of what is likely to happen, rather they explore the possible implications of different judgements and assumptions. The Outlook considers several scenarios and explores the energy tran-

March 2018

sition from three different viewpoints: fuels, sectors and regions. Unless otherwise stated, the findings below relate to the Evolving Transition scenario.

Fuel analysis

â&#x20AC;&#x153;By 2040, oil, gas, coal and non-fossil fuels each account for around a quarter of the worldâ&#x20AC;&#x2122;s energy. More than 40% of the overall increase in energy demand is met by renewable energy,â&#x20AC;? explained Dale. Oil demand grows over much of the Outlook, although it plateaus in the later years. All the demand growth comes from emerging economies. The growth in supply is driven by US tight oil in the

early part of the Outlook, with OPEC taking over from the late 2020s as Middle East producers adopt a strategy of growing market share. The transport sector continues to dominate global oil demand, accounting for more than half of the overall growth. Most of the growth in energy demand from transport, which flattens off towards the end of the Outlook, comes from non-road (largely air, marine, and rail) and trucks, with small increases from cars and motorbikes. After 2030, the main source of growth in the demand for oil is from non-combusted uses, particularly as a feedstock for petrochemicals. Natural gas grows strongly over the pe-

FEATURE

riod, supported by increasing levels of industrialization and power demand in fast-growing emerging economies, continued coal-to-gas switching, and the increasing availability of low-cost supplies in North America and the Middle East. By 2040, the US accounts for almost one quarter of global gas production, and global LNG supplies will more than double. The sustained growth in LNG supplies greatly increases the availabil-

BY 2040, OIL, GAS, COAL AND NON-FOSSIL FUELS EACH ACCOUNT FOR AROUND A QUARTER OF THE WORLD’S ENERGY. MORE THAN 40% OF THE OVERALL INCREASE IN ENERGY DEMAND IS MET BY RENEWABLE ENERGY ity of gas around the world, with LNG volumes overtaking inter-regional pipeline shipments in the early 2020s. Coal consumption flatlines over the Outlook period, with falls in China and the OECD offset by increasing demand in India and other emerging Asian economies. China remains the largest market for coal, accounting for 40% of global coal demand to 2040. Renewable energy grows over 400% and accounts for over 50% of the in-

crease in global power generation. This strong growth is enabled by the increasing competitiveness of wind and solar. Subsidies are gradually phased out by the mid-2020s, with renewable energy increasingly able to compete against other fuels. China is the largest source of growth, adding more renewable energy than the entire OECD combined, with India becoming the second largest source of growth by 2030.

Sector analysis

Power accounts for nearly 70% of the increase in primary energy demand. The mix of fuels used in power generation is set to shift materially, with renewable energy gaining share more quickly than any energy source in history, increasing from 7% today to around a quarter by 2040. Even so, coal remains the largest source of energy in power generation by 2040. Transport energy demand grows by only 25% despite total demand for transportation more than doubling, reflecting accelerating gains in vehicle efficiency. The transport sector continues to be dominated by oil (around 85% in 2040), despite increasing penetration of alternative fuels – particularly natural gas and electricity. This year’s Outlook argues that the penetration of electricity in the transport

Its ‘Evolving Transition’ scenario, which assumes that government policies, technologies and societal preferences evolve in a manner and speed similar to the recent past, expects: ■ Fast growth in developing economies drives up global energy demand a third higher. ■ The global energy mix is the most diverse the world has ever seen by 2040, with oil, gas, coal and non-fossil fuels each contributing around a quarter. ■ Renewables are by far the fastest-growing fuel source, increasing five-fold and providing around 14% of primary energy. ■ Demand for oil grows over much of Outlook period before plateauing in the later years. ■ Natural gas demand grows strongly and overtakes coal as the second largest source of energy. ■ Oil and gas together account for over half of the world’s energy. ■ Global coal consumption flatlines and it seems increasingly likely that Chinese coal consumption has plateaued. ■ The number of electric cars grows to around 15% of the car parc, but because of the much higher intensity with which they are used, account for 30% of passenger vehicle kilometers. ■ Carbon emissions continue to rise, signalling the need for a comprehensive set of actions to achieve a decisive break from the past.

March 2018

sector is best measured by considering both the number of electric vehicles (EVs) and how intensively each vehicle is used. In the Evolving Transition scenario, the share of EVs in the global car parc reaches around 15% by 2040 â&#x20AC;&#x201C; more than 300 million cars in a car parc of almost 2 billion. However, the share of passenger car kilometres powered by electricity, which also takes account of

the intensity with which electric cars are used, is over 30%. The Outlook shows how the interaction of fully-autonomous cars with shared mobility has the potential to substantially boost the intensity with which electric cars are driven. A key uncertainty in the period to 2040 is the speed with which sales of electric cars increases. To gauge the signif-

FEATURE

use of fuels grows at almost twice the rate of other industrial uses, although increasing environmental pressures on the use of some products, particularly single-use plastics and packaging, dampens growth quite materially relative to past trends. Oil accounts for nearly twothirds of the growth in non-combusted use of energy, with natural gas providing much of the remainder.

Regional analysis

In Numbers Renewable energy grows over

400% 50% of the

and accounts for over

increase in global power generation.

icance of this uncertainty, the Outlook considers a scenario in which there is a worldwide ban on the sales of cars with internal combustion engines (ICE) from 2040. This scenario reduces liquid fuel demand by around 10 million barrels a day relative to the Evolving Transition scenario but, even so, the level of oil demand in 2040 in the ‘ICE ban’ scenario is higher than in 2016. “The suggestion that rapid growth in electric cars will cause oil demand to collapse just isn’t supported by the basic numbers – even with really rapid growth,” explains Dale. “Even in the scenario where we see an ICE ban and very high efficiency standards, oil demand is still higher in 2040 than it is today.” Industrial energy demand, including both combusted and non-combusted uses of fuels, accounts for around half of the increase in energy consumption. Improving efficiency drives slower growth in industrial energy demand (excluding the non-combusted sector), in large part driven by China’s transition towards a less energy-intensive service and consumer-facing sectors. Some of China’s slowing growth is likely to be displaced to lower-income economies, including India and Africa. Non-combusted use of fuels, particularly as feedstocks for petrochemicals, are the fastest growing source of overall demand for oil and gas. Non-combusted

All the growth in energy consumption is in fast-growing developing economies: China and India account for half of the growth in global energy demand to 2040. Through the period China’s energy growth slows as it transitions to a more sustainable pattern of economic growth. India’s slowing in demand growth is less pronounced and by the early 2030s it overtakes China as the world’s fastest growing market for energy. In the latter stages of the Outlook, Africa also plays an increasingly important role in driving energy demand, contributing more to global demand growth from 2035 to 2040 than China.

Carbon emissions

In the Outlook’s Evolving Transition scenario, carbon emissions rise by 10% by 2040. While this is far slower than the rates seen in the past 25 years, it remains higher than the sharp decline thought to be necessary to achieve the Paris commitments. As such, the Outlook also explores an Even Faster Transition scenario, which has the same broad decline in carbon emissions as the International Energy Agency’s ‘Sustainable Development Scenario’ where carbon emissions fall by almost 50% by 2040. Most of the additional abatement of emissions in this scenario, relative the Evolving Transition scenario, come from the power sector, which is almost entirely decarbonized by 2040. “We need a far more decisive break from the past,” concluded Dudley. “In BP, we continue to believe that carbon pricing must be a key element as it provides incentives for everyone to play their part – from consumers using energy more efficiently to producers providing more low-carbon forms of energy.”

March 2018

OUTLOOK

Key highlights from Bank of America Merrill Lynchâ&#x20AC;&#x2122;s Global Energy Paper, prepared by their Global Commodity Research Team

We see oil prices averaging $50-70/bbl out to 2023

Once again, we have just completed our annual medium-term supply/ demand analysis. A key message is that we have decided to maintain our estimates from last year (see Medium term oil outlook, February 2017), so we see Brent crude oil prices averaging $50 to $70/bbl in a medium-term horizon to 2023. This forecast range compares to a current forward strip of $58/bbl on average over the forecast horizon to 2023, and a 15-year average price of $72/bbl. Global oil consumption has expanded by 1.4 million b/d in the past two years and remains on a solid footing. On our latest estimates, oil demand should keep growing by 1.1 million b/d p.a. out to 2023, falling short of average annual nonOPEC oil supply growth of 750 thousand b/d. But we expect OPEC to fill the gap, as the deal agreed to in December 2016 is cautiously pared back starting next year. What will support prices within this $50-70/ bbl average range? Below this price band, we see US shale oil supply rationing and rapid EM demand growth pushing prices higher. Above this level, we see a surge in global oil supplies and EM demand destruction curbing additional price gains.

March 2018

Brent neared $55/bbl in 2017, we see it at $64/bbl this year

Given the backdrop of stronger global growth and better-than-expected compliance with the agreed cuts among OPEC and non-OPEC deal participants, we recently reviewed our inventory path for 2018. Looking forward, we now expect total OECD inventories will be at 2.86 billion by the middle of the year and 2.80 billion by year-end, below the 5-year average. This drop from the current reported level of 2.90 billion barrels in November 2017 suggests that oil prices will likely be higher in 2018 than we originally expected and we now project an average Brent crude oil price of $64/ bbl in 2018, compared to $56/bbl prior.

Put differently, we expect Brent crude oil prices to average $9/bbl or 17% above last year in 2018, but we then expect prices to pull back in 2019 to $60/bbl as US supply responds and OPEC starts to unwind the supply deal.

Still, OPEC + Russia could start discussing an exit plan soon

As prices rise, the focus could soon turn to how OPEC and the non-OPEC deal participants will unwind the production cuts that were agreed to in December 2016. After all, rising prices could soon incentivize elastic US shale supply to come back into the market at an accelerating rate. In that regard, we present three possible scenarios for the OPEC +

OUTLOOK

Russia alliance to unfold. A first option is that the deal is extended through 2019 or beyond. A second option is that the deal is unwound gradually and the cartel exerts some discipline with only modest increases in supply. A third possibility is a return to another “market share war” between Russia and the cartel members.

OPEC COULD SIGNAL TO THE MARKET THAT PRODUCTION WILL INCREASE BY, SAY, 40 THOUSAND B/D EVERY MONTH UNLESS PRICES GO DOWN SIGNIFICANTLY. THAT STRATEGY WOULD KEEP BOTH SPOT AND FORWARD PRICES IN A RANGE AND THE CRUDE MARKET IN BACKWARDATION A return to another oil “market share war” is highly unlikely

How likely is a return to a market share war? In our view, this outcome is very unlikely, as it works against the interests of all participants in the deal in the short run. Following two decades of counter-cyclical OPEC supply swings to stabilize prices, Saudi Arabian oil production policy turned pro-cyclical in 2014. Yet the costs to the Saudi treasury have been enormous, with FX reserves falling by $240 billion in the past three years. Having said that, as supply rose, the cartel and Russia gained market share against non-OPEC in 2015/16. This situation has reversed with the cuts and Russia and OPEC are now losing market share, although higher prices are making up for volumes. So in our view the key question that OPEC and Russia need to ponder is: what is the revenue maximization opportunity in the oil market?

We expect a gradual approach as OPEC prepares to exit

Revenue is of course a function of prices and volumes. If prices climb too much and global supply responds furiously, OPEC could end up again in a tough spot. In our view, a backwardated Brent market with a long-term WTI crude oil anchor around $55 to $60/bbl is probably a good outcome for the cartel. Maybe as good as it gets. Should prices rise from there, US shale oil supply could shoot up higher and take market share away from the oligopolists. Oil demand

could get hurt. So OPEC and Russia would probably be better off signaling a gradual approach or a “tapering” of sorts. Essentially, OPEC could signal to the market that production will increase by, say, 40 thousand b/d every month unless prices go down significantly. That strategy would keep both spot and forward prices in a range and the crude market in backwardation.

Some countries in the deal will continue to see declines…

While a template for an agreed exit of the 4Q16 supply cut agreement should be ready by the summer, we expect a number of market developments to facilitate a smooth exit. For instance, we continue to see oil production declines in some OPEC members like Venezuela and Algeria creating room for other OPEC members to increase output. Similarly, some non-OPEC members like Mexico have seen average annual decline rates forcing output lower at an annual rate of 120 thousand b/d for the past five years. Mexican declines, at least until the energy reform leads to a production recovery post 2021, should make some room for growth in other members participating in the supply arrangement.

…but output from Saudi, Russia, Iraq, and UAE could rise

Still, an expectation of multi-year declines in production ahead will be easily offset by the growth appetite of a few key players. Primarily, Russia has a strong Greenfield oil project pipeline and companies expect to increase output by 1.5 million b/d by 2022, more than offsetting its own older field declines. On the OPEC front, a number of countries in the deal, like the United Arab Emirates, have been actively investing in new capacity, too and Iran and Iraq both have ambitions to increase output. Saudi Arabia is likely to remain restrained in its expansion of production capacity as prices are probably more important for the Kingdom than modest volume growth.

Meanwhile, rising Cal 2019 WTI prices will boost US output…

While OPEC and Russia continue to play output games to propel inventories lower and prices higher, we continue to

March 2018

estimate that US production is relatively sensitive to WTI calendar oil prices in a $40 to $60/bbl price range. In our view, these estimates imply that supply may increase by an extra 200 thousand b/d next year if WTI 2019 Calendar prices exceed $60/bbl. Herein is the risk for OPEC. If spot prices rally further over the next few months and ultimately drag up stagnant WTI crude oil calendar prices in 2020-23, US shale supply could also increase by 950 thousand b/d each year over the period, a concerning prospect given our expectation of slowing global oil demand.

…limiting OPEC + Russia growth to 3mn b/d by 2022

Viewed from a different angle, OPEC and Russia ultimately have to decide how much market share they are prepared to give up to shale over the course of the next five years. As we have explained before, sustaining forward Brent crude oil prices above $68/bbl would require additional OPEC and Russia cuts of close to one million b/d over the next five years, in our view. So is it worth it? Yes, if such collusion can be sustained, though this is unlikely to work indefinitely. If the colluding parties represent more than roughly 20% of the global market-Saudi+Russia alone is 25% of the market-then collectively reducing production below installed capacity is generally net revenue-positive. Both Saudi and Russia, however, can boost revenue by unilaterally cheating on the current agreement. So it is likely that over the medium term, collusion could eventually break down once the Russian election is over (March-18) and Aramco is floated (2H18), and each ramps production up to close to capacity to let shale balance the market at the margin. We believe this convergence to the competitive outcome could result in an average price of $55 to $65 over the next five years, in our view.

Over the next 5 years, OPEC will increase production by 2.3 million b/d

Where does this leave OPEC production over the longer term? In our view, this largely becomes a function of incoming projects, decline rates, spare capacity and budgetary breakevens. Over the coming five years, we envisage OPEC-

14 countries to increase crude and NGL production by 2.3 million b/d in our base case. In terms of crude oil alone, the bulk of the increase is coming from Saudi Arabia, the UAE and Iraq. This compares to an expected non-OPEC production increase of 4.5 million b/d.

OPEC is building up production capacity…

Although not evident judging by the rig count, which is only ever a short-term indicator of future production growth, OPEC is trying to build up production capacity over the medium term, taking advantage of its vast, relatively low-cost reserves. Of course, countries are battling steep declines rates, running as high as 2-3% in the case of Saudi Arabia for instance, but nevertheless we can expect capacity to increase.

OPEC IS TRYING TO BUILD UP PRODUCTION CAPACITY OVER THE MEDIUM TERM, TAKING ADVANTAGE OF ITS VAST, RELATIVELY LOW-COST RESERVES

…especially in Saudi Arabia, Iraq and the UAE

We see OPEC building capacity over the coming five years, largely driven by Saudi Arabia where we see the Khurais expansion in 2019 and the Marjan field start-up by 2021. Saudi Arabia is pressing ahead with upstream investment as part of its Vision 2030 strategy. To that end, capacity is likely to increase by 440 thousand b/d over the forecast horizon, helping to compensate for natural decline rates. Saudi Arabia is the only producer to boast of substantial spare capacity, which stood at 2.1 million b/d in recent months with output of just under 10 million b/d. We expect it to be able to maintain that capacity cushion through the five year forecast horizon. Countries like Venezuela, Algeria, Angola and Nigeria are likely to experience declines in capacity due to chronic underinvestment or economic crises while deepwater projects are experiencing delays in the latter two. Iraq, the UAE and Libya, assuming political stability, are projected to post strong growth. In the outer years, most of the capacity and production increases come from Iraq.

TECHNOLOGY

S&P Global Platts deploys Blockchain for collation of oil inventory data S&P Global Platts, the leading independent provider of information and benchmark prices for the commodities and energy markets, has announced that it is deploying a proprietary, secure Blockchain network to allow market participants to submit weekly inventory oil storage data to Fujairah Oil Industry Zone (FOIZ) and the regulator, FEDCom

OIZ hosts the Middle East’s largest commercial storage capacity for refined oil products. As exclusive publisher of FOIZ’s weekly oil inventory numbers, S&P Global Platts continues to partner with the Emirate in its journey to becoming a global trading hub. In collaboration with FOIZ, FEDCom and the 11 terminal operators that use the flagship Middle Eastern facility, S&P Global Platts has developed a full scale commercial deployment of the Blockchain distributed ledger technology. This offers FOIZ and its port operators security, together with ease of use, and a full audit trail to collate weekly inventory oil products storage data. The new technology improves the manual and unstructured process by which the terminal operators communicate their weekly inventory numbers to FEDCom. The new solution also alleviates the need for FEDCom to undertake manual validation and aggregation of each terminal operator’s numbers, reducing the scope for human error. James Rilett, Senior Director of Innovation and Digital Strategy, S&P Global Platts said: “We believe our project, in conjunction with our partners in Fujairah, represents a first for oil markets by offering a full Blockchain deployment to provide market participants with data that is increasingly critical in the region and to the global oil markets. As part of our on-going commitment to digital transformation in the energy sector and delivering innovative solutions, we are excited about the opportunity to engage with market participants to discuss ways of deploying this technology more broadly to help improve efficiency and manage risk in a secure environment.” Sohail Iqbal, Member Development Committee, FOIZ & Captain Salem Al-Hmoudi, Member FEDCom said: “We are very excited to be part of this digital transformation that S&P Global Platts have developed. The innovation represents the next step forward in Fujairah’s ambitions to become a

March 2018

global hub for commodity trading. It will allow our terminal operators to be at the forefront of technology while at the same time operating at the highest level of security.” Mamdouh Malek Azizeh, Commercial Director, Fujairah Oil Terminal FZC, said: “Blockchain innovation will allow Fujairah’s terminal operators such as us to deliver operations in a more efficient and secure environment. We are delighted to take part in this process, which will allow Fujairah Oil Terminal to increase operational efficiency and data management security. The technology will allow us to deliver results under a secure and no risk environment, which are seminal to the energy industry.” This project will deliver tangible benefits in recognition of an industry need for a more efficient and secure submissions process. These include: ■ Reducing the burden of manual data management for both FEDCom and the terminal operators; ■ Dynamic display of reported numbers at an aggregated or individual operator level; ■ Improving reporting quality by automatically validating numbers with pre-

THE NEW TECHNOLOGY IMPROVES THE MANUAL AND UNSTRUCTURED PROCESS BY WHICH THE TERMINAL OPERATORS COMMUNICATE THEIR WEEKLY INVENTORY NUMBERS TO FEDCOM defined criteria and aggregating numbers, avoiding human input; ■ Simplifying the certification of asset ownership; ■ Improving security of data transmission and storage. As in the current process, FEDCom will have sole access to all individual terminal operator numbers and will submit only the approved aggregated weekly numbers to S&P Global Platts for global distribution. Built on the open source hyperledger Fabric framework, S&P Global Platts has developed a permissioned submissions environment where terminal operators submit data to FEDCom through smart contracts on individual private channels. FEDCom in turn runs a second smart contract, with an automatic command to calculate and submit data to S&P Global Platts on a public channel. This provides additional security and convenience for terminal operators.

FEATURE

A CCS gold rush? By David Hone, Chief Climate Change Advisor for Shell

L ❱❱ Mr. David Hone

ater this year, the IPCC Special Report on 1.5°C will be released and it is very likely to put great emphasis on the importance of carbon capture and storage (CCS) and the role that it needs to play in containing global emissions such that a net-zero emissions outcome can be achieved and within the time needed to limit average surface temperature warming to 1.5°C. This is not a surprise, given the similar story in the IPCC 5th Assessment Report in 2013 for a 2°C outcome. Yet despite the recognition of the role of CCS, the technology is not being deployed at the rate necessary to make a difference, not just to emissions, but also to the cost of the technology itself which will almost certainly fall as experience is gained, supporting infrastructure is built and innovation kicks in. The Global Carbon Capture and Storage Institute (GCCSI) track CCS development and they note that only 17 CCS Facilities (>400kt CO2 per annum each) with a total capture capacity of approximately 30 MtpaCO2 are operating today. Just five new facilities are under construction. Recently in The Guardian (Australian edition), an article appeared under the title “It’d be wonderful if the claims made about carbon capture were true”, which turned out to be more a critique of the coal industry than a deep criticism of CCS technology, but titles of that type don’t help the technology gain a true foothold. In a roundabout way, the author also reaches the conclusion that CCS is necessary, but deployment is far too slow. Technology isn’t the issue holding up the deployment rate; that works just fine. CCS brings together a number of different technologies and processes that have been available in the oil and gas industry for decades and re-purposes them for CO2 capture and storage. Rather, the issue is the economics of doing this; unless there is a clear financial benefit for doing this, it won’t happen. To date that benefit has largely come through enhanced oil recovery (EOR), hence the number of blue coloured projects on the chart. But in a few cases, the benefit has come, at least in part, from a government implemented carbon pricing mechanism. But a CCS white knight has now appeared on the horizon and it is potentially a game changer. The U.S. Congress has considerably expanded what was a modest and limited tax credit for CCS, into something meaningful that ought to accelerate deployment of the technology. On 9th Feb-

March 2018

17 Operating

5 in Construction Boundary Dam

Power Generation

Lake Charles

Petra Nova Sinopec Qilu

Yanchang

Coal-to-liquids

TCEP

Illionois Industrial

Chemical Production Iron and Steel Production Synthetic natural gas Fertiliser Production

Abu Dhabi

Great Planes Enid Fertilizer

Lost Cabin Shute Creek

Natural gas Processing

Sleipner

Snøhvit

Norway Full Chain

ACTL Agrium

Century Plant

Oil refining

Hydrogen Production

ACTL Agrium

Coffeyville

Uthmaniyah Gorgon

Lula

Torrel (formerly Val verde)

EOR Dedicated Geological

Quest Air Products

Operating

2016

2017

2018

2019

2020

2021

2022

2023

[Courtesy: Shell Climate Change blogs]

= 1Mtpa of CO2 (area of circles proportional to capacity)

ruary, Congress passed and the President signed into law a budget agreement that included language to expand a 2009 tax credit for CO2 capture and storage known as 45Q. The key provisions are that for stored CO2, the tax credit rises to $50 per tonne in 2027, while for use (EOR as well as other uses) the equivalent value is $35. The amounts will be adjusted for inflation after 2026. The credit goes to the facility that captures the CO2 and is available for the first 12 years of operation. There is no cap on the arrangement for the tax credit for CCS facilities put into service after 2018 and for which construction has started before 2024 and eligibility is on a performance basis. In order for the capturing facility to receive the credit, certain monitoring and reporting rules apply to the use and storage of the CO2. Under the previous arrangements for 45Q, the tax credit expired after a total 75 million tonnes of CO2 were stored or used for EOR. The 2009 tax credit was $20 for storage and $10 for use. Besides increasing the amount of the credit and certainty regarding its availability, Congress also made the credit available for air capture and storage of CO2, a nascent technology ( just the cap-

TECHNOLOGY ISN’T THE ISSUE HOLDING UP THE DEPLOYMENT RATE; THAT WORKS JUST FINE. CCS BRINGS TOGETHER A NUMBER OF DIFFERENT TECHNOLOGIES AND PROCESSES THAT HAVE BEEN AVAILABLE IN THE OIL AND GAS INDUSTRY FOR DECADES AND RE-PURPOSES THEM FOR CO2 CAPTURE AND STORAGE ture part) that may become a key tool for drawing down CO2 from the atmosphere later in the century. As a result, the USA now has a $50 per tonne carbon pricing mechanism aimed directly at CCS and even more if removal of CO2 from the atmosphere is involved. While $50 per tonne of CO2 isn’t sufficient for every type of CCS project today, this amount could well be enough to unlock a wave of innovative projects, leading to new infrastructure, storage sites and technology improvements, giving birth to a real industry. Politics aside, this contribution from the United States could be the single most important step that any country takes in helping society reach the goal of the Paris Agreement.

FEATURE

March 2018

For new projects commissioned in 2017, electricity costs from renewable power generation have continued to fall. After years of steady cost decline, renewable power technologies are becoming an increasingly competitive way to meet new generation needs, according to the International Renewable Energy Agency (IRENA)

FEATURE

n 2017, as deployment of renewable power generation technologies accelerated, there has been a relentless improvement in their competitiveness. Bioenergy for power, hydropower, geothermal and onshore wind projects commissioned in 2017 largely fell within the range of fossil fuel-fired electricity generation costs, data collected by the International Renewable Energy Agency (IRENA) shows. Indeed levelised cost of electricity (LCOE) for these technologies was at the lower end of the LCOE range for fossil fuel options. [The LCOE of a given technology is the ratio of lifetime costs to lifetime electricity generation, both of which are discounted back to a common year using a discount rate that reflects the average cost of capital. In this report, all LCOE results are calculated using a fixed assumption of a real cost of capital of 7.5% in OECD countries and China, and 10% in the rest of the world, unless explicitly mentioned.] The global weighted average LCOE of new hydropower plants commissioned in 2017 was around USD 0.05 per kilowatt-hour (kWh), while for onshore wind plants it was around USD 0.06/kWh. For new bioenergy and geothermal projects, the global weighted average LCOE was around USD 0.07/kWh. The fall in electricity costs from utility-scale solar photovoltaic (PV) projects since 2010 has been remarkable. Driven by an 81% decrease in solar PV module prices since the end of 2009, along with reductions in balance of system (BoS) costs, the global weighted average LCOE of utility-scale solar PV fell 73% between 2010 and 2017, to USD 0.10/kWh. Increasingly, this technology is competing head-to-head with conventional power sources – and doing so without financial support. Offshore wind power and concentrated solar power (CSP), though still in their infancy in terms of deployment, both saw their costs fall between 2010 and 2017. The global weighted average LCOE of offshore wind projects commissioned in 2017 was USD 0.14/kWh, while for CSP, it was USD 0.22/kWh. However, auction results in 2016 and 2017, for CSP and offshore wind projects that will be commissioned in 2020 and beyond, signal a step-change, with costs falling to between USD 0.06 and USD 0.10/kWh for CSP and offshore wind. Three main cost reduction drivers have emerged for renewable power: 1) technology improvements; 2) competitive procurement; and 3) a large base of experienced, internationally active project developers. Historically, technology improvements have been vital to the performance increases and installed cost reductions which have (in addition to industrialisation of the sector and economies of scale) made solar and wind power technologies competitive. Competitive procurement — amid globalisation of the renewable power market —has emerged more recently as another key driver. Along with this comes the emergence of a large base of experienced medium-to-large project developers, actively seeking new markets around the world. The confluence of these factors is increasingly driving cost reductions for renewables, with effects that will only grow in magnitude in 2018 and beyond. Continuous technology innovation remains a constant in the renewable power generation market. Indeed, in today’s low equipment cost era, technology innovations that unlock efficiencies in manufacturing, as well as power generation equipment — in terms of performance improvements or installed cost reductions — will take on increasing importance. Bigger wind turbines with larger swept areas harvest more electricity from the same resource. New solar PV cell architectures offer greater efficiency. Real-time data and ‘big data’ have enhanced predictive maintenance and reduced operation and maintenance (O&M) costs. These are just a few examples of the continuous innovation driving reductions in installed costs,

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unlocking performance improvements and reducing O&M costs. Technology improvements, therefore, remain a key part of the cost reduction potential for renewable power. At the same time, the maturity and proven track record of renewable power technologies now reduces project risk, significantly lowering the cost of capital. These trends are part of a larger dynamic across the power generation sector, prompting a rapid transition in the way the industry functions. In many parts of the world, renewable power technologies now offer the lowest cost source of new power generation. In the past, typically, there was a framework offering direct financial support, often tailored to individual technologies (e.g., solar PV) and even segments (e.g., varying support for residential, commercial and utility-scale sectors, sometimes differentiated by other factors such as whether they are building-integrated or not). Now, this is being replaced by a favourable regulatory and institutional framework that sets the stage for competitive procurement of renewable power generation to meet a country’s energy, environmental and development policy goals. Around the world, medium-to-large renewable project developers are adapting to this new reality and increasingly looking for global opportunities to expand their business. They are bringing, not only their hard won experience, but access to international capital markets. In competition with their peers, they are finding ways to continuously reduce costs. The results of recent renewable power auctions – for projects to be commissioned in the coming years – confirm that cost reductions are set to continue to 2020 and beyond. In addition to the IRENA Renewable Cost Database, which contains project level cost data for around 15 000 utility-scale projects, IRENA has compiled a database of auction results and other competitive procurement processes for around 7 000 projects. Although care must be taken in comparing the results of these two databases, as an auction price is not necessarily directly comparable to an LCOE calculation,4 analysis of the results of the two databases provides some important insights into the likely distribution of renewable electricity costs over the next few years. Record low auction prices for solar PV in 2016 and 2017 in Dubai, Mexico, Peru,

Chile, Abu Dhabi and Saudi Arabia have shown that an LCOE of USD 0.03/kWh is possible from 2018 and beyond, given the right conditions. These include: a regulatory and institutional framework favourable to renewables; low offtake and country risks; a strong, local civil engineering base; favourable taxation regimes; low project development costs; and excellent solar resources.

COMPETITIVE PROCUREMENT, PARTICULARLY AUCTIONS, IS SPURRING FURTHER COST REDUCTIONS FOR POWER FROM SOLAR AND WIND POWER TECHNOLOGIES Similarly, very low auction results for onshore wind in countries such as Brazil, Canada, Germany, India. Mexico and Morocco have shown that onshore wind is one of the most competitive sources of new generation capacity. For CSP and offshore wind, 2016 and 2017 have been breakthrough years, as auction results around the world have confirmed that a step change in costs has been achieved and will be delivered in projects commissioned in 2020 and beyond. Indeed, auction results in 2016 and 2017 suggest that projects commissioned from 2020 onwards for both technologies could fall in the range USD 0.06 and USD 0.10/kWh. Competitive procurement, particularly auctions, is spurring further cost reductions for power from solar and wind power technologies. Still, achieving low costs depends on supporting factors, such as access to low-cost finance, a conducive policy environment and good auction design. The key policy drivers (outlined in IRENA, 2017, Renewable Energy Auctions: Analysing 2016) are confirmed by the latest auction results. Electricity from renewables will soon be consistently cheaper than from fossil fuels. By 2020, all the power generation technologies that are now in commercial use will fall within the fossil fuel-fired cost range, with most at the lower end or even undercutting fossil fuels. Even by 2020, projects contracted via competitive procurement will represent a relatively small subset of annual new renewable power generation capacity additions – and trends in auction results may not remain representative of LCOE trends at a project level. Nevertheless, recent auc-

In Numbers Auction results in 2016 and 2017, for CSP and offshore wind projects that will be commissioned in 2020 and beyond, signal a step-change, with costs falling to between USD

0.06 and USD 0.10/kWh for

CSP and offshore wind.

FEATURE

DECREASING ELECTRICITY COSTS FROM RENEWABLES AS A WHOLE, AND THE LOW COSTS FROM THE BEST SOLAR PV AND ONSHORE WIND PROJECTS, REPRESENT A REAL PARADIGM SHIFT IN THE COMPETITIVENESS OF DIFFERENT POWER GENERATION OPTIONS

In Numbers By 2019, the best onshore wind and solar PV projects will be delivering electricity for an LCOE equivalent of USD

0.03/kW

h, or less, with CSP and offshore wind capable of providing electricity very competitively, in

USD 0.06 to USD 0.10/kWh the range of

from 2020.

tion results show that cost reductions will continue for CSP, solar PV, onshore and offshore wind through 2020 and beyond. While the validity of comparing LCOE and auction prices for individual projects must be done with caution, the volume of data available and the consistent trends between the two datasets provide some confidence in the overall trend. Analysing the the trends in the LCOE of projects and auction results to 2020 suggests that average costs for onshore wind could fall from USD 0.06/kWh in 2017 to USD 0.05/kWh by 2020. The recent auction results for offshore wind from 2016 and 2017 in Belgium, Denmark, the Kingdom of the Netherlands, Germany and the United Kingdom suggest that for projects that will be commissioned in 2020 and beyond, costs could fall in the USD 0.06 to USD 0.10/kWh range. Indeed, in Germany, two projects that will be commissioned in 2024 and one in 2025 won with bids that did not ask for a subsidy over market rates. A similar story has emerged for CSP, where a project in South Australia to be commis-

sioned from 2020 will have a cost of USD 0.06/kWh, while in Dubai, a project that will be commissioned from 2022 onwards will have a cost of USD 0.07/kWh. Solar PV auction data needs to be treated with somewhat more caution. This is because the distribution of projects is concentrated in higher-irradiation locations than recent capacity-weighted deployment. Even so, if the auction results available do accurately represent global deployment trends, then by 2019 or 2020, the average LCOE for solar PV may fall to below USD 0.06/kWh, converging to slightly above that of onshore wind, at USD 0.05/kWh. The outlook for solar and wind electricity costs to 2020, based on the latest auction and project level cost data, presages the lowest costs yet seen for these modular technologies that can be deployed around the world. By 2019, the best onshore wind and solar PV projects will be delivering electricity for an LCOE equivalent of USD 0.03/kWh, or less, with CSP and offshore wind capable of providing electricity very competitively, in the range of USD 0.06 to USD 0.10/ kWh from 2020. Already today, and increasingly in the future, many renewable power generation projects can undercut fossil fuel-fired electricity generation, without financial support. With the right regulatory and institutional frameworks in place, their competitiveness should only further improve. Decreasing electricity costs from renewables as a whole, and the low costs from the best solar PV and onshore wind projects, represent a real paradigm shift in the competitiveness of different power generation options. Solar and wind power will provide very affordable electricity, with all the associated economic benefits. Furthermore, their low costs mean that previously uneconomic strategies in the power sector can become profitable. Curtailment – previously an unthinkable economic burden for renewables – could become a rational economic decision, maximising variable renewable penetration and minimising overall system costs. Similarly, very low prices in areas with excellent solar and wind resources could open-up the economic potential of “power-to-X” technologies (e.g., power to hydrogen or ammonia, or other energy dense, storable mediums). At the same time, low prices make the economics of

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[©IRENA]

electricity storage more favourable. This could turn a potential drawback of electric vehicles (EVs) – their potentially high instantaneous power demand for recharging – into an asset. In effect, EVs can take advantage of cheap renewable power when it is available, while potentially feeding electricity back into the grid when needed. This, however, needs to be balanced against the increased costs of integrating variable renewables and the increased flexibility required to manage systems with very high levels of variable renewable energy (VRE). To date, these integration costs have remained modest, but they could rise as very high VRE shares are reached (see IRENA, 2017, IRENA Cost and Competitiveness Indicators: Rooftop Solar PV), especially without complementary policies across the power sector. For instance, if transmission expansions fail to keep pace with deployment, renewable power sources could face curtailment. The sharp cost reductions for CSP, solar PV, onshore and offshore wind – both recent and anticipated – represent remarkable deflation rates. Conventional wisdom has been a poor guide in estimating the rate of cost reductions from solar and wind power technologies. It has underestimated the capacity of technology improvements, the industrialisation of manufacturing, economies of scale, manufacturing efficiencies, process innovations by developers and, competition in supply chains to all continuously drive down costs faster than expected in the right regulatory and policy setting. The learning rate for offshore wind (i.e. the LCOE reduction for every doubling in global cumulative installed capacity) could reach 14% over the period 20102020, with new capacity additions over this period estimated to be around 90% of the cumulative installed offshore wind capacity that would be deployed by the end of 2020. For onshore wind, the learning rate for 2010 to 2020 may reach 21%, with new capacity added over this period covering an estimated 75% of cumulative installed capacity at the end of 2020. CSP has a higher estimated learning rate of 30%, with deployment between 2010 and 2020 representing an estimated 89% of cumulative installed capacity by the end of that period. Solar PV has the high-

est estimated learning rate – 35% between 2010 and 2020 – with new capacity additions over this timescale that are estimated to be 94% of cumulative capacity by its conclusion. Onshore wind is one of the technologies with the longest histories of available cost data. Data in the IRENA Renewable Cost Database shows that the learning rate for the cost of electricity from this source is higher for the period 2010-2020 than the learning rate estimated for the period 19832016. This will, in all probability, be in part due to a lower WACC from the auction results than is used in the LCOE calculations. This is unlikely to explain all of the difference, however. The data therefore tends to suggest that the learning rate for onshore wind, at least, is currently higher than the long-term average. The modular, scalable nature solar and wind power generation technologies, and the replicability of their project development process, rewards stable support policies with continuous cost reductions. This has already made onshore wind and solar PV highly competitive options for new generation capacity. Auction results suggest that CSP and offshore wind should follow a similar path. A comparable process is playing out for electricity storage. Wherever renewable power technologies can be modular, scalable and replicable, decision makers can be confident that industrialization and the opening of new markets will yield steady cost reductions in the right regulatory and policy environment. Reductions in total installed costs are driving the fall in the LCOE for solar and wind power technologies, but to varying extents. They have been most important for solar PV, CSP and onshore wind. On the back of price declines for solar PV modules, the installed costs of utility-scale solar PV projects fell by 68% between 2010 and 2017, with the LCOE for the technology falling 73% over that period. The total installed costs of newly commissioned CSP projects fell by 27% in 20102017, with a 33% LCOE reduction overall. Installed costs for newly commissioned onshore wind projects fell by 20%, with a 22% reduction in LCOE. For offshore wind, the total installed costs fell by 2%, with a 13% reduction in LCOE over the same period.

FEATURE

While the international conversation on renewable energy has gone through some remarkable changes and rapid evolution in recent years, real change is largely made at the national levelâ&#x20AC;Ś Hereâ&#x20AC;&#x2122;s why

his is where the policy framework and regulatory environments need to mesh to create the investment climate for national and international players to make projects happen on the ground. This white paper outlines a discussion of the most significant challenges to the scale-up of renewable energy investment and development that the Coalition for Action Business and Investors Group members have encountered while delivering projects throughout the world. The paper additionally describes a selection of available tools and policies recommended by the Business and Investors Group to overcome these challenges. The focus is on solar and wind as the two dominant, rapidly growing technologies in the power sector that are now competitive, but the analysis could apply to other power-producing technologies as well. Every national situation is different, both from the point of view of the local energy system and as a reflection of the political, legal, economic and cultural realities of the country. The construction of the policy, regulatory and fiscal environment in each country is a sovereign matter, and although external parties, including industry and civil society, etc., should be consulted in this process, the final decisions on national energy strategy and objectives will be determined by national and sub-national governments.

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Key solutions

This section suggests steps governments can take to mitigate the various risks businesses are exposed to in renewable energy project development. While some risks are a normal part of assessing and undertaking new business opportunities, others are unique to new markets and can be mitigated through smart policy adaptations and tools.

TOOLS AND POLICIES TO OVERCOME FINANCE AND BANKABILITY CHALLENGES

The recent trends in renewable energy development are clearly diversifying the investor base and lowering the cost of funding. While those are positive developments, there are, as listed in the previous chapter and in the heat map, still challenges to overcome in order to scale up renewable energy deployment. Addressing finance and bankability challenges with the right tools and policies in place enables governments to effectively translate national and global goals into local implementation. This section proposes a range of risk mitigation tools, particularly related to off-taker and currency risks, that can increase the confidence of investors and the mobilisation of financing in renewable energy projects. Off-taker risk mitigation Off-taking parties (i.e., investor-owned, municipal or national utilities) to whom an independent power producer (IPP) is selling electricity do not always have a balance sheet strong enough to satisfy investors. If the off-taker is not creditworthy, a state guarantee can be used to mitigate the payment risk, and in some cases the regulatory risk, to make the PPA bankable enough to be accepted by lenders and investors. If the state itself does not have a high credit rating, development banks or export credit agencies can step in and provide guarantees, which should lower the cost of projects by lowering their risk profile. In markets where traditional off-taking parties (municipalities and national utilities) have limited capacity to satisfy investors, permitting third-party sales, allowing IPPs to sign direct PPAs with large corporate off-takers could be a way to further stimulate investment. See Boxes 1 and 2 for examples of off-taker risk guarantee mechanisms. Currency risk mitigation Currency risk is a significant obstacle for

financing projects in emerging markets. A significant portion of capital expenditures, spare parts and overseas workers’ salaries and expenses are often in one or more foreign currencies, while the revenue stream, operating expenditures and local workers’ salaries are in the local currency. While in the long run, if it is a significant market, most expenditure will be localised, there is an element of currency risk associated with investing in an emerging market. Various commercial risk mitigation instruments are available for purchase. Also, several public finance institutions, like the currency exchange fund (TCX) and GuarantCo, offer currency hedges (IRENA, 2016a). But these are generally considered quite expensive, adding considerably to overall project costs. The most common mitigation strategy is to offer the PPAs in foreign currency, usually US dollars. International financial institutions can play some role in providing hedging instruments, and/or underwriting some or all of the risk that is transferred from the project developer to the off-taker when PPAs are tied to “hard” currencies such as the US dollar or the euro (IRENA, 2016a). Standardised contracts for PPAs Another measure that can help mitigate both the administrative and financing risks is the reduction of transaction costs resulting from the complex nature of contractual arrangements supporting a renewable energy project. Governments and developers can tackle this challenge through the support and use of standardised contracts. The process of standardising contracts and/or contract components has been used in other related sectors and could in the case of renewable energy projects be used to establish, among other things, ownership structures, service requirements and PPAs. In an effort to standardise contracts and other project documents, IRENA, in partnership with the Terrawatt Initiative, has brought together a number of key stakeholders from the public and private sectors to agree on core terms and approaches via the Global Solar Energy Standardisation Initiative (IRENA, 2016b). The focus is initially on solar because such contracts can be relatively easily standardised, and projects can hence be scaled up more rapidly. By standardising key contracts such as PPAs, the Initiative can help streamline the project development process and address

FEATURE

able energy deployment includes a lack of capacity within governments to develop and operate the administrative framework required to enable investment in, and delivery of, these projects. One of the main barriers is a lack of experience regarding the nature and requirements of a renewable energy power plant. While governmental power and energy departments, and often finance departments, may be focused on renewable energy, colleagues in other departments may have very limited experience of, or interaction with, IPPs or the broad mechanics of renewable energy. This has implications for large swathes of government policy, from environmental and land-use permitting to aviation and transport.

TOOLS AND POLICIES TO OVERCOME POLICY AND REGULATORY CHALLENGES key risks such as power off-taker, political and regulatory risks through simplified provisions and clauses on energy purchase requirements and rates; grid interconnection and transmission responsibilities; agreement assignment or termination; adverse regulatory or tax changes; dispute resolution; and force majeure. To be launched by mid-2018, a comprehensive contract package will be freely available online for both governments and developers.

TOOLS AND POLICIES TO OVERCOME ADMINISTRATIVE AND CAPACITY CHALLENGES

As observed in the previous section, another category of barriers to up-scaling renew-

Addressing regulatory challenges requires building a sound regulatory system and an effective legal framework that establishes long-term, sound renewable energy policies and market conditions. While predictability is of the highest importance, flexibility needs to be recognised as a key element to adjust to a rapidly evolving market environment and technology development. Comprehensive and holistic energy strategy and policies Policy makers and regulators should consider delivering an energy strategy and policies focused on the implementation and growth of renewables that are coherent with three main principles: environmental sustainability, security of supply and economic affordability. Failure to address those adequately could result in an unbalanced

What is IRENA The IRENA Coalition for Action (Coalition) is an international network with a vision for its members to work together to advance renewable energy in order to drive the global energy transition in line with the Sustainable Development Goal on energy. Within the Coalition, the Business and Investors Group is a Working Group chaired by the Global Solar Council (GSC) and the Global Wind Energy Council (GWEC) aiming to provide a platform for renewable energy businesses and investors to discuss current challenges and agree upon solutions to put forward to policy makers. In 2017, the Coalition identified the scaling up of renewable energy investment as one of the most urgent topics to address in order to accelerate the global energy transformation. This white paper, identifying challenges and opportunities for unlocking investment in renewable energy, has been developed in a joint effort by the members of the Business and Investors Group.

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[©IRENA]

policy design, increased policy risks and damaged public acceptance – all of which are likely to have negative impacts on the renewable energy investment process. Policy risk mitigation Policy risk is a barrier in mature markets in the OECD as well as non-OECD countries. The most useful things governments can do to mitigate policy risk are to establish and maintain clear policies over the long term and to make only gradual policy changes, announced well in advance. Such steps will establish a clear track record and build confidence in the market. Some of the worst policy steps governments can make are the so-called “retroactive changes” that have been experienced recently in some markets. These have the effect of killing investment for a period of time, with confidence in the market returning only very slowly, if at all. These should be avoided at all costs. In line with the regulatory challenges included earlier, the tools and policies available to overcome those should cover institutional, economic, legal and technical aspects that will affect renewable energy projects. Grid regulation The process of acquiring grid connections, the establishment and enforcement of grid codes, transparent arrangements for dispatch priority, grid services (low voltage ride through, reactive power, etc.) requirements and curtailment compensatory schemes should be a) each under the responsibility of a single regulatory body, and b) clarified up front before the first projects are connected, and modified/upgraded periodically on a non-retroactive basis in response to both consultation with stakeholders and the evolution of the power system as a whole. Payment mechanisms Regardless of whether the payment mechanism is a result of participation in the energy market, a PPA, a FIT system, a feed-in premium system, a system based on clean energy certificates, tax benefits or something else, it is necessary for one body to be fiscally responsible to ensure a stable and predictable revenue stream. In the case of renewable electricity provision, long-term predictability in terms of revenue is crucial to lower the cost of capital. A mechanism designed to provide revenue stability is required.

International policy standards and comparability Participation in multilateral and/or international agreements, such as international trade promotion, investment protection or intellectual property rights, is crucial to deliver political and economic stability and produce positive effects on investment. Equally, collaboration in political and economic integration projects, will limit the risk perception that might hinder investment flow, particularly at the international level. Such an approach will deliver benefits in terms of institutional design, policy definition, rule production, market supervision and best practices sharing.

Conclusion

The increasing competitiveness of renewable technologies is driving the energy revolution across the globe, but there is yet huge untapped potential in the smaller emerging markets in Africa, Asia and Latin America. For wind, and increasingly for solar, the majority of market growth is in fact in emerging markets, but this growth is generally focused primarily on larger markets such as Argentina, Brazil, China, India, Mexico and the like. The benefits are clear: renewable energy technologies are low-cost, by definition indigenous, sources of energy that do not pollute and do not contribute to the climate change problem. In addition, they can attract billions of dollars of investment, help create jobs and grow local economies, while insulating local economies from the vagaries of the international commodity markets and improving their foreign exchange position. But the market alone, despite record low prices for wind and solar, has as yet proved insufficient to spread the benefits of renewables beyond the larger established markets. Intervention by governments, international financing institutions working in partnership with the relevant industry and investment sectors can help increase the pace and scale of investment. The most important element is for governments to send clear signals that they are eager to attract investments and to do so in a way that is beneficial to all concerned. Industry knows how to site and build solar plants, wind farms and other renewable energy installations, and both public- and private-sector financial institutions know how to finance them.

SPOTLIGHT

United Engineering Services

Exemplifying In-Country Value Development Perched high above the Rusayl Industrial Estate in Muscat, United Engineering Servicesâ&#x20AC;&#x2122; modern engineering complex is a striking showcase of Omanâ&#x20AC;&#x2122;s emerging capabilities as a world-class destination for high-end manufacturing and engineering fabrication services

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SPOTLIGHT

F The new UES facility was held inaugurated the auspices of HE Dr. Mohammed bin Hamad Al Rumhy, Minister of Oil and Gas, and in the presence of HE Mohammed bin Nasser Al Rasbi, Secretary General of the Ministry of Defence.

or a sense of the burgeoning In-Country Value (ICV) potential of the Sultanate of Oman, look no further than the state-of-theart campus of United Engineering Services (UES) in Rusayl Industrial Estate in the capital city, Muscat. One of the newest tenants of the sprawling industrial park adjoining the Muscat Expressway, UESâ&#x20AC;&#x2122;s sprawling facility is simply world-class in its design and aesthetics, and cutting-edge in its engineering capabilities. It stands as a testament to the reputation and aspirations of MB Holding Group, an Oman-based global conglomerate with interests spanning upstream energy services, drilling and oilfield services, engineering and mining, and hospitality and real estate development. The Group has a presence in over 20 countries spread across four continents, with a workforce of over 6,000 professionals. Earlier this year, this splendid flagship of UES was formally inaugurated at a grand ceremony attended by a number of high-level dignitaries from the government, public and private sectors. The event was held under the auspices of HE Dr. Mohammed bin Hamad Al Rumhy, Minister of Oil and Gas, and in the presence of HE Mohammed bin Nasser Al Rasbi, Secretary General of the Ministry of Defence. Also in attendance were a number of undersecretaries, diplomats, and heads of energy companies, oilfield contractors and prominent public sector enterprises.

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Speaking at the inauguration, Eng. Said bin Saif Al Maskari, UES CEO, said the company is uniquely positioned to serve as a hub for In-Country Value (ICV) development of high-end engineering equipment and parts for a number of sectors, notably Oil & Gas, Marine, Power & Water, and Defence & Aerospace, among other fields. Its growing network of engineering and fabrication workshops located around the Sultanate has been accredited by international certification agencies for quality standards, he said. Already, a number of key sectors, most notably Oil & Gas, Electricity, Defence and Marine sectors, have benefited from UES’s unmatched prowess, he noted.

Formidable capabilities

Set on the 220,000 sq metre facility is a pair of covered fabrication shops that are among the most modern of their kind in the Sultanate. The first of these structures, covering a 6,000 sq metre area, houses fully enclosed cladding, vessel, pipe and duplex shops. This is complemented by an 8,000 sq metre machine shop bristling with ultra-modern equipment and systems that can produce a range of machined items up to 2.2m diameter and 6m length. Ample car-parking areas, open yards and an elegant head office complete with manicured garden lend an upscale quality to UES’s Rusayl premises. Significantly, the new Rusayl facility is the latest addition to a growing network of assets established not only at key locations around the Sultanate, but in a number of overseas destinations as well. UES Rusayl (Marine/Composite) is a 26,000 sq.m facility, which specializes in fabricating Skid & trailer mounted systems, special welding services, blasting & painting, large scale maintenance and assemblies. UES Nizwa, for example, is a 72,000 sq.m. facility housing an API and premium thread licensed machine shop, complete with 20,000 psi test bay and overhaul capacities for hoist, work over and other oilfield equipment. Ideally located to serve the local oilfield industry, the facility manufactures slotted liners based on Canadian technology. Exemplifying UES’ commitment to ICV, a team of Omanis

SET ON THE 220,000 SQ METRE FACILITY IS A PAIR OF COVERED FABRICATION SHOPS THAT ARE AMONG THE MOST MODERN OF THEIR KIND IN THE SULTANATE hailing from Nizwa were sent to Canada for special training in this technology. In Duqm, UES has signed a 25 year lease for a 60,000 sq.m. plot in the Port of Duqm concession area. Located adjacent to the Oman DryDock, the yard is being positioned to provide a full range of OCTG management services to PDO, as well as engineering fabrication services to local investors. The company is also putting together a full suite of premium treading licenses to provide customized services to local players. Incorporated into the Rusayl complex is a 26,000 sq.m facility specializing in the fabrication of skid & trailer mounted systems, special welding services, blasting & painting, large scale maintenance, and assemblies. Further afield, UES owns and operates a 4,000 sq.m. precision machine shop facility in Stewarton, Scotland, following the acquisition of Hyspec Engineering (UK). The machine shop houses 44 modern CNC machines. Recently, Hyspec added a 2,000 sq.m facility in Moorfield - KMA (Germany) to its operational capabilities. The workshop is certified and approved for fabrication of sub-sea steel structures and structural steel components in accordance with DIN EN ISO 3834-2 standard

In Numbers UES Rusayl (Marine/ Composite) is a

26,000

sq.m facility, which specializes in fabricating Skid & trailer mounted systems, special welding services, blasting & painting, large scale maintenance and assemblies.

SPOTLIGHT

THE COMPANY IS UNIQUELY POSITIONED TO SERVE AS A HUB FOR IN-COUNTRY VALUE (ICV) DEVELOPMENT OF HIGH-END ENGINEERING EQUIPMENT AND PARTS FOR A NUMBER OF SECTORS, NOTABLY OIL & GAS, MARINE, POWER & WATER, AND DEFENCE & AEROSPACE, AMONG OTHER FIELDS, SAID ENG. SAID BIN SAIF AL MASKARI, UES CEO as well as pressure vessels pipelines and pipeline parts. The facility is equipped to fabricate trailer/skid mounted wireline units, fluid pump units, CT units and well site equipment. Following the acquisition of Koller Solutions in Malaysia, UES International (Malaysia) now owns a 5,000 sq.m facility in Melaka, which specializes in advanced composites fabrication for the Marine, Defense and Aerospace industries.

In Numbers UES Nizwa is a

72,000 sq.m.

facility housing an API and premium thread licensed machine shop, complete with

20,000

psi test bay and overhaul capacities for hoist, work over and other oilfield equipment.

Impressive showcase

As the only high-end engineering facilities of their kind in Oman, it is not surprising that international players welcome the opportunity to visit UES’s workshops, and in particular, its Rusayl flagship. “Part of our vision behind developing these facilities was to showcase our highend manufacturing potential to international players,” said Mr. Al Maskari. “Our engineering capabilities are not limited to

the Oil & Gas industry, but encompass a wider field as well. So when we receive international guests, they leave quite impressed with what we have built in Rusayl and elsewhere.” UES’s activities primarily fall under two broad categories: (i) Trading and (ii) Manufacturing. As agents for oilfield equipment and automation systems, UES represents more than 20 international brands in the Sultanate, including oil-country tubular goods (OCTG), valves, pumps, and so on. But unlike conventional agents who import and sell goods locally with a profit margin, UES adds an ICV component to the imported item. “Over the last two years, we have been moving away from the traditional agency model. Instead, we enter into a partnership with our principals, and with their permission, manufacture part of their equipment at our facilities here in the Sultanate. This exemplifies In-Country-Value (ICV) in its truest sense! In addition, we provide technical support, which includes commissioning, maintenance and after-sales support, to our clients in the Sultanate. Thus, in the event that a customer has a problem with a piece of equipment purchased from us, we despatch our fully trained engineers to site to look at the issue – rather than have the principals send in their specialists, which can be an expensive and time-consuming exercise.”

‘Made in Oman’

But it is UES’ manufacturing capability that wins admiration for the company. The high-tech machine shop, for example, is designed to manufacture subsurface equipment for drilling and completion. Indeed, UES has leveraged this unique capability to design and manufacture equipment proudly marketed under the ‘Made in Oman’ label. The company’s ‘Stuffing Box’, for instance, is already being patronized by PDO and Occidental Oman. A key part of UES’ manufacturing capability involves the engineering, design and fabrication of high-end oilfield equipment, such as chemical injection skids, metering skids, and so on. More recently, the company added boat construction to its capabilities, following the acquisition of Malaysian-based Koller Solutions, a

March 2018

A KEY PART OF UES’ MANUFACTURING CAPABILITY INVOLVES THE ENGINEERING, DESIGN AND FABRICATION OF HIGH-END OILFIELD EQUIPMENT, SUCH AS CHEMICAL INJECTION SKIDS, METERING SKIDS, AND SO ON. MORE RECENTLY, THE COMPANY ADDED BOAT CONSTRUCTION TO ITS CAPABILITIES specialist in the use of composites for marine craft. This capability has enabled UES’s entry into the marine and defence contracting business. UES’ investments are synonymous with the principle of ICV development, says the CEO. “Our acquisition of Hyspec UK and Koller Solutions gives us the expertise and wherewithal to manufacture a wider range of high-end oilfield equipment either at our facilities abroad or here in the Sultanate. For example, we

can manufacture larger diameter tools, such as Christmas Trees for the oilfield industry, blowout preventers, and other machined equipment of more than 2m diameter. Koller Solutions can enable the manufacture of high pressure equipment and wireline units. Thus, through these acquisitions, we can integrate international technology with our local manufacturing capabilities to provide customized, high-end products to the local market,” Mr. Al Maskari added.

CALENDAR

OPAL STAR 98

LEARNING HUB The OPAL STAR – Standards for Training, Approval and Recognition, has been introduced to support the ongoing Local Workforce Development Project (LWDP) and as a direct response to requests from the sector to standardize and improve the quality of training provision for the Oil and Gas sector. The OPAL STAR Brand is sole property of OPAL and is a mark of excellence for training provision and course content alignment to employer requirements.

OPAL STAR Recognised Providers

● Audited against recognised operational standards for: ★ Health and Safety ★ Quality control and assurance ★ Teaching staff ★ Student Care ● Recognised by employers as a mark of quality delivery

OPAL STAR Approved Courses

● Standardized course content and delivery for the O&G sector ★ Learning outcomes set by the sector ★ Course Curriculum designed by the training SME’s ★ Courses approved by the sector ● Standard pricing for courses and tender pre-approval

OPAL STAR Learner Awards

● Recognizing exceptional learners from the sector ● Recognizing exceptional training providers and Teachers

The OPAL STAR entity responsibilities are: ★ Ensure the procedures and processes for approval, quality assurance and communications are maintained to the highest level and are available for external audit on requests. ★ Set and maintain the OPAL STAR Provider recognition standard ★ Set and maintain the OPAL STAR course approval process ★ Facilitate and support the Training Provider Standardization Committee (TPSC) ★ Assist with obtaining Ministry of Manpower Approval for standardized courses and programs ★ Carry out annual audits and inspections of all OPAL STAR recognised training providers ★ Provide advice and support to the network of Oil & Gas Training Providers

For more information, please contact us: Oman Society for Petroleum Services (OPAL) P. O. Box: 493, P.C: 133, Al Khuwair Sultanate of Oman training@opaloman.org +968 24605700