Mergers and acquisitions activity in Oman's hydrocarbons sector increase growth opportunities

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The recent period of low global oil and gas prices has led to an increased incentivisation to streamline and rationalise the hydrocarbons sector’s administrative and corporate structures. Oman is a key player in this attempt to streamline, and recently there has been significant merging and rebranding of organisations that have traditionally held leading roles in the sector. These moves come as part of long-standing efforts by the sultanate to boost corporate integration, and this focus is expected to increase and continue in the future. In late November 2018 it was announced that two government-owned institutions, the Oman Oil Company (OOC) and Oman Oil Refineries and Petroleum Industries Company (ORPIC), would be merged at the beginning of December of the same year.


This is not the first time ORPIC has undertaken a major integration. It was originally established in 2011 through the merger of three other entities: Oman Refineries and Petrochemicals Company (ORPC), Aromatics Oman LLC (AOL) and Oman Polypropylene (OPP). ORPC itself was created in 2007 from yet another merger, this time between Oman Refinery Company and Sohar Refinery Company. When OOC and ORPIC have completely merged – a process that will take place in multiple phases, beginning with downstream – the new organisation will have stakes in some 1.1m barrels per day (bpd) of refining capacity spread across Oman, India and Hungary. It will also have a range of other overseas ventures, in addition to oil and gas production capacity directly in Oman. These advantages will make it one of the most significant oil and gas companies in the region, which in turn will allow it to benefit from a wide range of new efficiencies.

“The board believes this integration will create significant value for Oman and provide a solid platform for our ambitious growth plans for the group, as well as providing our people with more opportunities to develop and grow in this business,” Mohammed bin Hamad Al Rumhi, chairman of OOC and ORPIC, said in an official statement in 2018.

Taking Stock

OOC was first incorporated in 1996 in order to pursue investment opportunities both inside and outside the sultanate. It consists of four principal verticals: Takamul Investment Company, OOC Exploration and Production (OOCEP), Oman Oil Facilities Development Company (OOFDC), and Oman Oil Duqm Development Company (OODDC). The company’s international involvements, meanwhile, are managed by its internal international investment unit.

Takamul has a wide portfolio of assets. These assets are spread across petrochemicals, via the Salalah Methanol Company and the Oman India Fertilizer Company; metals and mining, with Sohar Aluminium Company, Vale Oman Pelletising Company and Minerals Development Oman; services, through Takatuf Oman Company and Innovation Development Oman Holding; and refining, by way of a 25% share in ORPIC. OOCEP, meanwhile, has stakes in a variety of blocks and fields around the country, holding 100% control of Block 42 and Abu Tabul, and smaller stakes in Mukhaizna (20%), Rima (25%), Karim (20%), Block 61 (40%), Dunqa (20%) and Pearls (20%). It also has 100% stakes in Abraj Energy Services and Musandam Gas Plant. OOFDC, for its part, holds a 100% share in Oman Gas Company, a majority stake in Musandam Power Company (70%), and minority stakes in the Oman Oil Marketing Company (49%), Oiltanking Terminals Company (25%) and Oman Shipping Company (20%).

Lastly, OODDC retains 90% control of the Duqm Petroleum Terminal Company and Oman Tank Terminal Company, as well as a 65% share in the Centralised Utilities Company at Duqm, and 50% of the Duqm Refineries and Petrochemicals Industry Company.

This constitutes a considerable spread of sub-sectors and activities throughout the industry, and international investments extend OOC even further. These investments range from shares in two energy infrastructure companies in Spain to a stake in a power company in Pakistan, and from holdings in two shipping companies in the UAE to a partial ownership of a refining and marketing company in Hungary.


OOC has had notable success in growing its asset base, furthering the sultanate’s global presence and boosting its investment income. Oman’s energy authorities have for some time been searching for ways to rationalise the company, examining how these assets might be more usefully grouped. One such exercise led to the creation of ORPIC itself, with the spinning off of AOL, OPP and ORPC. The latest merger takes place in this context, with the potential for development of additional spin-offs in the future. This is due in part to ORPIC having grown significantly since its creation in the early 1980s.

The company has its two refineries located at Sohar and Muscat, in addition to its aromatics and polypropylene plants. In regards to the first refinery, a major upgrade initiative called the Sohar Refinery Improvement Project (SRIP) broke ground in 2014. With an estimated total cost of approximately $2.1bn, this initiative spurred the incorporation of five additional units to the plant: a crude distillation unit, a vacuum distillation unit, a delayed coker unit, a hydrocracker unit and a bitumen blowing unit.

In May 2018 SRIP won the Project of the Year award from MEED, a Middle East business intelligence website and magazine. It also added 82,000 bpd to the refinery’s existing 116,000-bpd capacity, signifying an average boost in fuel production of approximately 70%. This figure is higher for particular fuel types. Diesel capacity has increased 90%, kerosene and jet fuel are up 93%, liquefied petroleum gas is up 91%, naphtha up 175% and propylene has increased by 44%.

SRIP also places a great deal of importance on best practices in terms of environmental regulation, and complies closely to both local and EU standards on performance and emissions reduction. A sulphur recovery unit, as well as vent-scrub and carbon absorption units help treat tail gas and volatile organic compound emissions at the plant. The extra capacity will be used at the new, $3.6bn Liwa Plastics Industry Complex that ORPIC is developing adjacent to the refinery. Sohar will provide light ends from the refinery and aromatics plant, and natural gas liquids and dry gas, which will be produced by the delayed coker and hydrocracker units.

Another important expansion project for ORPIC is the $320m Muscat-Sohar Product Pipeline (MSPP). This 280-km connection links the Muscat and Sohar refineries via an intermediate distribution and storage facility at Jifnain. It is the first two-way pipeline of its kind in the sultanate, and it is estimated that it will cut the fuel truck traffic between the two sites by approximately 70%. The MSPP commenced operations in late 2017 and includes advanced control systems, leak detection, and supervisory control and data acquisition technology.


In Duqm, another refinery project is taking place. This $7bn development is being put together by a 50:50 joint venture between OOC and Kuwait Petroleum International (see analysis). With OOC and ORPIC merging, Oman’s stake in the Duqm refinery is brought under the same umbrella as Sohar and Muscat. This may be a useful way to rationalise the refinery sector, which has an increasingly important role to play in the sultanate’s ongoing plans to boost value added from crude oil production.

Another highly scrutinised rationalisation concerns OGC, which is the state gas transport company that delivers to power and desalination plants, industrial units and petrochemicals facilities. It is 100% owned by OOC, via OOFDC. For some time there have been discussions about making OGC a more independent vehicle while simultaneously consolidating the whole gas network under a single, technical system operator. This process began in early 2018, with the restructuring of the capital of OGC, transferring assets from OOC and preparing for a major rebranding.

As part of this process, in November 2018 OGC announced that it had secured $1.1bn in financing from seven local and international institutions. This funding will be put towards capacity-expansion projects as OGC becomes more financially independent from the OOC. The move is part of a broader policy aim to move closer to matching gas transmission costs with actual costs – another necessary step in the process of making OGC an independent entity.

“The new structure is the first project of its kind in the sultanate,” Sultan Bin Hamad Al Burtmani, acting executive managing director at OGC, told local media in November 2018. He added that the deal would “allow OGC to operate independently with appropriate financial and operational incentives to encourage efficiencies by consolidating, owning and operating all government gas transmission assets”.

Consequently, the next several years are likely to see additional moves towards the streamlining and rationalising of Oman’s dynamic energy sector.


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The Report: Oman 2019

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