Improving performance: Expanded capacity will allow for more refined products to be exported

With 222,000 barrels per day (bpd) of refining capacity, Oman may be struggling to meet domestic demand now, but an expansion of one of the nation’s two refining facilities and the development of a new refinery operation is set to more than double the sultanate’s output of refined products and open the door to a new export business.


Located 200 km north of the capital on the shores of the Gulf of Oman, Sohar’s refinery was brought onstream in 2006 with a capacity of 116,000 bpd. Currently Oman’s largest refinery, it has been operated by the Oman Refineries and Petroleum Industries Company (ORPIC) since 2007. The result of a merger between the Oman Refinery Company and the Sohar Refinery Company, it is government-controlled through stakes held by the Ministry of Finance and the Oman Oil Company (OOC). Expansion plans for the facility have been on the table for some years, but the recent completion of a front-end engineering and design (FEED) study by Dutch firm CB&I Lummus has given the project fresh momentum. Under current plans, crude distillation capacity at Sohar will be increased by 50,000-60,000 bpd for a total of up to 176,000 bpd by 2016, consolidating its position as the largest crude distillation facility in the country, albeit temporarily. As a result, the national production capacity for increasingly in-demand petroleum products such as liquefied petroleum gas (LPG), naphtha, Jet A-1 fuel, gasoline, diesel and propylene will be significantly enhanced. The upgraded facility will also produce bitumen to meet a growing demand in the local market and eliminate the need to import bitumen asphalt products, which cost the sultanate $54m in 2010, according to the United Nations Commodity Trade Database.

Expanding Facilities

Achieving this 51.7% rise in production will entail the construction of a considerable number of new units at the Sohar facility, which will result in a more complex, and therefore versatile, configuration. Under the present system, residue from Oman’s Mina Al Fahal refinery is pumped up the coast from Muscat and mixed with crude oil before being fed into Sohar’s crude distiller unit (CDU). From there, distilled product is transferred to Sohar’s residue fluidised catalytic cracking unit, the primary output of which is propylene. The current configuration also includes an aromatics plant fed by naphtha product from the CDU. By the time Sohar’s expansion programme is fully realised, a new CDU will sit alongside the present one, feeding atmospheric residue to a vacuum distillation unit, which will in turn provide vacuum gas oil to a new hydrocracker. Residue from the vacuum distillation unit will be directed to a new solvent deasphalting unit to produce deasphalted oil, which will then be fed to the existing residue fluidised catalytic cracking unit. The expansion will also see the construction of a new isomerisation unit that will use light naphtha and raffinate from the new hydrocracker and send its output directly to the gasoline pool.

New Opportunities

A project of this scale provides considerable opportunities for the private sector. A number of specialist contracts have already been awarded to multinational firms, such as Chevron Lummus Global for the hydrocracking unit, Black & Veatch for the sulphur recovery unit and UOP/Foster Wheeler for the solvent deasphalting unit. The next significant contractual prize comes in the form of the engineering, procurement and construction (EPC) contract. In April 2012 ORPIC announced that it was seeking bids for the EPC at Sohar, and by August it had emerged that nine engineering heavyweights had reached the shortlist for a contract estimated to be worth $1.2bn: Tecnicas Reunidas, a Spanish engineering firm specialising in the design and construction of industrial plants; Hyundai Engineering and Construction, the Korean construction giant; France’s Technip, a provider of project management, engineering and construction services for the oil and gas industry; a joint venture between Indian engineering firm Larsen & Toubro and GS Engineering of South Korea; London-based Petrofac, a provider of integrated facilities services to the hydrocarbons and petrochemicals sectors; South Korean engineering and construction firm Daelim; and a joint venture between Korean engineering and construction conglomerate Daewoo and petrochemicals outfit Lurgi.

New Centres

However, even as work continues on the refinery expansion at Oman’s industrial centre, attention is already turning to another quarter of the country where a project is under way which, when completed, will take the title of Oman’s largest refinery from the newly expanded Sohar facility. Duqm is a settlement on the Arabian Sea that has developed as an industrial town as a result of its use as a base for Petroleum Development Oman’s activities in the interior and the subsequent expansion of its port and dry dock facilities. Its genesis as an oil industry centre and its transport links both played a part in Oman’s decision to choose it as the location for a new refinery – the nation’s third. The Duqm development is grand in scale. A memorandum of understanding signed in July 2009 and a royal decree in 2011 established a special economic zone at the site, the establishment of which will be undertaken by a joint venture between the state-owned OOC and the International Petroleum Investment Company (IPIC), owned by the government of Abu Dhabi. The joint venture company and Petrochemical Industries Company (DRPIC) will oversee the development of a refinery with a capacity of 230,000 bpd, which is scheduled for completion by the end of 2017. A second phase of the project will see the creation of a petrochemicals complex that will receive its feedstock from the refinery. An October 2012 bond prospectus released by IPIC revealed that investment in the new facility will reach around $6bn, which will be split evenly between the IPIC and OOC.

Both the refinery and petrochemicals facility will be linked to a planned liquid jetty on- and offloading facility via an inlet and outlet pipeline system. Given the fact that Duqm is not, like Sohar, linked by pipeline to a crude oil source, the liquid jetty will play an important role in production activity at the facility, receiving shipments of crude oil and acting as a platform for the shipping out of refined products and, later, an array of petrochemicals. The task of operating it falls to the Duqm Petroleum Terminal Company, a joint venture between the OOC and the Port of Duqm Company.

The extra production capacity that will be added to the domestic industry when Duqm comes on-line means that Oman will be in a position to move beyond its present status as an exporter of crude oil and liquefied natural gas and establish itself as an exporter of refined products. In October 2012 Yahya bin Said Al Jabri, chairman of the special economic zone at Duqm, reaffirmed the principal specifications and development timeline for the facility and gave an indication of where any surplus created by the new refinery would be destined. He told local press, “The capacity for the refinery will be 230,000 barrels of heavy crude oil per day, which will be mainly exported to Europe. The completion target for the project is by the fourth quarter of 2017.”

Leadership Changes

Development at the Duqm site is still at an early stage. The first board of directors meeting for the new DRPIC was held in July of 2012 and brought with it the announcement that Christopher Wszolek, formerly of Saudi Aramco and O’Brien Kreitsberg, has been taken on board as project director. It was also revealed that Shaw Energy and Chemicals had been selected as the management consultant for the project. A business unit of the Shaw Group, Shaw Energy and Chemicals has established a favourable reputation in the regional market with notable success in Abu Dhabi’s Umm Shaif Gas Injection Project. Previously well regarded in the industry as Stone and Webster, Shaw Energy and Chemicals was separated from the main Shaw Group in 2012 and taken over by Technip – one of the shortlisted bidders for the EPC contract for the expansion of the Sohar refinery.

Next Steps

With the project consultant in place, the next order of business for the Duqm development is the FEED work, which will provide the basis for the formulation and award of the execution phase contracts, such as EPC. According to a statement issued to the local press in September of 2012, the FEED contract was to be tendered sometime in 2013 and, while no further timeline information was available at the time of writing, a working period of a year or more would not be unusual for a project of this size. Much planning and theoretical development, therefore, remains to be carried out, but the more than doubling of Oman’s refinery capacity that the Sohar expansion and Duqm development represent is well in train. Progress bodes well for the industry, and as Peter Hall, the CEO of Al Hassan Engineering, told OBG, “The coming three to five years should be a very exciting time for local operators as there will be large-scale productivity in all facets of engineering and infrastructure development.”

You have reached the limit of premium articles you can view for free. 

Choose from the options below to purchase print or digital editions of our Reports. You can also purchase a website subscription giving you unlimited access to all of our Reports online for 12 months.

If you have already purchased this Report or have a website subscription, please login to continue.

The Report: Oman 2013

Energy chapter from The Report: Oman 2013

Cover of The Report: Oman 2013

The Report

This article is from the Energy chapter of The Report: Oman 2013. Explore other chapters from this report.

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart