Interview: Harib Al Kitani
As it seeks to keep up with the growing demand for gas, how is Oman addressing capacity-related constraints in the upstream gas segment?
HARIB AL KITANI: Demand for gas in Oman is high and keeps on growing every year, as it is used in power generation, domestic use and enhanced oil recovery, as well as other industrial applications. In fact, Oman has witnessed some of the world’s fastest rates of growth in the power generation sector, at a rate of around 10% per annum, and the only source of fuel for power generation is gas. At the same time, the cost of upstream production in Oman is rapidly increasing due to new and complex developments in tight and shale gas formations.
The government’s main objective is to ensure domestic gas demand is met. To meet demand, Oman must increase production, decrease gas-related inefficiencies and look more closely at options to import additional gas. Ongoing talks to import Iranian gas reflect the government’s desire to succeed in this regard. Additionally, BP’s Khazzan field is expected to produce an additional 28.3m cu metres of gas per day. Once it comes on-line, the government may be able to put forth a new set of priorities, increasing the amount of gas for exports of liquefied natural gas. Until then, it is important to structure pricing for gas to reflect increases in consumption, and account for scarcity and production costs.
Further to this, the government has reviewed gas subsidies in an attempt to decrease consumption, which would have the effect of putting further pressure on gas producers. One possible solution would be to increase the amount of investment in the gas sector. Direct technological investments would work to make the upstream segments more productive, while investments in infrastructure – such as the pipeline network and logistics – would increase overall efficiency. The more value we can create out of each unit of gas, the more economic benefits will accrue to the sector and the country as a whole.
How can the economic contribution of small and medium-sized enterprises (SMEs) be improved?
KITANI: The two major challenges that currently face SMEs are capital and expertise: in other words, not merely providing funding, but also translating this capital into success, profit and growth. We must therefore create a system to combine training with funding. Only this will put in place the fundamental elements of success for SMEs. Moreover, funding constraints for SMEs have already been addressed through various support mechanisms, while various training programmes under way will enable entrepreneurs to nurture their talents, broaden their expertise and enhance their management skills.
How can the energy sector best balance value and price when awarding tenders?
KITANI: The sector contracts out the provision of goods and services in cases where the most added value will be created for the business, and where the best possible commercial terms can be achieved. Long-term business relationships with strategic contractors and suppliers are usually preferable, although it is always necessary to conduct tenders in a fair and transparent manner.
Procurement policy is always focused around creating new opportunities for local companies. This can be done by ensuring competitive tendering and the procurement of goods and services from Omani companies, as long as they are commercially viable.
Accordingly, the Ministry of Oil and Gas has emphasised in-country value, encouraging SMEs to provide services to the hydrocarbons sector. This will provide an additional platform where ideas can be exchanged on how best to strengthen the tendering process, with the ultimate goal of contributing to the growth of SMEs. All operators have agreed that this will enhance the sector’s ability to build capacity, expertise and professionalism across the value chain, thereby retaining capital within the country.
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