Substantial investments are being made in Oman’s midstream and downstream oil industries as it looks to meet rising demand, boost its value-added petrochemicals industry and strengthen its position as an international energy transit centre.

Refining Capacity

Oman currently has two operating oil refineries. Sohar, in the growing industrial port of the same name, has a capacity of 116,000 barrels per day (bpd), while Mina Al Fahal (MAF), in Muscat, handles 106,000 bpd. MAF was Oman’s first refinery, commissioned in 1982 and expanded several times since, while Sohar was commissioned in 2006 and has also been enlarged and developed as part of the port’s petrochemicals complex. Both are operated by the Oman Oil Refineries and Petroleum Industries Company (ORPIC), majority-owned by the Ministry of Finance with a 25% stake held by the Oman Oil Company (OOC). ORPIC was incorporated in 2011, bringing together three state-owned petrochemicals and refining companies, and also owns polypropylene and aromatics plants in Sohar, respectively producing up to 350,000 tonnes of polypropylene pellets, 818,000 tonnes of paraxylene and 198,000 tonnes of benzene.


The Sohar refinery is due to be expanded again, with a further 60,000 bpd of capacity (around 70%) added in an ORPIC-led project with an expected completion date of end-2015. The so-called Sohar Refinery Improvement Project (SRIP) has proved attractive for international bidders – with around 50 companies applying for pre-qualification. Six were shortlisted, including South Korean players Samsung, Hyundai, SK E&C, Daelim and GS Engineering & Construction, as well as Tecnicas Reunidas of Spain. Bids ranged from OR727.7m ($1.89bn) from Samsung to OR1.11bn ($2.87bn) from Tecnicas Reunidas.

In December 2013, ORPIC announced that the engineering, procurement and construction contract had been awarded to a joint venture of South Korea’s Daelim and London-based Petrofac, which bid OR829.6m ($2.15bn), while the long lead item contracts were awarded to Italy’s ATB Riva Calzoni, UK-based GE Oil & Gas, Howden Thomassen Compressors of the Netherlands and the US’s Flowserve. ORPIC aims to channel around 15% of the total project cost to local suppliers and partners as part of the in-country value (ICV) programme, which local press reports suggest could bring $375m directly into the Omani economy.

The SRIP is an important boost to Oman’s refining capacity intended to retain greater value added in the sultanate’s energy sector by increasing exports of refined products and petrochemicals, rather than just crude oil, the price of which is more vulnerable to global fluctuations and adds less value to the Omani economy. By increasing exports of refined products, Oman hopes to boost the energy industry’s profitability while also generating skilled jobs for Omanis.

Knock-On Effects

The refinery’s development will dovetail with two other ORPIC projects, the Muscat-Sohar Pipeline Project and the Liwa Plastics Project. Increasing supply of feedstock from Sohar should also allow ORPIC’s polypropylene plant to reach full production capacity for the first time since it was opened in 2006, and will allow the production of bitumen at the company’s Sohar complex. Bitumen is used in road construction, and through this the SRIP will help support Oman’s infrastructure development drive, including the building of the Batinah Expressway, which is in turn expected to boost the port’s development The Sohar project is also significant in that it is designed to adapt refining capacity to the changing nature of Oman’s crude oil production, which will see heavy, viscous oil lifted in proportionately larger amounts in the coming years, as lighter sources are depleted and enhanced oil recovery is increasingly used to access more geologically and technically difficult reservoirs. Finally, the expansion will come under new environmental programme initiated by ORPIC in 2011, and is thus expected to improve environmental performance.

Sohar’s downstream development is set to be boosted by the 280-km Muscat-Sohar Pipeline, on which construction is due to start in the first quarter of 2014. The first phase will run from the MAF refinery to Muscat International Airport. The second phase, linking to Sohar, is due to be commissioned by 2016. As well as cutting fuel tanker traffic in Muscat and on the road to Sohar, the project, worth between $200m and $250m, will increase the storage capacity for petrol and diesel and connect the current storage facilities in Sohar and MAF, enhancing the refineries’ ability to meet demand.


Oman’s refinery development is unlikely to stop with SRIP. OOC is also planning to develop a $4bn, 230,000-bpd refinery at Duqm in the Al Wusta governorate in central Oman, a growing port and future major industrial, transport and tourism centre. The Special Economic Zone Al Duqm covers an area of 1777 sq km and is a key plank of Oman’s efforts to diversify the economy. It is expected to attract as much as $20bn in investment in the long term.

The refinery will be part of a $6bn complex, including petrochemicals plants, slated for completion by 2018. In June 2012, OOC formed a 50:50 joint venture known as Duqm Refinery and Petrochemical Industries Company with Abu Dhabi sovereign energy fund International Petroleum Investment Company for the development of the facility. In November 2013, the partners announced that they were nearing the final evaluation stage on the commercial and technical bids submitted by international companies for front-end engineering and design of the complex.

Ras Markaz

Plans have also been announced for a 200m-barrel crude oil storage “tank farm” at Ras Markaz, 70 km south of Duqm, which would be by far the world’s largest such facility. The project would significantly enhance Oman’s already strong position as a transshipment centre outside the Strait of Hormuz, which should receive a further boost in the longer term as Oman’s national railway is developed and links to the broader proposed regional network.

In January 2013, OOC established the Oman Tank Terminal Company for the development of Ras Markaz, in partnership with Takamul Investment Company, with the partners taking 90% and 10% stakes, respectively. Takamul is an investment vehicle designed to promote diversification in Oman, majority-owned by OOC.

The Ras Markaz storage facility would be constructed along with a new export terminal. A 440-km pipeline is then planned to connect to the sultanate’s main oil pipeline network, and another would lead to the Duqm petrochemicals complex. While the primary aim of the facility would be to store Omani oil, OOC envisages it being used by other clients as well, as part of Oman’s strategy of developing its position as a global logistics sector, particularly for the energy industry.

Nasser bin Khamis Al Jashmi, the former undersecretary of the Ministry of Oil and Gas, is confident that the location will prove strategically appealing to firms doing business across the Middle East and Asia. “The Middle East, being the largest oil exporting region, occupies a significant position in the global crude trade, and this will be strengthened in coming years, with increasing trading volumes from this region,” he said at the ceremony for the signing of the agreement between the OOC and Takamul. “The terminal will attract local, regional and international oil companies, traders, and both exporting and importing countries looking for strategic crude storage.”

Strait Shift

The Ras Markaz development, along with the Duqm petrochemicals complex and refinery, will establish a new centre of crude processing and exporting away from the Strait of Hormuz, where activity is currently concentrated. The Strait, the entrance to the Gulf, is both geopolitically sensitive and challenging to navigate. Some 40% of the world’s oil supplies are shipped through the passage, and it is becoming increasingly congested. Ras Markaz could introduce an option for storage that provides the capacity to stockpile supplies away from the Strait but near major energy shipping routes, with easy access to the Indian Ocean and thus much of Asia, Africa and beyond.

Other options outside the Strait of Hormuz do exist. The UAE already constructed a new export terminal at Fujairah, just outside the Strait, with a storage capacity of approximately 4m cu metres, which is expected to increase to almost 9m cu metres by 2015. Saudi Arabia, meanwhile, is looking to increase its exports from its Red Sea, rather than Gulf, coast. However, Fujairah is still very close to Hormuz, while Saudi Arabia’s Red Sea ports do not have the access to the Indian Ocean that Oman has, being as they are located beyond the Bab El Mandeb, another strait that is geopolitically sensitive and near waters notorious for piracy.

After several decades of expansion, Oman’s investments in mid- and downstream infrastructure are accelerating to meet growing domestic demand and help realise the country’s drive for economic diversification. The major projects under way and planned are creating a range of opportunities for investors, from design through to execution. When the new facilities are up and running, the sultanate stands to benefit from the enhanced business opportunities provided not only in energy, but in sectors such as industry and logistics.