December 2017 Special Report: Securing the future with 'Omanisation'

Petroleum Development Oman (PDO) is perhaps one of the earliest regional NOCs to have begun implementing a well-crafted programme to localise its supply chain and train the local workforce


Omani oil and gas major Petroleum Development Oman (PDO) has almost totally localised the supply and manufacture of goods and services in a number of key areas, such as scaffolding, carbon steel pipes, well engineering equipment and the provision of polymers for enhanced oil recovery. Approximately 41% of PDO’s overall contracts are now placed with local businesses, and as much as 53% of its well engineering contracts are awarded to Local Community Contractors – a figure that is amongst the highest in the regional industry.

In September this year, PDO signed two deals worth $253.1mn to ‘Omanise’ the provision of upstream equipment in its supply chain. The NOC has signed contracts for the local manufacture and supply of transformers and valves which will be used in its operations and beyond. The deals are further evidence of PDO’s In-Country Value (ICV) programme to retain more of the wealth of the oil and gas sector in the Sultanate and develop domestic supply chains.

PDO has struck deals with Rusayl-based Voltamp Transformers Oman for the supply of power transformers and with Al Jizzi Transformers and Switchgears, located in Ma’abella, for the supply of wellhead transformers. The companies employ almost 100 Omanis in total. It also penned agreements with Muscat-based Techno Fit Trading: one with Chinese concern Wuzhou Valve Company for the manufacture of ball valves, and one with Indian firm Gene-tech Controls for the manufacture of mono-flange valves.

After the first three years of these deals, both the foreign companies have agreed to establish production facilities in Oman to manufacture the components locally. The product range covers thousands of valve items from half-inch to 24-inch in size in various material grades, covering the majority of PDO operations.

“We are working hard with our partners to ensure that PDO builds its capacity and capability to competitively and professionally service both the nation’s oil and gas industry, but also that beyond our borders,” PDO’s managing director Raoul Restucci commented of the company’s ICV initiative. “ICV not only shortens our supply lines and reduces our delivery times and transport costs, but also provides more vocational training and employment opportunities for Omanis while boosting the Sultanate’s economy.”

The supply and maintenance of valves is the 17th opportunity to be realised by PDO since the ‘ICV Strategy Blueprint’ for the Sultanate’s oil and gas operators was unveiled in 2013 to boost local business participation in the country’s hydrocarbon exploration and production sector. “We are delighted to sign these contracts for the provision of important equipment and parts for the oil and gas sector. Beyond the local supply of goods and services to the requisite technical level, they provide the further demonstration of how our contractors and suppliers are playing a greater role in embedding ICV in their operations,” Restucci said.

Earlier in the year, PDO also awarded two key contracts valued at around OMR300mn or approximately $779mn to Omani businesses for work in its operations in northern Oman. Under the terms of the deals, off-plot mechanical work will be carried out by local community contractor (LCC) Seeh Al Sarya Engineering at PDO oilfields at Fahud, Lekhwair and Yibal and by Galfar Engineering & Contracting SAOG at Qarn Alam.

The contracts will run for four years with options to extend into the future. Both companies have pledged to uphold PDO’s standards on safety, quality project delivery and ICV, including the development and Omanisation of other LCCs and SMEs.

Separately, PDO also signed three contracts worth $35mn with Omani firms for the supply and servicing of compressors. PDO signed a deal with Bin Salim Enterprises LLC for the supply of instrument air compressor packages and the maintenance and repair of installed units. It also penned another service deal with PipeLine Supply Company LLC for an existing compressor fleet.

The Omani giant has been working on localising its supply chain, and has focussed on having its machinery, equipment and other supplies manufactured locally. Every year, the company spends approximately $100mn on importing casing and tubing from China. However, PDO has worked with Chinese manufacturer Changbao to set up a new tubing threading and finishing plant, where plain tubing will be sourced from China and then threaded and finished in the new facility in the Sohar Free Zone. The inauguration of the $20mn factory in Sohar in October, kicked off the process of localising oil country tubular goods (OCTG) technology.

The Changbao Oman Oil Pipe Company LLC facility will provide 30 jobs when it runs at maximum capacity, and the aim is to Omanise all positions over the coming years. The facility will have a threading capacity of 50,000 metric tonnes a year and also offer storage and repair services.

PDO Well Engineering Directorate currently spends $1.8bn on local contracts as the company ramps up its ICV policy to generate Omani job and training opportunities and develop a robust and skilled local supply chain. The directorate drills around 650 oil and gas production and exploration wells annually and drilled 1,473.7km last year, a 16% rise on 2015. There were also 19,600 well interventions – a 49% jump on 2015 – as the company ramped up its production activities.

Moreover, in October this year, PDO announced it has been supplied with the first ‘Made in Oman’ electric submersible pump (ESP) system for its oil operations from a newly-opened factory in Sohar. The $7.5mn Borets Seven Seas & Co LLC facility is assembling and servicing ESPs – which provide an efficient and reliable artificial-lift method for extracting moderate to high volumes of fluids from wellbores – for use in oil and water wells. Borets Seven Seas contractors will also install, commission, test and maintain the equipment in the field.

The factory was opened on October 29th on the Sohar Industrial Estate after PDO negotiated a three-year $105mn contract with Borets. Under the terms of the deal, which also has an option for a seven-year extension, Borets was mandated to establish the plant in the Sultanate, so it can provide training and job opportunities for Omanis, as part of PDO’s ICV requirements.

On the training front, PDO in Q2 2017 marked the graduation of 420 young Omanis from its sponsored training schemes to take up full-time employment. The jobseekers have 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 trainees were the seventh batch to graduate from PDO’s National Objectives programme which has created around 30,000 job, training and redeployment opportunities for Omanis since it was launched in 2011.

The Omani NOC is targeting the creation of 50,000 such opportunities in the next three years in close consultation with the National Training Fund, and is actively working with partners beyond its industry to help diversify the Sultanate’s economy.

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