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Oman Downstream: Building for the Future

While the Sultanate of Oman is not yet as present in industry-related news as neighbours Saudi Arabia or the UAE, the country is definitely a promising oil and gas producer and – in the near future – an important petroleum and petrochemical products exporter.

In Oman, investments made by local O&G companies shape the economy of the country and reflect the latest industry trends, such as using proven technologies, improving integration and operational excellence, etc.

As discussed in our previous columns, refining and petrochemical integration is a clear and sophisticated way to increase value of products and business in general, particularly for large-scale and new process facilities. This is especially true in the ME region, where major state or semi-private companies benefit from local natural resources and build advanced complexes that include processing, transportation and storage units, streamlining the process of making the most out of comparatively light sweet feedstock available at competitive prices.

Oman Oil Refineries and Petroleum Industries Company (ORPIC) have embarked on ambitious development plans for the next 5 years with targets for increasing and expanding the product portfolio (+ >4 mln. tpa of fuels and petrochemicals, plastics), creating new assets around existing refineries in Muscat and Sohar and construction of new pipelines, strengthening international cooperation with key regions of interest, including India and Asia (initially with China and Singapore), enhancing customer service and relations.

One major Upgrading project is worth ~$9.5 bln. – this is the improvement of Sohar Refinery, with the aim to upgrade crude refining capacity by 70% and increase transportation fuel production up to over 90% and middle distillates. Another goal is to ensure stable feedstock for PP plants and aromatics production to help meet ORPIC’s plans to achieve higher levels of petrochemicals production.

Another major company project for petrochemicals is the $6.5 bln. Liwa Plastics Industries Complex expansion that is due to come onstream in 2020. It should help ORPIC benefit from opportunities from the growing global plastics market and from natural gas produced in the Sultanate. The company calls it ‘transformational’ – an additional 1 mln. tpa of PE – that hasn’t been produced locally before – and PP will definitely impact and change this industry within the country and region, but ORPIC’s plans spread also on to other markets seeing higher demand for plastics in different manufacturing sectors of developing countries.

Contract strategy for this key project consists of 4 separate EPC contracts - Steam cracker (>40% of project CAPEX), PP and PE units (in Sohar, 14% of CAPEX), and NGL extraction unit (~11% CAPEX) which was awarded in 2017. The pipeline was also defined into an independent EPC-contract.

One of the cornerstones of ORPIC’s future plans is excellence, meaning synergy via maximised value and profitability – the key approach being applied to the ambitious plastics project. Every asset shall be completed within the budget, schedule and quality requirements. This requires strong Operational Excellence and Project Management teams as well as Strategy and Marketing division; the latter has been developed for the purpose of targeting external markets and securing a favorable position there.

Another interesting case is the grassroot DUQM refinery, also located in the Sultanate of Oman, but within a Special Economic Zone. All stages of the project will look to be completed within a 15-year-period and will require an overall investment in the region of $15 bln. - some of the infrastructure and utilities facilities are already in place.

The refinery will have a capacity of 230 kbpd, with a relatively lean Nelson complexity index of 8, focusing on feedstock flexibility, middle distillate, diesel and kerosene maximisation, and be followed by a petrochemical complex later.

DUQM Refinery and Petrochemical Industries Company (DRPIC) is a JV between the state-owned Oman Oil Company (OOC) and Kuwait Petroleum International (KPI), which in its turn is an international subsidiary of Kuwait Petroleum Corporation (KPC). Therefore, this plant has great importance not only for the country of its origin, but also in terms of cooperation between oil-producing countries in the region. Kuwait possesses substantial experience in advanced refinery processes, especially bottom of the barrel (some of those were presented at the Resid Hydrotreat Symposium organised for KNPC by Euro Petroleum Consultants in late 2017), that of course could come in handy for the DUQM refinery as well.

The history of the project is associated with a number of well-known industry names such as Wood (at the time Foster Wheeler) for FEED and CDU/DVU with the help of Yokogawa in supplying integrated control system, feasibility study done by KBC, PMC - Technip E&P.

Much like the Plastics project, this project was divided into 3 EPC contracts. The first and the largest one is a $2.75 billion LSTK-basis one awarded to a JV between Tecnicas Reunidas SA 65% and Daewoo Engineering & Construction Co. Ltd. 35% for engineering, procurement, construction and commissioning of all main process units at the refinery within 47 months:

  • DU (230,000 BPD), VDU (114,000 BPD), DCU (52,000 BPD), all - Wood;
  • Hydrocracker (74,000 BPD), diesel hydrodesulphurisation (83,500 BPD), saturated gas unit (6,500 MTD), hydrogen production (2 units 126,500 Nm3/d each), all – CLG;
  • Kerosene treatment (40,500 BPD), LPG treatment (2 units 12,500 BPD each), both – Honeywell UOP;
  • Sour water stripper (2 units 44 MTD each), amine regeneration (2 x 415 mT/d), and sulphur recovery (3 units 355 MTD each, FLUOR).

The initial mobilisation of both DUQM Refinery and contractors is scheduled to start in mid-summer this year.

The second EPC contract amounting to $2 bln.—covering refinery utilities and offsites — was assigned to a consortium of Petrofac International Ltd. and Samsung Engineering Co. Ltd.

The third one was won by JV between Saipem SpA (value of the contract - $750 mln.) and CB&I ($140 mln.). Led by Saipem, the JV will provide EPC, commissioning, and operation services for the project’s associated offsite facilities, including several sub-packages: Products Storage and Export Jetty at Duqm Port; Crude Pipeline from Ras Markaz about 80-km-long; Crude Tank Farm.

Taking into account the large number of interfaces and contractors involved, the company owning DUQM should be prepared to keep abreast of the progress, any possible changes and facilitation between parties - this might require certain PMC (or CPE) services to ensure smooth transfer of assets and responsibility between EPC-contractors and within consortiums as well as control over integrated project schedule and expenditure.

CPE or Client Project Engineer (CPE) services can be of great benefit in these types of projects by providing invaluable expertise, advice and support throughout all the key stages of project analysis and implementation.

Key advantages of CPE include helping to maintain the project within budget, on target and up to the required standard, and can also be an excellent way to train the Client team. In large projects, it is also important to have recognition from the Contractors that there is a team that is controlling activities, which can be instrumental in resolving issues or disputes.

The project constitutes the largest cross-border GCC investment in the downstream sector and will help transform the DUQM area into one of the most important hubs for encouraging and promoting energy related industries regionally as well as internationally.

In this day and age, it is important to understand the trends and developments of regional markets but also the target export markets such as Asia – this is critical to ensure future business success.

With these important projects in the downstream sector, Oman is well on the road to becoming an important petroleum and petrochemical products exporter.

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June 2018