On the High Seas

How has Oman Shipping developed since starting in 2003?

Oman Shipping Company was formed because there was a large volume of exports being moved on a freight-on-board (FOB) basis, where the buyer is responsible for the shipping, which meant we were losing the opportunity for a great deal of trade. Oman Shipping Company adds to the value chain of the Sultanate. For Omani producers, instead of shipping cargo only as far as the terminal, through Oman Shipping Company products can be delivered directly to the customer. We started in the liquefied natural gas (LNG) sector, as all of our LNG was done on an FOB basis with around seven vessels, exporting predominantly to Japan and Spain. We have since decided to expand into the export of other products, such as chemicals and various refined oil products. Our portfolio basically consists of LNG vessels, product tankers, very large crude carriers (VLCCs), bulk carriers, and, recently, container ships. We are now quite diversified in terms of our shipping fleet. We currently operate about 42 vessels, whereas in 2003 we only had one vessel. Oman Shipping Company is fully owned by the government, 80% by the Ministry of Finance and 20% by Oman Oil Company, itself owned by the Ministry of Finance. One of the key strategies behind Oman Oil Company’s participation as a shareholder is because it is the government’s arm for investing in the energy sector, and so we are involved in many of its projects. Our major focus is on Oman and imports and exports, but if we do find opportunities where it makes sense for us to go ahead outside, then definitely we will do it. We are heavily involved in the imports and exports of Oman, and our key strategy is to enhance them.

How do you cope with fluctuating global oil prices?

Many of the vessels in our portfolio are on long-term charters, and so we are generally not affected by any fluctuation in the market. When the markets are low you maintain appropriate chartering, though whenever the market is high, you still get the fixed rate; this is a kind of long-term strategy. We do have a small portfolio that is subject to the market, and especially the crude market, which is very cyclical. Today’s market for crude oil shipping is not what we would like it to be, but this will change. For example, before 2008, we were looking at rates over $100,000 a day just to charter one of these vessels. Today, we are talking about $7,000 to $20,000. The main reason for this is there was an oversupply of vessels as the market was high.

Where do you trade in the world?

Our vessels trade worldwide. LNG is quite specific, however. It goes to Japan and Spain, and sometimes it goes to China when you have diversion cargoes. Fundamentally though, we do not control where the product goes. Our role is to provide the vessel, and make sure it is manned and technically managed—it is the charter who decides where to take it.

How will Duqm build Oman’s standing as a maritime hub?

With Duqm Port, the authorities are trying to attract what they call mother vessels; huge containers that, instead of going to Jebel Ali, could stop at Duqm and save a huge amount of time. What they are trying to do is to have Duqm as the area to gather all these containers and then redistribute them through what they call “feeder vessels,” like a trans-shipment port. But they also need to take into consideration the biggest competitor in the area, which is Jebel Ali, and which has the necessary infrastructure to support all major vessels in terms of logistics and services around the port’s activities. Hopefully, we will be able to provide the same kind of infrastructure. Once we have the railroad, I am sure we will take a lot of business from Jebel Ali, because it is a lot more economical for the larger boats to come to Duqm, or even Salalah, than continuing on round the coast to Jebel Ali. The biggest advantage for the country is its strategic location. If you look at the Strait of Hormuz, it is a narrow corridor and a busy lane.

© The Business Year – March 2014