The Enabler

How has Shell’s involvement in Oman developed?

Shell’s involvement in Oman goes back to 1937, when the initial contract was agreed. The form of the partnership between Shell and Oman has changed over the years, but from about 1980 onwards it has a joint venture with the government of Oman in Petroleum Development Oman (PDO), and since 1999 with Oman LNG, when the first LNG was produced. Shell represents 34% of the PDO venture and 30% of the Oman LNG venture. We also have Shell Oman Marketing, which was floated on the Muscat Securities Market in 1997, with 49% of the shares owned by Shell and the rest owned by Omani investors. The Shell Development Oman office was set up in 2001 for the purpose of formalizing Shell’s in-country governance and support presence. I sit on the boards of PDO, Oman LNG, and its sister company Qalhat LNG. I also chair the board of Shell Oman Marketing, which is involved in market retail, commercial fuels, aviation fuel, and so on. In this office we also house Shell Technology Oman, a group of between 10 and 15 people doing enhanced oil recovery R&D for PDO.

How does Shell work to develop social infrastructure in Oman?

Our social investment agenda falls into four parts: employment, enterprise, environment, and road safety. Employment is the biggest, the main thrust being to create training opportunities with the Oman Society for Petroleum Services (OPAL) in industry, through which people are trained with the promise of a job upon the successful completion of their training. The Training for Employment project has been running for some years now and has been quite successful, creating an average of 140 jobs per year. These projects also include training for people with a range of disabilities for suitable jobs. We were awarded the Sultan Qaboos Award for Social Responsibilities in 2012 for our efforts. On the enterprise side we have an SME fund and we have a partnership with Grofin, the operator of the fund. Grofin is an SME fund specialist, and it set up a fund here in Oman for us, which has been running since 2007. We’ve invested $17 million in the SME fund and we’re trying to attract young businesses that have already started up and need a boost, not just by investing money, but by helping them develop business and marketing plans. Its aim is to create jobs through Omanis starting up and growing their businesses, or taking businesses to the next level. The environmental side includes various projects that we’ve been working on. The road safety side aims to try and push the awareness of road safety in Oman through schools, families, and the Oman Road Safety Association (ORSA). The loss of life we’re seeing is unnecessary, and we hope to bring in more awareness and the right rules and controls to prevent that happening. Our main thrust has been both through the Oman Road Safety Association (ORSA), an Omani NGO, and through schemes in schools to create awareness, and we’ve done that in conjunction with the Ministry of Education and Royal Oman Police. One more initiative is Outward Bound Oman project, which enables youngsters to go outside and appreciate what the country has to offer, exercise, and pick up leadership skills. This year it runs as an independent organization. It started off in 2009, is headed by Mark Evans, and has gone from 100 to over 1,300 young people in 2013, including both Omanis and foreigners. That’s our social investment side in a nutshell.

What level of support do you provide to PDO?

The biggest support we provide is through people and technology. In short, we work to ensure that all the strengths we believe make Shell competitive flow into PDO. Coupled with that is Shell Technology Oman’s R&D. That is paid for by PDO, but there are also strategic alliances where PDO and Shell pool money to develop future projects and initiatives. Among these big future projects are enhanced oil recovery techniques, which are being matured by PDO. Shell is helping with this new technology and Oman leads the world in this area. We aim to help PDO not just replace its reserves, but also replace future contingent reserves so it has a stable 10-year plateau. We help with the future, but also with day-to-day problems, asset integrity, system reliability, and reservoir maintenance to keep production levels up and maximize the value of each asset. On the people side, we have an agreement with PDO for it to use the Shell Graduate Training Process, which it has branded as its own to get youngsters from study through to functioning engineers much quicker than would usually happen.

How do you evaluate PDO’s training and development of its Omani staff?

The company has about 7,000 employees and it is roughly 80% Omanized. It has done a great job, with help from Shell and others, in terms of training and capability transfer with a lot of on-the-job training and help. A very visible measure of success is the leadership team, which is all Omani, except for the Managing Director. That gives you an example of how seriously it has taken the subject of developing Omanis. PDO isn’t just an exporter of oil, it’s an exporter of people into the Omani economy. Ex-PDO people emerge in all areas of the economy, and for good reason, because they’ve been tested, trained, and had work and leadership exposure.

How else do you instill Shell’s worldwide values and quality control?

PDO has its own culture and identity, and we don’t try and change that. It does, however, use many Shell standards, be they engineering, financial, ethical compliance, or other standards. There’s also the absorption of Omanis into the Shell system. All their top leaders have spent time in the Shell system worldwide, and that continues. We aspire to have 100 Omanis in the Shell network at any one time.

How do you see Oman’s production capabilities changing in the future?

I think Oman has done a great job at keeping a stable outlook. Oil was first produced in the early 1960s, today peaking at its highest production level ever for gas and oil. PDO alone produces over 1 million barrels a day oil equivalent, which is higher than it has ever been. Exploration is also extremely active, both in PDO and in other blocks. There are more and more production and exploration opportunities, more revolutionary production technologies, as well as a growing diversity of operators, which is up to around 20 now. BP is also coming in the future, and this is great for the oil and gas sector.

Do you think more competition is conducive to better production?

Definitely. It’s a great thing. PDO used to have a dominant position, which may have been healthy at the time to try and kick-start technology and get the oil and gas sector up and running, but as others have come in, it has created a very healthy environment.

What is your outlook for the Omani oil and gas sector over the next five years?

Very exciting. Khazzan and Makarem, operated by BP, is a tight gas project that will soon make its investment decision. Be it in tight shale/oil and gas, there is activity everywhere. The outlook is bright.

© The Business Year – August 2013