The theme of the oil and gas industry is change—major movements to become smarter, more efficient and to boost growth. One recent example is Oman’s OQ, formed in 2019 through the integration of nine companies. “Integration has created opportunities for synergies between OQ’s upstream, downstream and commercial verticals, in which the organisation has achieved quick wins of almost $500 million,” says Adil Toubia, upstream CEO at OQ. “Project delivery and execution have now been centralised via a projects function, ensuring cost optimisation, engineering and executional excellence and improved performance.”
OQ is a significant producer of oil and gas in the country, owns and operates its refineries, and exclusively owns and operates most of its gas transportation system, so integrating the companies will place all of those operations more easily within reach. Centralisation has strong benefits for any oil producer, and Toubia says that it creates “a platform for a holistic view of the end-to-end operations, from oil exploration to sale of refined products, under one roof.”
Overall, OQ contributes 4.4% to Oman’s nominal GDP (as of 2019), making it a key contributor to the national economy. Its upstream unit comprises exploration & production and its gas network. The exploration & production unit is divided into two parts, one focusing on operated assets, with three operated blocks in Oman. The other segment focuses on joint ventures, with 11 non-operated upstream ventures in partnership with foreign oil and gas companies for assets in Oman and one in Kazakhstan. Like most regional oil producers, OQ is leveraging the power of international partnerships to bring more expertise, collaboration, and investment into the nation. OQ works with major oil & gas companies such as Occidental, Eni, BP, Shell, Total, Petrogas and Medco, with OQ holding participating interests ranging from 20% to 45%.
OQ owns and operates almost all of Oman’s gas transportation network comprising 4,000 km of gas pipelines. OQ’s upstream unit typically contributes more than 60% of the Group’s EBITDA, and the company plans to grow this segment, with an aim to increase production from 145,000 barrels of oil equivalent per day (boed) to 300,000boed in 2030.
“This will require us to make distinct portfolio decisions, in which we will continue to expand our operating capability and technical know-how to extract value from all assets, pursue selective and opportunistic international acquisitions and focus on becoming a gas player in Oman,” Toubia says. “We will also continue to develop and seek new partnerships and be a partner of choice for other leaders in the industry seeking opportunities.”
But integrating nine companies is no easy feat, and although the process started in 2018, they had an eye on the future. “We realised that the energy landscape and the way we will do business in the future would be very different from that of the past decade, so OQ has established Alternative Energy and retail as emerging businesses,” he says. “As the world pivots from the current hydrocarbon energy mix to more sustainable sources of energy, OQ is committed to sustainability and growth that meet environmental, social and corporate governance criteria.”
Yet no one could have predicted the coronavirus pandemic and ensuing market crisis that would unfold. Toubia says that because of the integration, having closer interaction, optimisation and aligned objectives across business verticals strengthened the company’s position and resilience, “preserving capital with minimal impact on our operations and day to day activities.”
Despite market conditions, as the operator of Block 60, OQ was able to make operational improvements which increased the block’s oil production by 50%. Additionally, majority stakeholder and Block 61 operator BP and its partners (including OQ) in October 2020 were able to commission a major project, the Ghazeer field. Block 61 is an important part of the country’s plans, as it could satisfy approximately 35% of Oman’s total gas demand. The upstream segment in general is a key part of OQ’s growth strategy, as Toubia notes that it is “set to grow and contribute significantly to fund OQ’s strategic long-term shift towards the energy transition.”
But a lower-carbon future is not the only strategic goal for the company—aside from becoming an integrated energy company, it is also embracing digital transformation, with several projects lined up, including smart fields and artificial intelligence.
“Digitalisation is reshaping the global oil and gas industry and new digital technologies that are being deployed will drive operational efficiency and streamline processes, triggering changes in competitiveness,” Toubia says.
The company’s smart field concept includes a centralised control room housing real time data from wells, which it says will reduce operating costs and enhance production. Among newer technologies, OQ has started building infrastructure to enable digital twins technology for its gas network. Digital twins provide a virtual copy of real assets in the field, allowing operators to visualise what is happening in real time. Common applications for the technology include data collection and visualisation, inspection, maintenance and training.
“The digital twin will improve the exchange of information between different functions,” Toubia says. “It will also allow us to use artificial intelligence and machine learning applications to maximise our physical asset lifecycle and performance while allowing us to monitor live leading KPIs for optimum decisions as a continuous improvement process.”
But he does not shy away from the challenges of the year, noting the “supply glut and demand disruption due to the COVID-19 pandemic.” While emphasising worker safety, Toubia says that OQ was also able to ensure that its essential assets continued to operate. As with most operators, continuing business also meant deferring or cutting costs. Although many already started the transformation process before this year, the pandemic has undoubtedly presented an opportunity to oil and gas companies.
“This pandemic has been a catalyst for change in the industry,” Toubia concludes. “It has accelerated the response for energy transition, innovation, digitalisation and is a driver to strengthen balance sheets.”
