Oman’s national oil refining and petrochemical company, Orpic, reported its current position and looked forward to the next five years in a presentation given today to media at the Ministry of Oil and Gas by its CEO, Musab Al Mahruqi.
Following a year which featured a planned shutdown of the Sohar Refinery and focus on an environmental improvement plan, the company reported significant improvements in environmental performance and the achievement of key milestones in its future growth projects.
Safety record continues
With over 1600 employees, Orpic’s safety record continued at an exemplary level. 2013 saw just one LTI (Lost Time Injury) to a contractor employee during the Sohar Refinery Turnaround, during which Sohar Refinery had over 1500 contractors working on the project. Orpic’s three other plants continued to build their safety sequences: Mina Al Fahal Refinery passed 3 years without an LTI, and the Aromatics and Polypropylene plants 4 and 6 years respectively. In terms of Lost Time Incident Rate (LTIR) the company performed at a creditable 0.04 compared to CONCAWE’s European benchmark of 0.11. To support the continuation of this record, Orpic devoted over 10,000 hours to HSE training during 2013.
Processing and manufacturing
In terms of processing, Orpic processed around 56 mn barrels of Oman’s Export Blend during 2013 which is equivalent to 17% of total country’s production, with the remainder exported. Mina Al Fahal Refinery witnessed a record level increase in its crude processing level at 36.4mn barrels over 2012’s 30.8mn barrels, whereas Sohar Refinery levels came down from 27.7mn barrels in 2012 to 19.4mn barrels as a result of the planned shutdown. Overall processing was therefore reduced from 58.5mn barrels to 56mn barrels. As a result, fuels production figures for LPG, Gasoline M-90 and M-95, Gas Oil (Diesel) and Jet-A1 were also less than 2012, although the sales levels for these products outstripped local demand except in the cases of Diesel and Gasoline.
Petrochemical production levels for 2013 over 2012 increased for Paraxylene (710kMT vs 700kMT) and Benzene (219kMT vs 165kMT), but fell for Polypropylene (159kMT vs 219kMT) which was impacted in terms of feedstock availability from Sohar Refinery. .
In term of the operational performance of the four Orpic facilities, Mina Al Fahal Refinery (92% vs 80%) and Aromatics Plant (84% vs 78%) both increased their capacity performance over 2012, with Sohar Refinery and Polypropylene plant (70% vs 90%) and (43% vs 59%) operating at lower capacity levels than the previous year due to the planned shutdown of Sohar Refinery for regular maintenance activity.
Orpic Financial Performance
Orpic’s profitability is largely impacted by the production levels of its facilities and the relative international market prices for the various refined petroleum products and petrochemicals. In 2013, and despite healthy oil prices above USD 100/bbl, the international refining margins were lower than levels seen in 2012 and 2011.
Orpic buys its feedstock requirement from crude oil at prevailing international prices and all local sales of Orpic are made to local marketing companies at regulated prices, with the Government compensating Orpic directly for the difference between the fixed prices and prevailing international prices.
While the refining margins were low, the petrochemical margins were healthy with Aromatics contributing over 223 mn USD to the total Gross Margin of Orpic in 2013 (394 mn USD).
In 2013, Over 70% of Orpic’s revenue comes from local sales of refined products while the rest of revenue is derived from export of both refined products and petrochemicals, mainly Paraxylene, Benzene and Polypropylene.
2013 saw the successfully renewal of required Environmental Permits issued by the Ministry of Environment and Climate Affairs (MECA). The ongoing effect of Orpic’s Environmental Improvement Plan (EIP), first established in 2011, led to further milestones in 2013 across a number of areas. Flaring levels at Sohar refinery were reduced by over 60% from 2011, and SOx emissions fell to a level 80% lower than 2012. A Hazardous and Non-Hazardous Industrial Waste Storage Facility was inaugurated within the Orpic Sohar Complex, so the materials it handles no longer have to be stored in offsite facilities. A Hotline was established so that the local community could report incidents that were affecting them by calling directly through to the operations team in the Sohar Refinery main control room, allowing rapid investigation should it be necessary. During the rebuild of the Sohar Refinery’s Wet Gas Scrubber the opportunity was taken to upgrade its function. In addition, for 2014, Orpic will be reporting its environmental performance for the Sohar Refinery in the national print media on a monthly basis. The January figures for all ambient air quality readings (Nitrogen dioxide, Sulphur dioxide, Carbon monoxide and Particulates) all range between 40% and 96% below MECA’s limit, with SOx emissions 68% below the limit, and 100% compliance with the required standard for cooling water discharge to the sea.
With projects that will see its workforce of 1600 being increased by over 1000 skilled positions over the next five years, Orpic’s people are a priority for the company. With the Omanisation rate at over 70%, training and recruitment are areas of prime focus, and in 2013 some major undertakings began to happen. The company’s first batch of 110 graduates completed their 18-month training period in May, and towards the end of the year the next group began their programme. Over the coming years the numbers of graduate engineers and technicians entering Orpic will rise further up to addition 500 trainees in the next 5 years, but there will also be an increased requirement for those involved in support functions as well. At the management level, the Arriyadah Leadership Development Programme started its year-long journey for over 150 senior staff, while the company welcomed over 300 interns to a variety of departments for several weeks of job experience.
Suppliers, Community and CSR
Understanding its responsibilities to stakeholders, in 2013 Orpic ratcheted up its commitment to groups that hold important relationships and partnerships with the company. In addition to the local purchasing levels that Orpic has set for the country and for the Al Batinah region, the company joined the MOG ICV initiative that supports local entrepreneurs through sponsorship of business-building projects. Orpic is now involved in three such projects; tank maintenance and cleaning, scaffolding manufacture and servicing, and compound chemical procurement.
Suppliers will also have an easier time now in discovering and participating in the Orpic tendering process. As part of the revamp of the company website (orpic.om) a special section has been added where tenders can be viewed throughout their lifecycle, with insights and details on the processes, along with a question and answer booklet. This was prepared for the successful 2nd Orpic Vendor Symposium, which took place in December 2013, and which will be repeated at least once in 2014.
Orpic’s strong relationship with Jusoor, its social investment arm, continued in 2013, while the company also invested in direct projects and programmes with the communities that neighbour the Sohar Complex. In 2013, Jusoor announced an investment in a Drugs Rehabilitation Centre in Sohar. An OMR 1.6 million project under development with the Ministry of Health the drug rehabilitation project will be constructed by Jusoor and operated by Ministry of Health. It is the first of its kind in Oman. Other sponsorships and social projects were implemented by Jusoor in Northern Al Batinah Governorate to cover areas of culture, professional education, sports and volunteerism.
During the year over 1,500 visitors were welcomed into the Sohar Visitor Centre – 50% above the projected target. Visits were organised for community leaders to Holland, Hungary and Slovakia to learn about locations where refining operations and local communities exist in close proximity and enjoy longstanding close relations. At the year end, Orpic’s own Ehsan team won a competition run by Jusoor to judge the best developed and executed community programme.
In the field of education Orpic initiated the Orpic International Scholarships, an elite programme designed to give an unequalled learning experience annually to 50 bright and motivated students from the north Al Batinah governorate. Associated with the Takatuf Scholars Programme, the Orpic scheme sees those students chosen on academic criteria completing their school education with two years at boarding school in the UK or US, before going on to four years of college at some of the most highly regarded universities in the world. The programme is designed to develop the next generation of Omani business and government leaders.
In 2013 Orpic issued its first Sustainability Report, an important moment in its progress towards its stated desire to improve the transparency inside the organisation. The 2013 report is currently being prepared and will be issued in mid-2014.
In addition, Orpic’s environmental reporting has taken a new direction with the recognition that the company should be responsible not only to the authorities that govern environmental issues, MECA and the Sohar Environmental Unit, but also to the general public. With this target in mind, the company will be reporting its environmental performance on a monthly basis throughout the year through a series of placements in the national print media.
Over 2013 a variety of new communications media were developed for both internal and external audiences. Orpic’s Facebook site (www.facebook.com\orpic) was given more attention and generated more content and news. An Orpic App was created for iPhone, iPad and Android use. The company website has been revamped to include features such as the tendering and posting of job vacancies, as well as links through to the Orpic International Scholars website (Takatuf) and to forms that will enable students to apply for internships with the company.
On the electronic media side a corporate video and the company’s first television commercial were produced, and the latter aired during the second half of the year. A new digital signage system has been installed throughout the company sites, and is currently being tested. A new quarterly physical magazine, Orpic Today, was also introduced to sit alongside the internal magazine, Inside Orpic, and caters to the local community.
Future Strategic Plans 2014-18
Three major projects will transform Orpic over the next five years as it develops from a secure refining operation to a fully-fledged integrated refining and petrochemicals player.
The Sohar Refinery Improvement Project (SRIP) will increase the refinery’s ability process heavier crude, reduce environmental emissions and develop the Sohar Complex’s integration. As a result current production levels will be raised by 70%, the naphtha and propylene will be provided to enable the Aromatics and Polypropylene to operate at greater capacities, and fuels production levels will increase by 4.2mn tonnes a year, reaching 13mn tonnes in 2016. Orpic will also be able to produce bitumen for the first time. The main EPC contract for SRIP was signed in December with Daelim and Petrofac and the project will be completed by end 2016.
The Muscat-Sohar Product Pipeline (MSPP) adds considerable flexibility to Orpic’s operations, consisting of a 290km 2-way multiproduct fuels pipeline system between the Muscat and Sohar operations. It will also connect to a strategic storage facility at Jifnain, Muscat Governate, with a pipeline spur directly to the new Muscat International Airport, enabling jet refuelling to take place using a ‘closed’ system, rather than tankers. Within Muscat itself the pipeline will see tanker traffic reduced by 70%. MSPP’s elements are scheduled to be completed in 2017.
The Liwa Plastics Project (LPP) involves the construction of a steam cracker and associated units which will enable Orpic to produce two new types of plastics, HDPE and LLDPE, along with greater polypropylene production. It will take its feedstock from existing refinery light ends and C2+ from Oman’s natural gas production, the allocation of which was approved by the government in 2013. LPP will also help to optimise refinery and petrochemical integration leading to improved motor gasoline sales and an increase in benzene production. LPP is expected to be commissioned in 2018.
The combination of the three projects represents a growth strategy that revolves around increased integration within the manufacturing complex, and the production of a broader slate of petrochemical products that will enable Orpic to extract far more value from a barrel of Omani oil than it can do at present. The three investments will require over USD 7bn of funding of which around 70% will be from local and international banks. The three projects will enhance the profitability of Orpic and generate returns for its shareholders. Orpic’s growth strategy will create more jobs in this sector and be able to support an Omani downstream plastics industry that will add further value to the national economy, while also becoming a bigger player in the international plastics market, earning export dollars for the country.