Can you tell us about the inception and development of the National Gas Company (NGC)?
NGC has been in operation for over three decades, and has been a listed company from the outset. We have been engaged in the bottling and distribution of LPG since 1981, and we are also bulk LPG distributors. Primarily, the company was a supplier of gas to residential customers through a distributor network. Because of the regulations on branding, pricing, and cylinder replacements, the margins have shrunk over the years. This led the company to seek out new opportunities beyond Oman. In 2006, the company ventured out into the UAE market. We buy gas at international prices and sell it to the UAE market through a wholly-owned subsidiary in the UAE. Launching operations in the UAE has been one of NGC's milestones, as it contributes significantly to our business. The gas business has two components: the first is subsidized gas and the other export gas. Subsidized gas is available for distribution within the Sultanate of Oman, while export gas comes from another source. In 2012, we looked into expansion to Southeast Asia. At the time, Shell was selling its Malaysian LPG business, the second largest business of its kind in Malaysia, which NGC successfully bid for and acquired. The leader of the Malaysian market is state-owned company, Petronas, while we are the single largest private sector player in the peninsular Malaysian market. The acquisition promoted us to a higher league: our pre-acquisition annual revenues of approximately OMR20 million, have subsequently reached around OMR120 million.
What's the importance of the local market for NGC?
The Omani market is still at the core of our operations. We have been in dialogue with the government to modify regulations that intervene in the normal course of business. LPG continues to be an important line of business for Oman considering its social and economic implications, and NGC aims to supply it in the local market, be it to meet household or industrial demand.
We are currently awaiting the passage of a new regulation that stipulates the mandatory replacement of cylinders every 15 years, which would impact our local business significantly. Another challenge is related to the nature of cylinders in the market, which are not branded by any single player given that no law stipulates this. As a result, when a cylinder is bought, it is fitted by one company, and can then be serviced by any other company when refilling. Ultimately, the company bears losses, as it replaces old cylinders with new ones that eventually get refilled by any other company. The issue on branding has repeatedly been brought to the government's attention. Hopefully, this situation will be resolved. Pricing and selling is another problem demanding urgent attention. Since gas is a socially subsidized product, prices were fixed many years back. And yet operational costs have been on the rise over the years, which has resulted in imbalance.
Do you also manage the entire logistics process?
Yes, we have our own fleet of vehicles-tankers and bobtails that we use to transport the product to the customer, or to our plants. We also have an in-house competent fleet maintenance team to address all related issues for our fleet.
You have recently announced the awarding of a contract to supply LPG tanks in Saudi Arabia. What is the importance of this market for your business?
This numbers among various projects that we are working on in Saudi Arabia, and we have many such projects coming up. We are in the process of establishing a wholly-owned subsidiary in the Kingdom of Saudi Arabia, to tap into the huge infrastructural development occurring there. Hopefully, our project and equipment supplying business will receive a boost in that market once the subsidiary commences commercial operations.