AT THE FOREFRONT

Oman 2015 | ENERGY | VIP INTERVIEW

TBY talks to Chris Breeze, Shell Oman Country Chairman, on enhanced oil recovery (EOR), supporting SMEs, and the development of health and safety standards in the country.

How has Shell developed in Oman over recent years?

A relatively recent development has been the establishment, in 2002, of a Shell office separate from the joint ventures in which we are partners—Petroleum Development Oman (PDO), Oman LNG, and Shell Oman Marketing (SOM). We are a minority shareholder in each of these, with the principal shareholder of the first two being the government of the Sultanate of Oman and the Omani public owning the majority of the third through the Muscat Stock Exchange. We subsequently also became a partner in Occidental's development of the Mukhaizna field. The establishment of a separate Shell office has enabled us better to reach into the wider Royal Dutch Shell group on behalf of our joint ventures in Oman in order to deliver cutting-edge technology and experienced people to the ventures. This ensures that we help the joint ventures deliver projects, enhance their operational excellence, and continuously improve their performance. Other relatively recent Shell in Oman milestones include the 2006 opening of the Shell Technology Oman (STO) office, which is a vehicle for our strategic alliance with PDO on enhanced oil recovery (EOR), the 2010 Technical Support Agreement, which put Shell's technical support under the PDO board governance structure, the Services Agreement signed with Oman LNG the same year, and the 2011 Technology Development Cooperation Agreement between Shell, the government, and PDO. We now have four other strategic technological alliances with PDO, in addition to EOR, covering smart fields, geophysical technologies, materials and corrosion, and fiber optics for wells and reservoir management, with the last two added in 2014.

How would you assess the importance of EOR for the Sultanate of Oman? What kind of contribution are you providing to PDO and Oman LNG?

According to the government, approximately 18% of Oman's current oil production involves EOR. Part of this is Occidental's development of the Mukhaizna field, which is one of the largest steam flood operations in the world. In PDO the percentage of its oil production using EOR is currently 11%, but PDO expects this to reach 33% by 2023. So EOR is increasingly important for the Sultanate of Oman. The relationship between Shell and PDO on EOR is truly symbiotic in the sense that PDO benefits from Shell's world-class subject matter experts in a range of different EOR disciplines and from Shell's global EOR network, while Shell benefits from PDO's experience implementing novel EOR technologies. This cooperation has placed Oman, PDO, and Shell at the forefront of global EOR innovation. Shell's contribution to PDO and Oman LNG is, by means of technology, people, and a strong focus on asset integrity, safety, and project delivery, helping them to be the extraordinary companies that they are. SOM is one of the leading companies on the local stock exchange, and PDO and Oman LNG are principal engines of the Omani economy. The contribution that these companies make is important to Oman, and we are honored and proud to be partners.

Besides the complex geology of the country, what other challenges are you presented with here?

The complex subsurface and understanding the nature of PDO's reservoirs is indeed the biggest challenge for us in Oman. Easy oil would be nice to find, and it may still be there to be discovered. As new technologies develop, we may find more resources. The development of seismic technology, for example, has enabled PDO to see small but prolific reservoirs that were just not visible before. In terms of the business environment, meeting the required Omanization rates is sometimes a challenge for us. The nature and the composition of our small office requires experienced expatriates to support the business activities in our joint ventures including R&D, technology transfer, and health and safety. We are part of a business line within Shell that includes countries as far afield as Denmark, Italy, and Kazakhstan, and a number of our staff have regional or global roles. This approach ensures that our people share best practices among these countries, leading to business improvements. One local advantage of having these experts here in Oman, rather than in other countries in the business line, is that they are closer to our important joint ventures here and can provide direct support.

SMEs play a critical role in Oman's economy. How are you supporting young entrepreneurs in that respect?

We have a program called Intilaaqah, based on the Shell LiveWire program, which was started in the UK in 1982. It aims to give young people the entrepreneurial and innovative skills required to start their own businesses. We have been running Intilaaqah in Oman since 1995. Intilaaqah is a training scheme that takes people through the process of starting their own businesses and teaches participants how to make business plans, apply for funding, and covers a series of other aspects on how to successfully run a business. In 2007, we expanded beyond training by establishing a fund to finance start-ups. In 2011 we enhanced that fund with an additional cash injection, and developed it into the Nomou Fund, which is run by the Shell Foundation and GroFin. Through Intilaaqah we have recently signed MoUs with Future Generations International and Haya Water. We intend to sign an MoU with Al Raffd Fund, too. The first step for an Intilaaqah student is to attend a one-day “Bright Ideas" workshop. We aim for around 2,000 people to go through those every year. Through the workshops we try to get around 500 participants into Intilaaqah's seven-week course, which is called Becoming a Successful Owner/Manager. Everyone has SMEs on their mind. There is a strong focus on promoting SMEs in the Sultanate, and that is absolutely right because the proportion of SMEs here is smaller than in other parts of the world and they can be an engine of future growth. Our youth development programs, FutbolNet and Outward Bound Oman, encourage the sort of personal attributes that might help young entrepreneurs and we run a training for employment program, through which we train about 100-150 young Omanis annually, with guaranteed employment at the end of the training courses. We also train hundreds of Omanis on soft skills like project management, human resources management, communications, work ethics, and customer services.

“Right from the outset, we have driven high health and safety standards in all of our joint ventures."

How would you assess the development of health, safety, and environmental standards here in the Sultanate?

This is something that we, as a company, take a huge amount of pride in. Right from the outset, we have driven high health and safety standards in all of our joint ventures. In 2013, PDO had the best health, safety, security, and environment (HSSE) year ever. Oman LNG has recently recorded 11 million man-hours without any lost time through injury. One only needs to look at the road accident statistics in Oman to see that safety is not what it could be. This is the reason for the considerable effort that we put into our road safety programs. Of all fatalities this year in the oil and gas sector, almost all of them have been road accidents, and this is just tragic. I strongly believe that companies should voluntarily introduce speed limits for trucks that work for them of no more than 80 kilometers per hour. If you get a flat tire driving a heavy truck at speeds greater than this, even if you yourself survive, the result will be a massive weight moving at speed, out of control, that could result in serious damage to the environment and to others. I personally feel that if companies introduced a self-imposed speed limit they could, by the end of the year, definitely have saved someone's life.

What changes are Omani companies supposed to make in order to maintain their competitiveness and to contribute to Oman's in-country value (ICV) initiative?

Economic theory would suggest that if you can buy things more cheaply locally, you will. So, by its very essence, ICV implies that you are giving preference to something that is more expensive than something else you could buy abroad. If you are a company like Shell, having a global procurement function can save money. What you do not see looking at it through that end of the telescope is that, as a local venture, you may lose in terms of control, time, and influence over the providers of goods and services. While it may not initially be as cheap for, say, PDO to buy something locally as it might be from China, good ICV policies can, over time, ensure that local companies become more internationally price competitive as well as enabling greater local control over the prioritization of repairs and supplies as well as over quality control and product standards. The work that GlassPoint is doing with PDO is a good example of the potential for ICV to bring costs down over time. Everyone is now looking for the next big thing in that space, both in terms of energy conservation and renewables but also in terms of things like water treatment. What is the next really promising technology that we can help generate or foster in Oman? I think that innovation and entrepreneurship should be nurtured in Oman. There are lots of bright young people here and we need to do our utmost to encourage innovation and entrepreneurship in the new generation.

© The Business Year - August 2014