Salim Nasser Said Al Aufi, Undersecretary, Ministry of Oil and Gas: Interview

Interview: Salim Nasser Said Al Aufi

How do you assess the progress of the in-country value (ICV) initiative, and what additional mechanisms are needed to meet value retention targets?

SALIM NASSER SAID AL AUFI: The ICV initiative seeks to retain a portion of the $64bn within local oil and gas supporting industries by 2020. In December 2013, the first wave of 14 supply chain development opportunities were launched, followed by another six in June 2014. So far these represent about 17% of the total value to be captured.

That said, all of these opportunities are still in early stages of development and are not expected to reach the tendering phase before 2015. Capturing value for local firms will not be realised instantly as it is expected to be a gradual process. It is the continued viability of the winning bidders and subsequent contracts that would lead to a portion of the $64bn being localised.

In addition, the Ministry of Oil and Gas has collaborated with industry operators to standardise the use of special ICV terms and conditions for exploration and production, whereby bidding companies are required to submit a clear ICV plan. These standards will form an important part of tenders as a means of maximising ICV. I am pleased to say that some operators have begun incorporating them into their tender documents, which will influence award decisions.

A related component to the initiative is the recent activation of an online Joint Supplier Registration System, which went live on June 30, 2014. The system is designed to cater to the oil and gas industry, allowing operators to access and explore a wide range of registered suppliers for their procurement needs, thus providing greater exposure for local companies.

What are some under-exploited areas that have potential to increase the local capacity to procure goods and services for the hydrocarbons sector?

AL AUFI: The ICV programme identified around 50 supply chain development opportunities across different market segments where potential ICV could be exploited. These categories – which range from construction support services and inspection services to water treatment and the development of manufacturing capabilities – were identified by analysing tier-2 suppliers and contractors to understand where the dollars coming from operators are spent. Indeed, further ICV opportunities are still up for grabs, either in sectors not included as part of the study or even going deeper along the value chain to suppliers in tier 3 and tier 4.

What more needs to be done to incentivise international oil companies (IOCs) to cooperate with local companies in Oman?

AL AUFI: With the support of oil and gas companies, the ministry has identified several initiatives that will encourage further cooperation between local and international companies, some of which are already being implemented. However, more effort needs to be focused on knowledge transfer, which will help develop a competitive and sustainable local supply market capable of providing high-quality goods and services.

This is especially important as oil and gas activities are expected to increase in the coming years, which will generate a considerable number of jobs and training requirements, and necessitate a competent local workforce. IOCs will need to play an active role in providing training programmes that will enhance the skills of the local workforce to meet internationally recognised standards, while ensuring that this responsibility cascades down the value chain to sub-contractors as part of tender requirements.

Another important area requiring the involvement of IOCs is in research and development, thereby promoting the innovation and capacity-building that will allow local companies, small and medium-sized enterprises, and other stakeholders to benefit from the oil and gas ICV initiative. In order to promote more technology transfer, IOCs can also encourage and attract experienced international suppliers to set up businesses and manufacturing facilities in Oman in the form of joint ventures or other types of local collaboration.