The conversion of gas as feedstock in diesel based power stations with the help of two pipelines criss-crossing Oman will have an adverse effect on companies engaged in the retail oil business.
All the three retail oil firms, which supply diesel to power stations, foresee a sharp decline in their commercial business when the power stations switch over from diesel to gas as their feedstock.
Ministry of Housing Electricity and Water (MHEW), which has scores of power stations throughout the country, need out have to depend on oil companies for diesel once these units in Southern Oman are converted to use gas as fuel, sources said, adding that this is expected by mid-2003. The three independent power projects (IPPs), which are under various stages of implementation, are gas based, while the conversion will be done in a plased maner in other existing units.
"From the country's point of view, it is a sensible thing to do.
But from the point of view of retail companies, it is a bad news." said Nicholas Pattison, Managing Director of Shell Oman Marketing Company.
"Gasification in the South will result in a drop in volume by more than 50 per cent", said Shell Oman, adding, "Margin impact is relatively small". A major chunk of Shell Oman's commercial business is from diesel-based power units. "We will have to find other avenues of business", Pattison said while making a presentation on the financial performance and future prospects of the company.
The construction of two pipelines, which will supply gas to power stations nad industrial units, are at an advanced stage.
Work on two gas pipelines linking Salalah and Sohar with Saih Nihayda in Central Oman is almost complete. The pipeline will supply gas required by power companies as well as industries.
Pattison also said that government debt is on the rise which has consequent effects on the company's working capital.
The government's outstanding amount to Shell Oman is ruling at RO 13 million now. He said that the payment terms and conditions with Oman Refinery Company (ORC) are different.
He added that Shell Oman, the market leader for supply of petroleum products, would concentrate on developing new retail outlets.
Four new sites are scheduled for this year, of which two are planned to be operational before the year-end. This follows lifting of a moratorium (by the government) in 2001.
Six Select Stores were successfully franchised to individual Omanies as part of the company's drive to create work opportunities for Omanies. The company has 116 retail service stations and 32 Select Convenient Stores.
The company which has stadff strength of 208, has achived 73 per cent Omanisation. It was the first to introduce the convenient store/24 hours concept in Oman and also the first MSM listed company to transfer dividends electronically.
Meanwhile, Shell Oman has reported a 6.3 percent growth in net profit half of 2002 as compared to RO 2.63 million achieved during the corresponding period in the previous year.
Sales revenue was also higher at RO 75.99 million as compared to RO 70.19 million during the period under review.
"In the commercial market unit margins remain at unsustainably low levels. We see little respite from this senario during the reminder of this year and will be extremely selective at renewing contracts.
The lubricants market, however, is showing signs of picking up with the market responding extremely well to the current Helix promotion", said the chairman while presenting the half-yearly results.
-Ends-
© Press Release 2005
