Orpic (Oman Oil Refineries and Petroleum Industries Company) and a consortium of 21 international and national financial institutions held a signing ceremony in Muscat on Wednesday for a $2.8bn loan arranged for Orpic’s projects including the the Sohar Refinery Improvement project (SRIP) which will be 65% debt financed.

The loan agreements were signed on behalf of Orpic by H.E. Dr. Mohammed bin Hamad Al Rumhy, Minister of Oil and Gas and Chairman of Orpic, and Musab Abdullah Al Mahruqi, Orpic’s Chief Executive Officer. The agreements were also signed on behalf of Orpic shareholder by H.E. Nasser bin Khamis Al Jashmi, Undersecretary of the Ministry of Finance, and Mulham bin Basheer Al Jarf, Deputy CEO of Oman Oil Company.

The signing ceremony was also attended by a number of government officials, board members and senior management of both parties.

H.E. Dr. Mohammed bin Hamad Al Rumhy said: "This is a significant moment for both Orpic and the nation on two counts. It demonstrates the considerable appetite there is for international investment in Oman’s Oil and Gas sector, and at the same time a step further in maximizing the added value of the Omani crude."

Commenting on the signing ceremony Musab Al Mahruqi, Orpic’s Chief Executive Officer said: "It is a reflection of the robustness of our business, the viability of our vision, and the commitment we have demonstrated that such a grouping of significant banks and financial institutions has come together to provide the financing required for a multibillion dollar project. We have proved that we are a business worthy of significant investment as we continue to transform Orpic in the coming five years".

Nazar Al Lawati, Orpic’s Chief Financial Officer who led the negotiations for agreements said: "The financing is one of the largest in Oman with a unique hybrid finance structure that will support the attainment of several of Orpic’s finance strategy objectives. The Export Credit Agencies (ECAs) and other lenders have demonstrated their commitment to and confidence in Orpic’s growth strategy".
"Attracting a consortium of eminent international financial institutions to sponsor the Sohar Refinery Improvement Project reflects the viability of the Omani market and Orpic’s credible and strong position in the regional and international markets," Nazar added.

SRIP is also a brownfield project and represents a significant technical improvement to the existing refinery, which will further enhance its capabilities to cope with the changes in the quality of the Omani crude, reach international levels with regard to environmental improvements, competitiveness and profitability, thus making the project very attractive to investors.

Financial Institutions

The consortium is made of a number of local banks namely Bank Muscat, National Bank of Oman, Al Ahli Bank, Bank Dhofar, Bank Sohar, and Oman Arab Bank.

The consortium also includes international financial institutes namely, the Korean ECAs (KExim and KSure), Italian ECA (Sace), HSBC, Sumitomo Mitsui Banking Corporation, KFW IPEX Bank, Abu Dhabi Commercial Bank, Qatar National Bank, The Saudi National Commercial Bank, National Bank of Abu Dhabi, Standard Chartered Bank, Arab Banking Corporation, Arab Petroleum Investment Corporation, Ahli United Bank and Arab Bank.

Upgrading Sohar Refinery
The importance of the improvement project stems from the fact that it will help Sohar Refinery overcome the existing technical constraints resulting from the change in the quality of the Oman Export Blend (OEB), meet the increasing demand for refined products, support the industrial development initiatives of the Government of the Sultanate of Oman, and drive the integration of Orpic’s Sohar complex to a new level.

As part of the project, SRIP will improve the Residue Fluidized Catalytic Cracker (RFCC) unit feed quality to meet design parameters, meet the polymer grade propylene demand of the polypropylene plant, maximize additional gasoline and diesel production, ensure that all Sohar Refinery fuel products are in conformity with Euro IV norms and meet current product specifications where these are better than Euro IV, produce naphtha of desired quality for the Aromatics plant, and equip the refinery with the necessary tools to become capable of producing bitumen and petroleum coke.

Following the completion of SRIP, the Sohar Refinery will be a high conversion refinery using RFCC (existing), and five new unites such as hydrocracking (new) and coking (new) to achieve a zero fuel oil yield, with the majority of products being high value transportation fuels or petrochemical feedstock. With the new improvements the refinery will have more flexibility to handle unexpected changes in OEB quality. The hydrocracker provides a means to upgrade the quality of residue feedstock to the RFCC.

Meeting Domestic Needs

SRIP will also enable Orpic to meet the domestic growing needs for gasoline in the near and far future. The existing refinery at Sohar, which first started operation in 2006, has a crude oil processing capacity of 116,400 barrels per day of OEB crude oil. The new units that will be built as a part of SRIP will add a further 82 kbpd of OEB crude oil processing capacity, to achieve a total refining capacity of 198 kpbd. Crude throughput of the refinery will increase by 70% with increased product yields for diesel (90%), gasoline (37%), Jet Fuel (93%), LPG (91%), Naphtha (175%) and Propylene (44%).

SRIP will be located at the Sohar Industrial Port, complementing the existing Sohar Refinery, which was commissioned in 2006. Orpic estimates a requirement of 500 new personnel for SRIP. The company will follow a blended resourcing strategy hiring fresh graduates and experienced individuals as well as capitalizing on the existing company’s personnel. Orpic has been gearing up for this through its successful fresh graduate program, which sees over 100 trainees a year entering a program of up to 18 months.

Environmental Importance

Integrated within SRIP is a series of environmental upgrades which will meet the Omani regulations on environmental protection and pollution prevention. In addition, applicable international regulations, such as those contained in the environmental directives of European Union (EU) and environmental standards provided by United States Environmental Protection Agency (US EPA) will be used as appropriate to ensure that the technology, equipment and operations selected for SRIP are capable of meeting national and international environmental requirements.

In addition, SRIP will take into account the Guidance Notes issued by the Sohar Environmental Unit (SEU) for management of materials and wastes, industrial safety and the EIA study for the industries within the SIPA. Orpic has also elected to meet the following international environmental standards: IFC Performance Standards on Social & Environmental Sustainability, and World Bank Group Environmental, Health and Safety (EHS) Guidelines.

In-Country Value

As well as the integration of environmental processes within SRIP, In-Country Value has also been incorporated to ensure that whenever possible the value of the project becomes directed to local businesses and communities. Meetings have already been held between the major contractors and local and national suppliers, and further meetings are planned for subcontractors in the near future.

Orpic and its Future Plans

Orpic was established as Oman’s largest integrated refinery and petrochemical complex and the sole supplier of refined oil products by the restructuring of the three companies; ORPC, AOL and OPP. Orpic is responsible for arranging the sale of refined products to the marketing companies engaged in distribution of petroleum products to local consumers and for the construction, maintenance and operation of the facilities and depots providing means of refined products distribution in the Sultanate of Oman. In addition, Orpic is engaged in the production and sales of aromatics and polypropylene products from its downstream petrochemical complex.

In this role, Orpic is the nation’s company specialising in refining and petrochemicals, and is currently a central player in the Government’s strategy to consolidate and modernise the oil and petrochemicals industry in the Sultanate of Oman.

Orpic is developing two additional major projects, which are at design stage, namely the Liwa Plastics Project (LPP) and the Muscat-Sohar Product Pipeline (MSPP). LPP is a steam cracker project to improve value added by processing light ends produced in Orpic’s Sohar refinery and aromatics plant as well as optimize NGLs extracted from the natural gas. It will bring new business opportunities and employment in the Sultanate of Oman, and firmly establish Orpic as a significant player within the Arabian Gulf and on the international stage. The project is on schedule for completion during 2018.

It will enable the Sultanate of Oman to produce, for the first time, polyethylene, the form of plastic that enjoys the highest demand globally. Upon completion of the project, plastics production is expected to have increased by 1 million tonnes, giving Orpic a total of 1.4 million tonnes of polyethylene and polypropylene production by 2018. The company’s revenue will grow following LPP and the profitability will double.

The MSPP involves a 280km pipeline between Muscat and Sohar for the transporting of refined products and will include a large storage & distribution terminal in Jifnain, north of Muscat. It will also connect directly to Muscat International Airport for delivery of jet fuel. The key benefits and objective of the project is to improve the efficiency and safety of transportation of refined products by pipeline, thereby reducing vehicular tanker trucks and ship tankers between Muscat and Sohar. The project is due for completion in 2016/2017.