Shell Oman Marketing Company has completed 60 years of its operations in Oman. CEO, Dr Mohammed Mahmood Al Balushi, talks about the company’s major milestones, operational efficiency and the indelible footprints it left in Oman’s oil and gas sector
Shell Oman Marketing Company (SOM) has recently completed 60 years of operations in Oman. What are your thoughts on achieving this milestone?
We celebrated the diamond jubilee of Shell Oman’s downstream business at an event that was held under the auspices of His Highness Sayyid Shihab bin Tariq Al Said, advisor to His Majesty the Sultan. It was attended by an array of senior stakeholders – that included our business partners, the public and private sectors and the company’s senior management team and executives. Shell Oman’s 60th anniversary celebrations gave us the opportunity to reminisce about the past with pride and to recognise the contribution of those who helped make the company what it is today – an Omani company with an international affiliation and expertise that is committed to serving Oman.
Shell Oman has witnessed the development of the nation over 60 years, particularly under His Majesty’s wise leadership; and we are fully committed to the future of this country in the years to come. As a company, Shell Oman has been consistently delivering innovation and pioneering technologies with world-class quality products and services while contributing to the Sultanate’s growth and sustainable development. This has been achieved through the creation of in-country value (ICV), focus on operational excellence and the fostering of a health, safety, security & environment (HSSE) culture among the wider community. Of course, this comes with great responsibility; and our customers’ trust in our brand has been always motivating.
So, as we celebrate this remarkable milestone, we would like to reiterate what Shell brand is best known for which is our commitment to continue being pioneers in innovation and technology, and a great example and role-model of an Omani company that is run and managed by Omani talents in the industry, through sustainable business practices, operational excellence, ethics and compliance; while maintaining the highest standards of HSSE.
Can you share details of SOM’s retail business and are you looking at enhancing it in 2019?
The retail business remains the largest revenue segment for Shell Oman, which has helped sustain Shell Oman’s market leadership position. In order to provide its customers with convenient locations across Oman, the business continued with its multi-year investment programme bringing the total number of service stations to 190. Additional sites are currently under construction and we expect to cross the 200 service stations milestone later this year. In addition, a number of upgrade projects including “Knock Down and Rebuild” projects are planned for 2019 as part of the business’ focus to upgrade customers experience. Leveraging the research and development of the Shell Group, a new premium fuel from the Shell global fuel portfolio – Shell V-Power was launched for the first time in the Middle East, thereby offering our customers in Oman our best performance and efficiency fuel.
In the non-fuel-retail (NFR) segment, the business took a leap in enhancing customer experience, launching the new generation Shell select experience. In addition, car-care facilities such as car wash, Shell Helix Oil Change+, were commissioned across our retail network, providing customers with an integrated retail experience.
The contribution of business partners and frontline staff remains the driving force behind consistently delivering operational excellence and delivering our customer promises. Shell Oman’s commitment towards the ‘People Make the Difference Real’ programme has developed retailers as key business partners, in turn ensuring the highest standards of service at our service stations.
In 2018, the top three retailers represented Oman in the ‘Shell Retail Smiling Star’, held in the presence of the best shell retailers from more than 70 countries across the world. In 2019, the business continues to build on its mission of “Making Life’s Journeys Better”. This includes network expansion, operational excellence, developing world class people and introduction of new innovative customer value propositions; all of which are key priorities in order to adapt to evolving customer needs and changing regulations. In addition, we will continue to capitalise on the evolving customer trends and infrastructural investments in roads and strategic projects across the Sultanate.
What are SOM’s main lines of business and how have they performed in the last couple of years?
Shell Oman operates in a multi downstream-business structure providing retail, commercial, lubricants, aviation, marine and bitumen products and services in Oman. Moreover, our lubricant blending plant in Mina al Fahal serves several international markets in addition to Oman.
The last three years have witnessed several influencing factors that have impacted the local market; starting from the reform in government subsidy on retail fuel, which impacted the fuel consumption in the retail segment all the way to slowing down of several investments and projects due to the drop in the crude oil prices internationally. While the former has impacted the retail segment, the latter has impacted the commercial business in both fuel and lubricants. However, we at Shell Oman always look at the opportunities that come with such market changes, and rely on the ability and experience of our people to embrace and lead changes. We have managed to win a contract for the new Muscat Airport Fuel Farm operation for the coming five years. That’s not all. Shell Oman remains the sole operator at Salalah Airport in addition to fueling PDO’s airfields.
As a result, SOM’s aviation business, saw a significant increase in volume, driven by winning fuel supply contracts from new airlines and managing to retain almost all of our existing customers.
Another example is the recent launch of Shell V-Power fuel in our retail stations. Being offered for the first time in the Middle East, the product has been extremely well-received by our customers, which encourages us to fast-track the roll-out of V-Power across our network.
We have also continued to enhance our offers to our customers. Commercial fleet cards business continued its penetration in the overall retail business showing steady progress, with year-on-year growth in volumes by further enhancing its customer portfolio and signing new customers. The company continued to leverage its upgraded cards management system, allowing significant improvement in our offer to commercial fleet customers through better transaction controls and superior experience from the vehicle recognition system (VRS), a fully-automated revolution in fleet management that uses RFID technology to communicate fuelling type and limits at the retail station, with no manual intervention. The bulk fuels business continued to be challenging, given the competitive market pricing environment and tighter credits. However, the focus remained primarily on higher margin opportunities with the provision of HSSE and operational excellence as well as quality service.
The Lubricants market environment remained challenging due to the overall slowdown in the market and significant drop in new vehicle registrations compared to 2018 which has resulted in overall lower demand and a tighter credit market. Despite that, the commercial lubricants business maintained its market leadership position by retaining key customers, winning new accounts, enhancing premium products penetration and focusing on innovative CVPs. The business continues to leverage Shell Oman’s lubes blending plant, Oman’s only ISO-certified facility of its kind, which gives us a competitive edge where we are the only producers of an internationally renowned quality lubricants in Oman. Our made-in-Oman Shell-branded lubricants cater to the local market’s needs and are exported to international markets as well.
In the marine business, Shell Oman showed exceptional growth in recent years, which is demonstrated by the winning of key tenders including lately winning the tender to operate the bunkering facilities at Mina Sultan Qaboos in Muttrah. Additionally, the company continues to be the preferred supplier to most public-sector customers due to our HSSE and operational excellence. Recently, we have signed an agreement with Port of Duqm Company SAOC (PDC) to develop fuel bunkering facilities and services, and we have already started supplying fuel to key customers in Duqm Port. Due to the strategic and geopolitical location of the port on the international shipping lines, it is poised to transform into a regional hub attracting large investments and projects in the coming years; while driving the diversification of the Sultanate’s economy and enhancing its global competitiveness. In keeping with this, we are committed to play a crucial role in the attainment of this vision by delivering global fuel technology and operational excellence to local and international marine customers in Oman, as part of the global Shell network.
In the last two years, Orpic’s Al Jifnain terminal has become the main permanent supply point of fuel, following a successful transition of 100 per cent of volumes from Shell Oman’s Mina Al Fahal Terminal.
This transition was well managed by the trade and supply team on both the HSSE and operational fronts, ensuring product availability across the Shell Oman network. The MAF terminal will remain an asset to Shell Oman, providing the Company a significant strategic advantage, and we are working on exploring new business opportunities to capitalise on this strategic asset.
How was SOM’s financial performance in 2018 and what are your expectations from 2019?
Year 2018 was another year where we crossed the 2-billion litres volume. The year’s revenues were RO528.9mn, 13.5 per cent higher, compared to the same period in 2017, largely as a result of higher retail fuel prices. Shell Oman posted a net income after tax of RO12.1mn, 6.5 per cent lower than the same period in 2017. This was mainly attributed to the revised margin structure for the new supply point at Al-Jifnain and reduced demand on fuel in the retail business. The company’s cash flow from operating activities was RO18.2mn, compared to RO15mn in 2017 mainly due to improvements in working capital.
The current market environment for retail is continuously evolving with monthly fuel price changes. The fuel marketing business normally follows the economic trend of the country. We expect the developments in the macro-economic landscape, to reflect on growth in the fuel marketing business. Having said that, there are changes that have already been witnessed in consumers’ behaviour.
In addition to carpooling when commuting, there is a shift towards using the more affordable grade fuel (M91) by consumers, and this may have also been supported by the launch of National Subsidy System cards.
At Shell Oman, we are going ahead with our long-term growth strategy of investing in our retail network with the opening of new retail service stations. Meanwhile, we are already realising the gains from customers’ interest in our premium fuel, Shell V-Power, and we expect to see the same from our premium lubricants as well.
What are the major values for SOM and how are you propagating and furthering them?
Shell’s core values are honesty, integrity and respect for people. The Shell general business principles, code of conduct, and code of ethics help everyone at Shell act in line with these values and comply with relevant laws and regulations.
As an Omani company with a globally renowned brand operating in the Sultanate, we set high standards for both performance as well as ethical behavior. We are judged by how we act and how we live up to our core values of honesty, integrity and respect for people. Our business principles are based on these. They promote trust, openness, teamwork and professionalism, as well as pride in what we do and how we conduct business.
We were one of the first companies, globally, to state and share our beliefs when we published our general business principles in 1976. As part of these principles, we are committed to contribute to sustainable development, balancing short and long-term interests and integrating economic, environmental and social considerations into our decision-making.
All Shell employees, contractors and suppliers are expected to understand and continually behave in line with our business principles. Shell Oman is actively engaged in promoting ethical business behavior as a publicly listed company with strong corporate governance and controls as well as its membership and support of the Oman Centre for governance and sustainability, Oman Chamber of Commerce and Industry, Muscat Securities Market and others.
Omanisation is a major national priority for the Sultanate. How is SOM contributing to this goal?
Shell Oman plans and executes projects and runs facilities to create lasting social benefits. Right at the top of this comes our focus on Omani talent development; a fact highlighted by the 92 per cent omanisation rate across the organisation, including the top management.
In addition to this, we work with local suppliers and contractors to create in-country-value (ICV) that create jobs and business opportunities for Omanis. Shell Oman invests in creating and sustaining a value proposition that attracts the best talents, keeps them engaged and stimulates them to take a leading role in enhancing and broadening their competencies. The company believes that this strategy will help address and sustain the requirements of the dynamic businesses they support and promote workforce’s development needs and aspirations, while helping build local professional talents in Oman.
CSR has been an important part of SOM’s business. Please share some of the major initiatives that the company has undertaken in this direction?
Shell Oman is committed to meet the country’s growing energy demands and contribute to its prosperity in an economically, environmentally and socially responsible way, while creating sustainable value for the Omani society. The Company has put in place an annual social investment budget and has developed a strategy that targets a wide range of initiatives to drive social awareness and contribute to the well-being of the local community focusing on the following strategic themes: road safety, environment and community development. Apart from the targeted strategic social investment initiatives planned at the beginning of every year, Shell Oman keeps a window open for a dialogue with the Omani community in terms of social investment through donations and sponsorships to address the requests received from various organisations, charities and entities in Oman. This approach allows the company to build on its strategic long-term relationship with its stakeholders in the public and private sector as well as non-government organisations and youth charity groups, and sees the active participation of Shell Oman’s staff, to ensure the reach of its CSR programmes to the grassroots level, and to enhance the effectiveness of such initiatives. Following the launch of the first solar-powered service station in the Sultanate (Mukhaizna Shell Service Station) with the help of an Omani SME, the company has continued to work on energy-transition related initiatives that include: working on the expansion of the “solar into service stations” project, as well as sponsoring Omani student teams’ participation in the Shell eco-marathon, one of the worlds’ leading energy efficiency competitions.
Muhammed Nafie is an Assistant Editor at Oman Economic Review.