CONSTRUCTION OF OIL REFINERY IN OMAN

DONE BY

AMIT SRITOSHGOWTHAMKAVIAMUDHANHARSHAVARDHANSURYA

OMAN

• Oman is a tranquil state strategically located in

the south eastern corner of the Arabian

Peninsula.

• Oman is a liberal state and the government is

keen to attract foreign investors to further

sustain and enhance economic growth and

realise its strategy of economic diversification.

WHY OMAN?

• Ranked 57 out of 181 economies in the ‘Ease of Doing

Business’ by the World Bank.

• Ranked 25th out of 140 countries on the Global Peace Index

• Ranked 3rd out of 17 countries in the Middle East/ North

Africa region and 43rd globally, with a score of 67, in the

Index of Economic Freedom.

• Foreign ownership of businesses is permitted depending on the

level of investment.

• Oman has a liberal tax regime, as corporate tax is low and

there is no personal income tax

OMAN’S ECONOMY

• The government is currently focusing on developing natural gas resources

• Pursuing phased privatization of the utilities and telecommunication sectors.

• Oman has been recording real economic growth at an average rate of 6%.

• Annual Inflation rose to 12.4%.

• Private consumption has been rising since 2001 as a result of rising oil prices

• Government expenditure has remained stable at about 25-30% of GDP.

INCENTIVES FOR FOREIGN INVESTORS

Industry Sector Incentives

Income Tax Customs Duty General

1.Industry and mining

2.Export of locally manufactured /

processed products

3.Tourism

4.Production & processing

5.Public utility projects

(excluding management

contracts & project

execution contracts

6. Education institutes

1. 5 year tax holiday

(renewable)

2.Tax losses incurred

during tax holiday

may be claimed

against future

profits (no time bar)

3.No personal

income

tax

1.Exemptions on

import of plant,

machinery & raw

material for 5

years

from

commencement

of production

(renewable once)

1. Repatriation of

capital & profits

of the project

permissible

2.The businesses may

not be confiscated/

expropriated

unless in the

public interest

with equitable

compensation

3.No import

registration – with

approval

FEASIBILITY STUDY

Structure Activity Conditions Regist.

Joint-stock company

(up to 100% foreign

shareholding)

Deemed in the ‘interest of the

national economy’ by the

Development Council, upon

recommendation of Ministry of

Commerce & Industry

• Min. capital RO 500,000

• FCIL license from

Ministry of Commerce &

Industry

• Commercial

registration

• OCCI registration

Limited Liability

Company (LLC)

(70% max. foreign

shareholding

As approved by Ministry

of Commerce & Industry

• Omani shareholding

30%

• Min. capital RO 150,000

• FCIL license from

Ministry of Commerce &

Industry

• Commercial

registration

• OCCI registration

Branch

Office

(Temporary status)

• Government Contracts;

• Businesses declared necessary

for Oman’ by the

Council of Ministers

• Foreign participation

limits in FCIL not

applicable

• Commercial

registration

• OCCI registration

Representative Office • Trade, industry & service sectors • Permitted to promote

and market only

• Commercial &

OCCI registration

ADVANTAGES

Political stability.

Liberal foreign ownership in companies permitted.

Oman is rich in oil and gas.

Capital and profits of a business entity is fully reparable.

No personal income-tax. All individuals can fully repatriate their savings.

Committed to privatization, industrialization, economic diversification and development.

Free trade and open market policy.

Taxation relief treaties available with many countries.

MARKET ENTRY STRATEGY

• A company should visit Oman in order to appreciate its distinctive culture.

• Personal relationships are key to finding and retaining a partner.

• Agents are commonly used, but not always required.

• Agreements generally require significant lead time and follow-up before finalization.

• Importers must be registered with the Ministry of Commerce and be members of the Oman Chamber of Commerce and Industry.

PESTEL Analysis

Political and Legal environment

• Government is considered to be responsible for making decision about the oil process and the quality. Moreover the international politics are also affecting the prices of the Oil as well as the oil industries of many countries

Economic Environment

• The reduction in the tariffs has ensured that the

prices of goods particularly the petroleum

goods are now very much close to the global

prices. Calculating GDP on the basis of the

purchasing power parity in measuring the oil

intensity has validated the fact that the oil

consumptions can be measured in terms of

Volumes.

Social and Cultural Environment

• The Changes in the social and cultural

environment has an important impact on the

operations of any company. Oman is a country

which is divided into 5 regions i.e. Ad

Dakhiliyah, Al Batinah, Al Wusta Ash

Sharqiyah and Az Zahira

Technological environment

• Oman Oil Company has invested USD 800

million for upgrading the technology of

petrochemicals. Moreover Oman Oil Company

is also making huge investments in the up

gradation of Hydro carbon sector.

SWOT ANALYSIS

Strength

• Capacity to acquire 35 percent of the total

refinery capacity with huge investment

• Planning to acquire stakes in the BG group

PLC

• Oman oil is planning to supply possible

through a wide distribution network of

pipelines around the country of capacity 51.23

MMT.

Weakness

• The most important weakness that needs consideration of the management is R&D. There is a strong need of developing a separate R&D department to bring innovations in their processes.

Oppurtinities

• Oman Oil planning to start large number of outlets and refineries in the country so it is easy for Oman oil to extend its business and develop new products while utilizing the network.

• The company can make the buying process easier for their customers by offering various schems on the range of their products.

• This arrangement will make the Oman oil an independent player and this will also support the aviation fuel supply.

Threats

• The entry of foreign players like Oman Shell and Oxy is the greatest threat.

• The supply of the crude oil is the biggest threat for Oman Oil now days.

• It is difficult to fix the prices of the crude which are resulting in a big loss for the company.

• It is the biggest threats to the Oman oil because the large part of the Crude oil is imported.

Expansion strategies• Expansion in Oil refinery company in oman

market through International Diversification

• Multinational diversification attracts companies with big opportunities for long term growth by entering new business sectors and growth in the existing business on the markets of other (new for the company) countries

RISK Vs CONTROL

COMPETITIVE ADVANTAGE

• Full use of resources and distribution of costs on the basis of the growing market and product range which leads to economies of scale and accumulated new experience.

• Valuable resources can be transferred from business to business and from country to country.

• Highly competitive and well-known trademarks can be used jointly.

Contd..

• Partnership potential can be capitalized in the form of the different business sectors and countries and strategic coordination.

• The different business activities at home and abroad can be funded internally which brings better instruments to fight competition and achieve higher sales.

CONCLUSION

• Oman’s economy is based on oil, although its reserves are modest compared with other states in the region. By some estimates, Oman’s proven oil reserves will be substantially depleted by 2020; however, this is generally considered a sliding window in light of the potential for new discoveries or technological advances, which can add to the stock of reserves.

• The country also hopes to expand non-oil, non-energy-related industry including light manufacturing, agriculture and fisheries, and tourism