The Oil and Gas IndustryIn-Country Value Development

Blueprint Strategy2013-2020, Sultanat of Oman

“…We have instructed our government to focus, in its future plans, on social development, particularly its aspects related to the daily lives of citizens. This should be achieved by the creation of renewable employment opportunities and training programmes for citizens and promoting production capacity, as well as scientific, cultural and intellectual development. We will closely follow the steps taken in this field” – His Majesty Sultan Qaboos Bin Said, Sultan of Oman

ICV - A National priority

In-Country Value (ICV) forms part of the National agenda for increasing and improving the sustainable employment of Omani nationals together with improving the incorporation of Omani goods and services within the procurement processes of local companies.

Role and contribution of the Oil and gas industry in stimulating Oman’s economy

Within the oil and gas industry, ICV is an initiative which is fully supported by the Omani Ministry of Oil and Gas, the Oman Society for Petroleum Services (OPAL) and the oil and gas companies in Oman. They acknowledge the industry’s significant role in stimulating and positively impacting the economy in Oman.

The Ministry of Oil and Gas formed an ICV Committee, chaired by His Excellency Under-Secretary of the Ministry of Oil and Gas. The committee groups government representatives and executives from the major oil and gas companies. The role of the ICV Committee is to provide guidance and governance to ICV development and raise opportunities while coordinating the efforts of the industry. Two specialist sub-committees have been created to support the ICV Committee: the Contract and Procurement managers sub-committee and the Human Resources managers sub-committee.

What is In-Country Value?ICV is the total spend retained in-country that can benefit business development, contribute to human capability development and stimulate productivity in the Omani economy. In short, products made and services provided by skilled Omanis.

Building on ICV success to date

The ICV Committee has already launched initiatives aimed at developing ICV with successful results. Those initiatives tackle several areas, such as:

Development of the local workforce through employment of Omanis, implementation of expatriates succession plans, and investment in dedicated training and education programs,

Increase of local sourcing mainly through tendering, long-term business agreements, and business development support,

Enhancement of the business environment and development of the required infrastructure to support local businesses and Foreign Direct Investments (FDI) through government driven projects,

Implementation of a Joint Supplier Registration System (JSRS) as a ‘single window’ system for registration of Omani registered suppliers in a common pool of oil and gas supplier base, and

Definition of a standard approach to contractual Terms and Conditions.

The ICV Committee recognizes that further ICV development requires a collaborative and coordinated ICV development programme underpinned by an industry ICV blueprint strategy based on a detailed analysis of the industry’s future demand and the current constraints and gaps.

A unique opportunityInvestments in the oil sector will be in excess of $60-70 billion over the 2013-2022 timeframe, while the gas sector will attract more than $40 billion in exploration and production related investments.

A joint effort to review the oil and gas industry ICV blueprint strategy

The ICV Committee, through its Contract and Procurement managers sub-committee and with the support of Accenture Management Consultancy, carried out a comprehensive study to review the oil and gas industry ICV blueprint strategy.

The goal of the study is to build on the success to date, identify new pan industry opportunities and develop a comprehensive roadmap aiming to maximize the contribution and efforts of the oil and gas industry in ICV creation in Oman.

In line with government objectives, the roadmap includes of two main streams:

Sustainable and balanced industrial growth through the expansion and the launch of new industries, activities, products and services in Oman. This allows Oman to retain part of the value that is currently imported, create new jobs, and stimulate the economy through the value chain and the multiplier effect, and

Human resources development to increase Omanization levels in targeted areas and improve competency levels to internationally recognized standards.

Participating entities

Assessing industry demand and supply gaps to identify new ICV opportunitiesThe study is based on a bottom-up quantitative and qualitative gap analysis that allowed to:

Quantify and consolidate oil and gas industry demand in Oman to assess the feasibility of new sustainable ICV development opportunities,

Measure the local supply market’s current capability and capacity to provide the required goods and services, and

Address activities and businesses throughout the overall value chain.

Inputs for the analysis have been consolidated from the oil and gas companies, the local suppliers and governmental bodies and organisations.

Bottom-up gap analysis approach

What is a Local Company?The study defines a local company as any company established and operating in/from Oman based on the Ministry of Commerce and Industry’s definition.

Goods and services

Demand consolidation

Supply assessment

Gapmeasurement

Workforce

oil and gas industry

Required

Local supply market

in key selected goods and services over

the period 2013-2020

for Oil and gas industry supply market

activity over the period 2013-2020 of the workforce within

oil and gas industry

overview

Consolidated demand forecast

Workforce Current size and distribution

Current Capacity and Capability

Gaps in the local supply market

Gap in oil and gas industry workforce

Significant value already retained through the oil and gas companies direct expenditures

Initial analysis show that thanks to the achieved and on-going ICV development initiatives, a significant proportion (more than 80%) of the direct expenditure of the oil and gas companies goes to local suppliers (as per the study definition). The initiatives have managed to constantly increase the employment of Omanis, especially within oil and gas companies and major service providers.

Omani contractors and suppliers are already witnessing increased demand from the oil and gas companies following the introduction of ICV across the oil and gas industry.

Deeper analysis down the value chain to track the retained value

Further detailed analysis, down the value chain, indicates that an additional ICV opportunity of USD64 billion exists over the period 2013-2020 (excluding the ICV generated by the multiplier effect).

This additional opportunity consists of:

Enhancement and expansion of the oil and gas companies direct sourcing and employment of Omanis,

Localization of contractors and suppliers sourcing (goods and services), and

Development of contractors and suppliers local workforce.

The ICV blueprint strategy has been defined to address this opportunity progressively, through a collaborative and coordinated ICV development programme broken down into specific initiatives involving the contribution of all relevant stakeholders.

Approximately

USD 64blnAdditional ICV opportunity down the value chain, over the period 2013-2020

Our Mission: Developing a competitive and sustainable

local supply market: goods, services and skills…together!”

Technology & Innovation Invest in research & development, innovation and promote technology transfer and dissemination in strategic goods and services that have high local and regional demand to develop a sustainable competitive advantage

Human Resources Increase the competency level and productivity of the local workforce and emphasize the development of intellectual capital to the drive performance in technical and medium to high-end positions

Capital & Finance Enhance financial products in order to facilitate access, reduce risk and cost of credit to local investors and companies, especially for SMEs

Business Development Facilitate long term business development and strong partnerships throughout the value chain with a focus on SMEs, local companies and Foreign Direct Investments (FDIs)

Legislation & Process Improvements Support business development by continuously improving governmental and administrative processes and business related legislation with relevant stakeholders

Contracting & Tendering Set up contracting frameworks that increases local market participation and opportunities through contract and procurement processes

An overarching ICV blueprint strategy for the oil and gas industry A mission and an overarching strategy has been defined to provide a coordinated and integrated ICV development programme. The oil and gas industry is confident that beyond the strong commitment of all stakeholders, optimal ICV development requires enhancing the competitiveness of the local market with international standards and providing sustainability to the local business community by investing in and implementing short and long term initiatives.

The mission will be delivered through an overarching strategy by:

Leveraging the oil and gas industry collaborative efforts to progressively and effectively develop the Omani supply market and enhance the ICV development environment.

The strategy is broken down into six dimensions: Human Resources, Technology & Innovation, Capital & Finance, Contracting & Tendering, Legislation & Process Improvement and Business Development.

In line with the mission and strategy, Cross-Industry Development Initiatives, 53 Supply Chain Development Opportunities and a Local Workforce Development Programme have been identified based on the gap analysis. Implementation of the initiatives and opportunities is supported by a Programme Management Office and a monitoring system.

Delivering the ICV blueprint strategy

Cross-IndustryDevelopment Initiatives

Local Workforce Development Programme

Key Performance Indicators (KPls)

53 initial Supply Chain Development Opportunities

Program ManagementOffice (PMO)

To enhance the overall business environment in Oman covering the six dimensions defined in the strategy

To develop a world-class local workforce required for the oil and gas industry in the upcoming years (2013 - 2020)

To monitor ICV development progress and results of the implemented initiatives and opportunities

To expand or launch new industries, activities or products in response to the demand of the oil and gas industry and generate new jobs

To ensure alignment with the strategy, manage and coordinate initiative and opportunity implementation and act as a single point of contact for ICV related communication with internal and external stakeholders

Development opportunities across the entire value chainAnalysis of the demand forecast of priority categories and the associated capacity and capability of the local supply market allowed the identification of 53 Supply Chain Development Opportunities which are currently imported and identified as high potential to be carried out in Oman.

They range from the creation, expansion or enhancement of industries, products or activities, and balanced between the development of raw material, manufacturing, assembly, blending, fabrication activities and services.

The opportunities are addressed to entrepreneurs, Small and Medium Enterprises (SME), well-established local companies, or Foreign Direct Investments (FDI).

The opportunities have been prioritized and categorized into periodical waves for implementation.

The 53 opportunities are not restricted to the direct suppliers and vendors of the oil and gas companies, they also include opportunities across the industry’s value chain.

53 Supply Chain Development Opportunities

For more information about the Supply Chain Development Opportunities, please visit the ICV website: www.incountryvalueoman.net

Towards a world-class localworkforceA dedicated Local Workforce Development Programme has been defined based on the analysis of the industry demand. The programme’s main objective is to develop the specialized workforce required by the industry for the period of 2013-2020 in terms of number and with international standards. The programmes will allow to attend the short-term needs as well as preparing the future generation.

The programme was developed based on the analysis of 228 skills.

Currently the number of Omanis working for the oil and gas industry topped approximately 22,000 out of a total of 55,000. By 2020, the number of jobs required by the oil and gas industry would reach 72,704, which forms a significant opportunity for Omani employment.

Jobs forecast in the oil and gas industry over 2013 – 2020 (as of April 2013)

228 Skills assessed

72,704 Required jobs for oil and gas industry activities by 2020

22,369 Current number of Omanis in the oil and gas industry

4,738

24,868

32,094

11,004

2013 2014 2015 2016 2017 2018 2019 2020

80000

70000

60000

50000

40000

30000

20000

10000

0

Job

Posi

tions

Operators Construction Sector Service Providers Manufacturing

Increasing Omanisation levels across all sectors

The analysis shows that oil and gas companies the direct workforce of the oil and gas companies has the highest Omanisation levels, where 5,629 professionals out of 8,991 (63%) are Omanis. It is followed by the service provider workforce, where Omanis represent 59% of the total service provider workforce. The construction sector is constrained by business challenges and the availability of human resources. It therefore reached 25% of Omanisation levels (data as of April 2013).

Beyond the analysis of the Omanisation levels, the study demonstrated that 82% of oil and gas industry jobs are provided by service providers and the construction sector.

Increasing local employment through development the local workforce

Henceforth, the study highlights the importance of focusing on the development of the supply market workforce, while maintaining and recognizing the current efforts and investments in developing the direct workforce of oil and gas companies.

Acknowledging the importance of expatriates in businesses, especially with regards to the technology transfer and business viability, the program suggest educating and training 36,020 Omanis, representing mainly the semi-skilled and medium to high end positions to fulfill the oil and gas industry demand.

Along with the Local Workforce Development Programme, the ICV blueprint strategy highlights the need to align the education and training curriculum to industry standards, set integrated training programmes to close competency gaps and define industry standards, among other local workforce development initiatives.

The ICV blueprint strategy also emphasizes the criticality of coordination between stakeholders: government, education and training entities and sponsors from the private sector.

Number and scope of training skills

Total number of trainings: 36,020 Omanis

7,154 Managerial positions & engineers

3,237 Operators

17,556 Semi-skilled

3,347 Supervisors

4,390 Technicians

3,622 Unskilled

1,195 Inspectors

OOCEP

For more information, please visit www.incountryvalueoman.net