PDO boosts Duqm with $1.2bn pipeline supply contract

In-Country Value: Five-year deal with Sumitomo includes a new supply yard in Duqm SEZ to serve as a logistics centre for materials being delivered to PDO’s drilling locations.  

Business Reporter -

MUSCAT, JAN 26 -

Petroleum Development Oman (PDO) signed on Thursday a $1.2 billion contract to supply piping for its drilling operations through Duqm. The five-year deal with Japanese supplier Sumitomo further includes a new supply yard in the Duqm Special Economic Zone which will be a logistics centre for materials being delivered to PDO’s drilling locations.

The agreement will confirm PDO as an anchor tenant at Duqm from mid-2018, with up to two shipments a week (carrying 3,000 metric tonnes of pipe) being routed through the port for its oil and gas fields.

The logistics hub will provide integrated supply chain management services – such as storage, planning and delivery – and 30 trucks a day will be needed to transfer the pipes from the new supply yard to PDO’s drilling locations.

The move will significantly build capability at Duqm to become the primary logistics hub for the Sultanate’s oil and gas sector and complements the Tanfeedh programme on economic diversification.

PDO Managing Director Raoul Restucci said: “This contract will spur the growth of Duqm and attract even more business as the port demonstrates its ability to handle major operations. Every year, we drill 600 wells across our concession area and all the piping for that will be managed at Duqm.

“This agreement is further evidence that PDO’s In-Country Value (ICV) programme to retain more of the oil and gas industry’s wealth in the Sultanate by creating Omani jobs and developing local capability and infrastructure is going from strength to strength.

“At the same time, it underlines our commitment to turn the promise of Tanfeedh programme on economic diversification into concrete action.”

The new agreement is a renewal of an existing contract to supply PDO oil tubular goods, casing and tubing pipes used for drilling, and consolidates the Company’s long-standing business relationship with Sumitomo.

The official contract signing took place under the auspices of Yahya al Jabri, Chairman of the Special Economic Zone Authority Duqm, with special guest, Mitsugu Saito, the Japanese Ambassador to Oman, at PDO’s Knowledge World Centre. The signatories were Restucci, Shuichi Suzuki of Sumitomo Corporation and Masayasu Abiko of Nippon Steel & Sumitomo Metal Corporation (NSSMC).

During the ceremony, Sumitomo presented PDO with a Japanese Samurai helmet and PDO presented Sumitomo with an Omani sword as tokens of mutual respect and appreciation.

Suzuki said: “We have enriched our contribution towards In-Country Value in this renewed agreement, especially by relocating our supply base to Duqm. This shows Sumitomo’s commitment in Oman to contribute towards this country’s continued good fortune and development.

“This is an exciting challenge for us, and is a great honour for the whole Sumitomo Corporation Group to participate in the development of a new industrial oil and gas capital for Oman.”

Abiko commented: “We believe more and more high-end pipes will be required for tougher well conditions in the future. As a premium casing and tubing supplier, NSSMC will continuously supply high-performance goods to PDO from our enriched product line-up.”

Under the terms of the deal, Sumitomo has committed to further support ICV initiatives, on top of its large investment in Duqm.

The deal builds on the Government’s strategic aim to make Duqm the oil and gas port for Oman and will further attract other companies’ services to the hub. Its proximity to Oman’s major oil fields and its links to a congestion-free road network will enable PDO to reduce road safety exposure and achieve cost reductions.

Restucci said: “Duqm meets a strategic need for Oman, both in terms of its location and facilities. For PDO and our contractors, its proximity to some of our major fields is a great boon as it enables us to import and move vital equipment and material faster and cheaper than routing cargoes through other locations.

“This new approach will save time and money while at the same time aiding the development, capability and capacity of a vital logistical hub for the Sultanate, complementing the well- established ports of Sohar and Salalah.”