OGC signs 50-year concession agreement with government

February 10, 2019

Oman Gas Company (OGC), a subsidiary of Oman Oil Company and the sultanate’s gas transporter, has signed a 50-year restated concession agreement (RCA) with the government.

The RCA grants OGC the concession to own and operate Oman’s gas transmission system of pipelines, metering, compressor and gas supply stations under a new revenue framework, according to a statement issued by Oman Oil Company.

The new framework reshapes the gas transmission sector by implementing a cost-reflective tariff to transport gas across the system and new (market) processes that guide the interaction between OGC, the Ministry of Oil and Gas (as the shipper), gas producers and final gas consumers. The framework is based on a regulatory asset base (RAB) method consistent with international best practice and will be regulated by the Authority for Electricity Regulation.

The signing of the RCA represents a major milestone in OGC’s transformation into Oman’s sole independent gas transmission system owner and operator.

The Financial Affairs and Energy Resources Council first instructed OGC to establish an appropriate business model to allow for the acquisition of selected government-owned gas assets. Since then OGC and the government have been working closely on selecting, designing and implementing the appropriate framework.

In November 2018, OGC secured US$1.1bn in bank financing with seven international and local banks. The commitment of these international investors underscores the success of OGC’s RAB framework. The funds will be used to acquire the government-owned assets and finance pipeline network expansion.

OGC expects significant network growth, working on adding 500km to 600km of pipelines to existing the 2,500km national gas transmission network in the coming years. Major projects include connecting Duqm and addressing growing demand in Sohar.

“OGC has the technical know-how and has proven itself as a reliable operator of the gas network in the country. It knows the system and customers very well and is extremely competent in managing the relation between the seller and buyers. This major milestone is to transform the gas market model in Oman,” said H E Salim al Aufi, Undersecretary in the Ministry of Oil and Gas. “The implementation of RAB has not only changed OGC but has positioned the entire Omani gas transportation sector such that it can further evolve to create maximum value to the sultanate’s gas sector and contribute to security of gas supply in the long-run,” said Sultan al Burtmani, acting executive managing director of OGC.

He said OGC is in the process of acquiring gas transportation assets operated by PDO to establish itself as the sole gas transmission system owner and operator in Oman.