ORPIC delivers second year of strong profitability in 2012 on increased production levels

The company delivered the results whilst adding improved and new employment opportunities for Omanis, investing in environmental performance improvements and delivering its mandate to supply the Oman market with fuel products.

The company reported a cash profit of OMR96m ($254m), with each of its major business lines - refining, aromatics and polypropylene - returning a profit. This follows the 2011 results of OMR150m ($400m) which marked a first profit for the company and followed the integration of three companies into Orpic which started in 2010.

Orpic said the 2012 results were adversely affected by international pricing trends and a lower utilisation of its plants in Sohar and Muscat due to technical challenges in Sohar Refinery and the Aromatics Plant, as well as the unplanned shutdown of MAF in October 2012.

Musab Al Mahruqi, CEO of Orpic, said: "We are pleased to have delivered another year of profit, thanks to the focused effort and hard work of our 1,600 employees. The market this year was tougher, with international pricing exerting a downward pressure on prices.

"Our utilisation was also affected by planned shutdowns, for maintenance, at Mina Al Fahal Refinery and at our Aromatics Plant during the year. Our Sohar Refinery recorded its best ever utilisation until October, when some technical issues had an impact on performance.

"Despite these challenges, we continued to meet our mandate of supplying Oman's motor fuel, diesel, cooking gas and jet fuel needs. In July, we passed the milestone of 12 months' supplying all Oman's domestic fuels requirements and across the year as a whole, only 2.2 million barrels of imported refined products were required, which represents 4.8% of the total fuel used in Oman."

The company invested in the development of its employees, with 115 Omani employees (representing 10% of Orpic's Omani workforce) being assigned more complex jobs during the year based on newly acquired competencies. In addition to training and development initiatives, which included e-learning and the company's new Weyana programme, the year also saw the completion of performance contracts for all employees.

Orpic took on 115 new Omani apprentices during the year, continuing its strong Omanisation efforts. Omani employees now make up 73% of the workforce.

The company also invested heavily in environmental improvement projects, with five major initiatives under way in 2012, worth OMR18m ($47m). These initiatives have already resulted in major reductions to emissions, particularly those causing odours in and around the plants, and to flaring, which have been reduced by 40% compared to 2011 levels.

Musab Al Mahruqi said these investments were being made in response to the local community, following regular meetings with community representatives.

"We have evaluated and we have acted," he said. "For example, on the major issue of odours, we have invested in new waste water treatment processes as well as measuring more than 10,000 sources during our Leak Detection and Repair program. In 2012, local complaints about odours have fallen by 83%."

In April 2012, Orpic opened its first Visitor Centre, in Sohar Refinery, which had welcomed more than 1,000 visitors by year end. Groups from schools, colleges, local communities and families of Orpic employees all had the chance to learn about refining and petrochemicals production, as well as the company's environmental improvement projects. The company also opened a new showroom in Sohar, allowing local suppliers and business partners easier access for tenders and meetings.

Orpic also introduced new local supplier policies during 2012, with the goal of increasing procurement with Omani suppliers and ensuring 10% of this spending is done in the North Al Batinah region. During 2012 Orpic spent 50% of its procurement spend in Oman, with 7% in North Al Batinah alone.

In addition, the company provided vocational training for 285 individuals of which 142 trainees were from its local communities, as well as supporting the Jusoor corporate social responsibility initiative, in conjunction with Sohar Aluminium and Vale, which introduced projects which impact the neighbouring communities.

On an operating level, Orpic said its expenses during the year remained within budget levels and the company maintained its 'self-funded' target for the second consecutive year. The APPLE Savings Pipeline, an initiative to identify cost savings through the business, beats its target of OMR135m ($350m) by end of 2012, with savings worth OMR141m ($367m) being identified.

Orpic has already taken a number of steps to integrate In-Country Value into its business. One of its initiatives is to encourage local supplier sourcing, with a goal that 10% of its local spend is made in the North Al Batinah region. Orpic will also establish a department within the company to look at innovative ways of enhancing In-Country Value. One of the goals of this department is to identify local SMEs and entrepreneurs who can fill crucial product or service niches within Orpic.

Regarding the future plans of the company, Orpic said that the Front End Engineering Design (FEED) for the Sohar Refinery Improvement Project was completed in September 2012, ahead of schedule. This project will allow a greater proportion of each barrel of crude oil to be refined, meaning far greater efficiency and a greater contribution to the national economy. The major investment by the company will result in major reductions in the plant's environmental impact, while creating almost 300 direct new jobs for Omanis, as well as new business opportunities for local SMEs.

Another major project will include new Storage facilities, loading station and a 280 km pipeline connecting Mina Al Fahal (MAF) with Sohar Refineries. The pipeline near the Muscat expressway will cut the heavy fuel tank truck traffic in Muscat by 70%. The project will increase the storage capacity for Diesel, gasoline and connect the current storage facilities in Sohar and MAF refineries to cope with ever growing demands.

During 2013, engineering and construction will continue with the pipeline from MAF Refinery to Muscat Airport with completion expected in April 2014. The pipeline to the new terminal from Sohar Refinery is in the engineering and construction phase, with a later completion date of January 2016 expected.

Mr Al Mahruqi concluded: "We are proud to deliver another strong profit in 2012, despite the challenges of tougher international pricing and the planned shutdowns of some of our plants. Most importantly, we have delivered this profit whilst keeping our responsibilities to our nation and to our local communities to the fore.

"In 2013, we will continue to focus on further improvement, delivering another year of profitability to our shareholder, the Government of Oman.