Oman has broken ground on a new pipelines and storage project that aims to overhaul the way oil products are distributed in the main population centres in the north of the sultanate.

The $320m Muscat Sohar Products Pipeline (MSPP) and Al-Jifinan Terminal (AJT) project will connect the country’s two oil refineries – Mina al-Fahal in Muscat and Sohar – via a new storage terminal that will deliver half of all fuel used in Oman.

The 290-kilometre two-way product pipeline will transport gasoline, diesel and jet fuel, and another new pipeline will supply jet fuel to Muscat International airport.

MSPP is one of several major schemes being developed by Oman Oil Refining & Petroleum Industries Company (Orpic), which operates the two refineries along with a petrochemicals complex in Sohar.

Musab al-Mahruqi, CEO of Orpic, began running the group after it was formed in 2010 by combining the three existing state-owned businesses that were previously operating the sultanate’s refining and petrochemicals operations.

Transformative phase

Al-Mahruqi, who was previously chief investment officer at Orpic’s parent group Oman Oil Company (OOC), is taking the downstream company through a transformative phase, with major refining, petrochemicals and infrastructure projects under way.

“The MSPP and AJT projects are part of Orpic’s larger growth strategy to build an integrated refining and petrochemicals business that generates opportunities to better serve domestic and international markets,” Al-Mahruqi tells MEED.

“This 290km pipeline will enable the loading and transportation of up to 500 trucks a day and will deliver several additional benefits to Orpic, the communities where we operate and the region as a whole, including the creation of new jobs, improved road safety, more jet fuel supply, logistics efficiencies, reduced gas emission and greater generation of in-country value.”

The project is being developed by Orpic Logistics Company (OLC), a joint venture between state-owned Orpic and Spain’s Compania Logistica de Hidrocarburos (CLH). It is expected to be commissioned in 2017.

OLC is 60 per cent owned by Orpic, with CLH holding the remaining 40 per cent. OOC, which owns a 25 per cent interest in Orpic, also owns a 10 per cent stake in CLH.

The engineering, procurement and construction (EPC) contract was awarded in December to a consortium of Oman’s Gulf Petrochemical Services (GPS) and Spanish companies Abanita and Diseprosa.

Bids resubmitted

The deal was awarded after direct negotiations with contractors, sources close to the bidding process told MEED. Talks took place after OLC asked bidders to resubmit commercial proposals, causing two companies to drop out of the tender.

Other companies submitting bids on the tender were Indian groups Essar, Larsen & Toubro and Punj Lloyd, and Egypt-based Petrojet.

OLC also signed a financing agreement covering 70 per cent of the project with Oman-based Ahli Bank and Bahrain’s Ahli United Bank.

Orpic was initially planning to build the scheme in three phases, but the EPC was combined into one package.

“The scope of the MSPP remains unchanged. As per the original plans, the two pipelines and the Al-Jifnain terminal are being constructed,” says Al-Mahruqi.

“The project will be constructed in one phase to capture synergies during construction, as well as to synchronise the readiness of the different assets with the requirements of Orpic’s customers.”

The pipeline is split into three sections: Mina al-Fahal refinery to AJT (40km, 10 inch diameter); AJT to Muscat International airport (30km, 10 inches); and Sohar refinery to the AJT terminal (220km, 18 inches).

Orpic’s largest development under execution is the Sohar refinery improvement project, which started the execution phase after a $2.1bn EPC was awarded to South Korea’s Daelim Industrial and UK-based Petrofac in November 2013.

Orpic is expanding the refinery’s capacity to 187,000 barrels a day (b/d), from 116,000 b/d, to meet growing demand for fuel and petrochemicals feedstock.

“Our Sohar refinery improvement project, which will essentially upgrade Orpic’s refining capabilities in order to further maximise the value of Omani crude, is scheduled for completion in 2016 and will already be operational at the time of commissioning the pipeline and new terminal,” says Al-Mahruqi.

Orpic has also recently tendered its estimated $3.6bn Liwa Plastics petrochemicals complex to be based in Sohar. The company finished prequalifying EPC contractors for four packages at the beginning of February.

“Orpic has already issued the tender for the EPC packages for the Liwa Plastics project,” says Al-Mahruqi. “We expect bids in by July, and anticipate awarding the project in October.”