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SWOT Analysis of OOC

Discuss about the Oman Oil Marketing Company SAOG.

The future of Oman is being shaped up by Oman Oil Company by syncing its operations with visions Oman 2020.This paper is a report of this Oman Oil Company where the primary objective is to ascertain its SWOT and find out how the corporation is fighting to overcome the threats and weaknesses it faces. It is also to find how its impact and vision is moving along with the Oman Vision 2020 contributing to the nation on a much larger scale (Bloomberg, 2017). The company is located in Oman. Its vision is to invest into businesses which are profitable in Oman so as to create a better value for the country.Oman Oil Company is a company which is working commercially since when it has been incorporated in 1996.  The company is under Government ownership totally. The primary reason of its establishment were to pursue opportunities of investment in outspread energy sector both in and out of Oman (Oman Oil Company, 2017). The OOC has been playing a vital role for the Sultanate as a participant in energy related projects. It has a crucial role in the various attempts made by the Sultanate’s  to expand the economy of Oman thus  promoting Omani and foreign investments comprised of the privatised sectors (Anonymous, 2015). Oman has four subsidiaries of invested products: 

  • Oman Oil Company Exploration and a company named Production L.L.C
  • Oman Oil Duqm Development Company L.L.C
  • Oman Oil Facilities Development Company L.L.C
  • Takamul Investment Company S.A.O.C.

Strength: 

  1. The company being researched has the reputation of having a strong market position locally.
  2. The company is considered to be one of the top four large scale companies in United States. In Texas Permian Basin region, it is the largest along with California and New Mexico.
  3. Internationally in America, offshore Qatar, Oman, and in Libya it is the largest exploration acreage holder.
  4. The company has a record that it enhances its reserves of oil and gas steadily both nationally and internationally resulting in stable revenue growth.
  5. The company has an efficient way of operating. A superior infrastructure leads it in excellent performance.
  6. The oil drilling methods are high technology driven methods with cost cutting techniques springing up to increase in profits (Weiner Consulting, 2017).
  7. The company exhibits a strong performance by the subsidiaries (BusinessWire, 2013).
  8. The company has nearly 12,000 employees and is found in 9 big oil resource rich nations.
  9. Oman Oil company has a highly effective distribution channel.
  10. Procurement of raw material fetches less cost expenditure due to its location proximity.

Weakness:

  1. Obviously having large competitors in the market the company lacks in scale to compete owing to its large scale and its varied operations, and ownership of assets.
  2. It tends to have a fix concentration on the US market and over dependence. Therefore OOC gradually is going to face a situation where the revenue which is to be accrued from other nations can be a loss (Weiner Consulting, 2017).
  3. The investors that are looking forward in getting aboard might have been in trouble due to the declining operational efficiency consequently limited liquidity.
  4. Control of government is very high in the country. Oil prices are fixed by the government.
  5. The company has to maintain many environmental compliances.
  6. Employment retainment is comparatively poor.
  7. Procurement of new candidates is less.
  8. Cost of labor in the oil industry has been ever rising. This can lead to increased costs.
  9. Outdated machineries is a problem area. Proper maintenance requires a lot of investment.
  10. The company lacks in making real time market based researches.

Opportunities: 

  1. The OOC has a high opportunity to leverage its operation and position internationally.
  2. Expansion of its operation in the country of Middle East (Yemen, UAE, Qatar, Iraq, Bahrain, Oman, Libya) etc would give it high international position.
  3. The US Market according to a forecasted data indicated an increased demand in natural gas is a great opportunity and option for future growth.
  4. Furthermore, it can enhance the quality of revenue expected to be achieved from the market of US (Bezzack, 2016).
  5. Two projects can increase the company’s revenue earning potentials. These are the Abu Dhabi based gas project of Al Hosn and the plant located in Tennesse, the Cell Chlor-Alkali. 
  6. New partnerships with China and Turkey can procure effective results.
  7. The company can diversify its products.
  8. Demand for oil is high and hence a huge number of potential investors and customers is speculated.
  9. Any new requirement or expectation of the customer is a potential opportunity.
  10. Better penetration to new countries with improved infrastructure can give it better exposure.

Threat:  

  • The Company is exposed to face certain risk of loss. One of the major and common risks is involved in drilling and exploration.
  • The exploratory activities involve risks common to drilling.
  • Government in specific time passes laws and regulations that directly affect the business.
  • Political instability is another factor that could cause threat to the business.
  • The operation in foreign countries and its government’s actions can affect operations of the corporation in a negative manner.
  • Stringent rules, regulations, and environmental compliance. Some of these legislations are as follows:- The Solid Waste Disposal Act, Comprehensive Environmental Response and the  Compensation, and Liability Act  also known as the CERCLA.
  • There are some legislations which can increase the operational expenditures of the company. These are Federal Oil Pollution Act of year 1990, 1972 Clean Water Act, legislation of 1970 Clean Air and Toxic Substance Control law of year 1976.
  • There is constant threats from competitors in the market.
  • Employee loss at a regular basis and employment fluctuations is another threat.
  • World external economic fluctuations also is a potential threat.

Strength

Weakness

Strong local market positioning, strong operational control and effective infrastructure gives Oman Oil Company a steady growth.

High levels of competition in the market fetches lowered investor interest and less accruable income.

Opportunities

Threat

The company has enormous opportunities to expand itself internationally. With diversified portfolio it can get better returns

Loss from exploring, drilling and government compliances is a threat. Regulations and legislations along with environment compliances cause threat to the company performance.

  • The first and foremost step for the company is to make an in-depth situational analysis of its present work scenario. Such an analysis must cover internal as well as external analysis as well.
  • A prominent recommendation to combat the weakness of high competition is to partner with countries like Turkey and China. Oman Oil Company’s stance on the international oil and gas sectors is unstable and is also subject to scrutinies of international nature (ICAEW, 2016). The partnership will give the company a good exposure.This will ensure more profitability for the firm.
  • Overdependence on USA is generating a lot of accruable revenue and hence this is a weakness in itself. New partnership with different countries stated above will help ease out such over dependences.
  • Expenditures has been extraordinarily high for the company and hence the company is recommended to develop their own tankers for LNG and gas (ArabNews, 2017). Recruiting tankers from the West involves a lot of regulatory issues and must be avoided.

Oman vision 2020, although the Sultanate’s oil wealth has been the strongest traditional pillar of the economical growth looks forward to a better future. Approximately, 90% of the government revenues are drawn from it. Nevertheless, many efforts are being made by the government to enlarge its reliability focusing into various plans to diversify, industrialization, privatisation or tours and tourism. The Oman Vision 2020 comprises of furnished strategies that can help increase the  Sultanate industrialization (Stratfor, 2017).The government has encouraged the privatised sectors to so that more better plans can be made to make the economy of the Sultanate  more stable. The SMEs  or the small and medium sized businesses plays a crucial role in achieving the vision of Oman (Bureau, 2015). To the sultanate these SMEs are critical components constituting 90% of Oman’s corporate sector. The government also considers this as a priority area which needs great push and employment generation opportunities.

Government wants the private sectors to become the source to generate employment opportunities. In the last few decades, the Government has aimed development in prominent sectors such as tourism, agriculture, manufacturing, and aquaculture (Abed, 2003). The Government had made significant reform programs in order to diversify the economy.Consequently, the oil wealth of the Sultanate had to encounter falling oil prices.

Summary of Oman Oil Company SWOT Analysis

The Oman economy comprising of numerous SMEs was expected to lower down with the growth of GDP on average of 3.3 per cent a year for 2015 to 2017. Nevertheless, the Oman’s growth will definitely be sustained. According to Standards & Poor (S&P) rating agency Oman had a solid performance (Strolla, 2017). The rating was “stable” then was lowered to 'A-/A-2' from 'A/A-1' in its latest update. However, the international rating agency in its fresh update has affirmed that the outlook is stable. Alfred Strolla Phaninder Peri with core objectives introduces various investment projects that are cost efficient. Vision 20/20 aims in improving this.

The objectives are of building a non-oil economy, and expanding the multiple programs that were initiated.Vision 2040 is a new long-term economic strategy formulated by the Oman Government. Oman Vision 2040 bases itself on the targets strategies in 20/20 visions.

The Oman Government comes up with new agendas to move forward with Taxes and fees being a key component (The Telegraph, 2014).The other components of taxes and fee include commercial registration fees, customs duties, labour license fees etc.

Oman’s long-term diversification strategy is mainly focused in the industrial sector as it is also capable of generating more employment opportunities meeting the country’s social development needs.  Undoubtedly, the industry’s contribution to the Sultanate’s GDP at 16.6 per cent, has brought about accelerated growth in Sultanate’s economy.It has given the Sultanate sustainable development with a goal to generate employment opportunities. Apparently, out of total FDI investment in 2014 almost 46% were towards manufacturing sector.

Oman’s Mineral industry currently is progressing fast towards its development path. Oman’s huge mineral resources comprises of minerals zinc, chromite, gypsum, silicon and limestone amongst others. The sector is potentially expected to make a significant contribution to the country’s GDP, which as a result a large numbers of investors are drawn towards it.Being a part of national development process several industries have been emerging around the mineral sectors, boosting up the employment opportunities. Moreover, this has initiated a young Omani workforce, as well as contributed much to the nation’s GDP (Times, 2011). According to Standard & Poor’s credit rating, in the first eight months of 2013 the mineral products, which comprise the largest component of non-oil exports, jumped 51% to $1.73bn, up from $1.15bn in 2012.

The Oman Oil Company (OOC) had many diverse effects from the Oman Vision 20/20.  In 1989 the oil prices got lowered at a price of $10 per barrel. The authorities of Oman has launched a new program of diversification which was popularly termed as the Vision 2020 (RSM, 2014).This program involved gas sale to finance infrastructure projects.  Furthermore, the long-term ambition of Oman Company makes efforts for attracting producers of international petrochemical to the Sultanate in order to have infrastructures and logistics which were well developed.  In order to accomplish this ambition Oman started a transshipment which is highly technical. Since 1994 Oman is associated in exporting gas to the UAE.This situation has been reversed since 2008, as a response to the increasing domestic demand the Oman started importing gas from Qatar via the UAE through the  Dolphin project. Since the early 1990s the Oman is basically ambitious on having a industry related to petrochemicals.  But the Sultanate has been extremely cautious on this in the view of the about the associated high expenditures and risks of markets involved and also because of the feedstock limitations (Inflibnet, 2013). Petrochemical industry investments has been increasing since October 1999 when BP Chemicals withdrew as the OOC was intending to own a costly gas separation plant. In year 2006 the Oman’s Polypropylene were recorded to be 340?000 tonne per year and that was one of the first few such companies. The Sohar Refinery Company (SRC) supplies the Polypropylene.Currently this company is constructing a brand new set of  116/000 barrels every day on sites close by (Worldfolio, 2014). The structure of shareholders of the  Oman Oil Company’s O is a combination of both companies located internationally and the government agencies (ArabianBusiness, 2010). The Company comprised of 60%, Kuwait based Gulf Investment Corporation controls the 20% and  LG International of South Korea is 20%. The marketing of the product  is distinguished in between Oman Polypropylene and LGI. Around  35 to 40% of this is produced in China and Europe.

Action plan of Oman Oil Company

Conclusion

The Oman Oil Company has been the major source of economy to the Sultanate.  In spite of its weakness and threats Oman with its effective ways to deal with its hazard exclaim to always be the pride of the Sultanate. The Vision 2020 will certainly set the OOC on the right track and would accomplish Oman as an independent oil related country. Oman with its new ambitions of building an oil independent economy and doing well in the industrial sectors will once again rise above its odds providing the Government with employment opportunities building up younger workforce both nationally and internationally.

References

(2010). Oman’s 2020 vision. Available: https://www.arabianbusiness.com/oman-s-2020-vision-89986.html. Last accessed 3rd May 2017.

(2017). OOCEP named fastest-growing oil & gas company in Mideast. Available: https://www.arabnews.com/node/1071896/corporate-news. Last accessed 3rd May 2017.

(2015). Welcome to Oman Oil Company S.A.O.C. Available: https://www.oman-oil.com/index.php. Last accessed 3rd May 2017.

Abed, G. T (2003). Challenges of Growth and Globalization in the Middle East and North Africa. Oman: International Monetary Fund. p550.

Bezzack, K. (2016). Oman Oil Marketing Company SAOG (OOMS) - Financial and Strategic SWOT Analysis Review. Available: https://www.bharatbook.com/oil-gas-market-research-reports-385236/oman-oil-marketing-company.html. Last accessed 3rd May 2017.

(2017). Oman Oil & Gas Report. Available: https://store.bmiresearch.com/oman-oil-gas-report.html. Last accessed 3rd May 2017.

(2017). Company Overview of Oman Oil Company S.A.O.C.. Available: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=10877852. Last accessed 3rd May 2017.

(2013). Research and Markets: Oman Oil and Gas Strategic Analysis and Outlook to 2025 - Supply, Demand, Infrastructure, Investment and Market Shares. Available: https://www.businesswire.com/news/home/20130225006026/en/Research-Markets-Oman-Oil-Gas-Strategic-Analysis. Last accessed 3rd May 2017.

(2015). SME sector’s growth in Oman. Available: https://oeronline.com/special-reports/sme-oman/sme-sectors-growth-in-oman.html. Last accessed 3rd May 2017.

(2013). A Middle East Point of View. Available: https://www2.deloitte.com/content/dam/Deloitte/xe/Documents/About-Deloitte/mepovdocuments/mepov12/dtme_mepov12_Oman2020vision.pdf. Last accessed 3rd May 2017.

(2013). The Vision for Oman’s Economy: Oman 2020.. Available: https://shodhganga.inflibnet.ac.in/bitstream/10603/3836/11/11_chapter%206.pdf. Last accessed 3rd May 2017.

(2016). Saudi Arabia on right path to overcome weak oil prices. Available: https://www.icaew.com/en/archive/about-icaew/news/press-release-archive/2016-press-releases/saudi-arabia-on-right-path-to-overcome-weak-oil-prices. Last accessed 3rd May 2017.

(2016). Oman: 25 Years of Progress . Available: https://www.lexology.com/library/detail.aspx?g=067f1e9b-fcaa-466d-bbcc-4a751471921e. Last accessed 3rd May 2017.

(2014). Oman: seeing with 20/20 vision. Available: https://www.rsm.global/insights/rsm-global-blog/oman-seeing-2020-vision. Last accessed 3rd May 2017.

Strolla, A. (2017). Oman Vision: 20/20. Available: https://www.islamicbanker.com/publications/oman-vision-2020. Last accessed 3rd May 2017.

(2017). Declining Oil Prices Present Opportunities for Change. Available: https://www.stratfor.com/analysis/declining-oil-prices-present-opportunities-change-0. Last accessed 3rd May 2017.

(2011). Near vision can now be treated. Available: https://timesofoman.com/article/2257/Round-up/Near-vision-can-now-be-treateddisqussion-0disqussion-0. Last accessed 3rd May 2017.

The Telegraph. (2014). Oman: Focusing on diversification. Available: https://www.telegraph.co.uk/expat/expatpromotions/7361955/Oman-Focusing-on-diversification.html. Last accessed 3rd May 2017.

Weiner Consulting. (2017). Oman Oil Marketing Company SAOG dynamic and strategic SWOT analysis. Available: https://www.swotanalysis24.com/swot-o/80162-swot-analysis-oman-oil-marketing-company-saog.html. Last accessed 3rd May 2017.

(2014). Tradition of smart planning to boost economic diversification. Available: https://www.theworldfolio.com/files/file/report-546b3bcc5f675.pdf. Last accessed 3rd May 2017.

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