BrazilOman calls in McKinsey on refining and petrochemical industry integration
Strategy and management giant McKinsey & Company has been working with Oman on plans to integrate the Sultanate’s refining and petrochemical sectors into a single entity, according to recent reports.
As the Supreme Council for Planning prepares to release the first draft of Oman Vision 2040 by the end of the year, which following the 2020 agenda outlines the future roadmap for economic diversification, the global strategy and management consulting leaders McKinsey & Company has been reported to be advising the government on integrating the nation’s refining and petrochemical sectors.
The Oman blueprint for economic diversification sits alongside the raft of national transformation programmes released across the GCC in response to the dive in global oil prices, including the Saudi Vision 2030, long held to have been devised by McKinsey, with a focus on breaking the local reliance on oil resources – which, according to Deloitte figures, in 2016 accounted for approximately 90% of Omani government revenues and more than 50% of the national GDP.
While Oman has in part sought to build its non-resource sectors with an increased focus on heritage, technological innovation (marked already by the advanced multi-million dollar regional cybersecurity centre unveiled by EY in the country last year) and tourism, with the latter to be supported by the newly opened Muscat International Airport designed to cater to up to 48 million visitor per year through future expansions, the nation has also looked to develop its petrochemical and petroleum refining sectors – such as with the $6.5 billion Liwa Plastic Industries Complex project (LPIC).
With manufacturing identified as a priority sector in Oman’s diversification initiatives – expected to deliver 15% of the nation’s future GDP – the LPIC project is one of the focal points of the latest five-year phase of Vision 2020; its petrochemical refining activities projected to bring up to 3% of the manufacturing total alone. Featuring a pipeline-connected refinery, aromatics plant, steam cracker, and downstream polypropylene and polyethylene plants, the refinery and petrochemical facility is said to be one of the best integrated in the world.
Now, with the aid of McKinsey, the entire refinery and petrochemical industries of Oman are themselves set for integration, according to Reuters by way of an anonymous senior Omani government official. “The work is being carried out by McKinsey. It is not finished yet,” the source told the international news agency. According to the report, Oman has also been toying with the idea of privatising a number of state firms over the past years, as the Sultanate seeks to raise cash and enhance efficiencies during an era of low oil prices.
Industry Consolidation
A recent report on the Gulf petrochemical sector from McKinsey rivals The Boston Consulting Group, released in conjunction with the Gulf Petrochemicals & Chemicals Association (GPCA), noted in its recommendation of greater local consolidation that the accelerated consolidation trends within the industry globally have granted a competitive advantage to international rivals as activity in the Middle East greatly lags behind.
Consolidation, the report argued, could “build market leadership in certain segments, achieve portfolio coherence, increase cost competitiveness (including better integration of site networks) and support accelerated development of capabilities.” Mirko Rubeis, Partner & Managing Director at BCG, said in conclusion; “Multiple market developments – both internal and external – are reshaping the petrochemical industry in the Middle East. We believe that consolidation is an effective route to positive transformation for GCC producers.”
While Oman is the second smallest management consulting market of the GCC ahead of Bahrain, at an estimated worth of around $100 million, it has nevertheless grown at a faster rate in recent years than several of its Gulf neighbours. The Sultanate, however, still has one of the lowest female workforce participation rates in the GCC, ahead of only Saudi Arabia – and potentially soon eclipsed by the Kingdom as Saudi reforms come into effect and women hit the road.
