Ahmed Al Azkawi: ‘We are the national champion for oil and gas’

Personal confession: I didn’t know much about the Omani energy sector before I sat down to lunch with Ahmed Al Azkawi, chief executive of oil and gas producer OQEP.

I saw Oman as an intriguing but enigmatic member of the global oil community: a comparatively small producer, certainly compared to its giant hydrocarbon neighbours in the UAE and Saudi Arabia. It was, however, big enough to be a member of the influential “Group of Eight” decision-makers within Opec+.

I knew that state-controlled OQEP – the E and P stand for exploration and production – hit the headlines last October with an initial public offering that made it the biggest company on the Muscat stock exchange.

The IPO raised about $2 billion, valuing the company at $8 billion. It was a trailblazer for Oman’s privatisation programme, which had got banks and advisers excited all round the Gulf.

Beyond that, relatively little. But over a pleasant Italian meal by the turtle rehabilitation lagoon at the Jumeirah Al Naseem hotel, Al Azkawi led me up a steep learning curve.

A petroleum engineer who has spent his career in the industry, with stints working directly for the Omani government and for US businesses, he set the tone even as we looked through the menu at Il Borro. 

Reuters/Abir Al Ahmar

“We are the national champion,” he declared while joining me in a spicy Virgin Mary. “The intention was to have a national champion that would drive government strategies in expanding oil and gas positions.”

Some history is relevant here. Crude was discovered in commercial quantities later than in Saudi Arabia or the UAE. It was not until the mid-1960s that the sultanate exported its first barrels, in partnership with Western oil companies. That partnership concept survives to this day, in contrast to the Saudi or UAE models of a dominating national oil company.

In the current round of concessions being offered by OQEP, aimed at increasing production by 30 percent by 2030, the list of existing or potential partners include many of the biggest Western oil majors, such as Shell, Occidental, Total and Eni. Global giants Exxon Mobil and Chevron may also be interested in Oman. 

“If you look at the other GCC countries, all have a national oil company. OQEP, by definition, is not a national oil company – it’s a national champion,” Al Azkawi reiterated.

OQEP is not the biggest oil producer in the country. That is the state-owned company Petroleum Development Oman. 

But with about 17 percent of the sultanate’s hydrocarbons under its command and the lustre of a high-profile market listing, OQEP is regarded as the transformational energy player in Oman and the leader of its international expansion ambitions.

Both pictures: OQEP

“The purpose of OQEP was not to compete with international oil companies, but rather to complement, attract and collaborate. We are becoming a partner with every single international oil company present in Oman.

“Because we are partners with the IOCs, we have helped strengthen our talent and workforce,“ Al Azkawi said, tucking into a rocket salad while I munched on burrata.

The terrace tables at Il Borro are perfect for an al fresco “winter” lunch in Dubai, relaxed and convivial. It’s not really a business lunch venue, smack bang as it is in the middle of the Madinat Jumeirah beach resort. But what’s wrong with a laid-back lunch if it encourages candid conversation, even against a backdrop of beach-goers?

What OQEP does have in common with other oil companies in the Gulf is the central role it plays in Oman’s diversification strategy, Vision 2040.

Accounting for something like 14 percent of GDP, OQEP contributes directly in terms of revenue to the government and also via the multiplier effect of its international partners’ investments in the country.

“The projects that we create allow for diversification; the same private sector that supports diversification also benefits indirectly from these projects.”

The company’s central role in Omani economic strategy was one of the reasons the government decided on an IPO. It was a big event in the country’s business and financial history – and had been many months in the planning.

“The IPO certainly met our expectations in terms of the national agenda. There are market factors beyond our control, but from a corporate point of view, the company continues to have a very efficient financial and operational performance.”

One of those factors is the share price, which has remained below the issue level since trading began despite a “robust” dividend policy aimed at luring investors.

“The share price has been a challenge,” said Al Azkawi.

“Certain market improvements are needed for the share price to meet some analysts’ predictions. This is a new company – the largest to be publicly listed in Oman and the first of its kind in our business segment – so it is not totally understood by everyone.”

OQ Group

Shares in OQEP were trading almost 18 percent below their offer price by the end of March – OR0.32 versus OR0.39.

He is confident that, even with the big dividend – $450 million paid in 2024 and an additional $150 million earmarked for shareholders including the government-owned OQ Group, which owns 75 percent – there is sufficient cash flow for expansion. Net profits last year came to $849 million on $2.2 billion of revenue.

The strategy is pretty firmly fixed in the CEO’s mind: domestic organic growth – as in the concessions process under way to raise oil output – mixed with selected foreign investments.

“There is further unused capacity within Oman that we can develop. When looking outside Oman, we focus on opportunities with reliable operators – most likely existing partners in the region – and provided they have the right assets, we will go for it,” he said.

“Outside the region, we prefer projects not too far away so that we can capitalise on our existing relationships. For example, when considering projects in Central Asia or East Africa, we evaluate them based on their indigenous resources. 

“There are some Indian partnerships already in place because Oman sells oil to India and Indian oil companies are partners in one of the concession blocs.”

As with any oil company, future investment decisions depend very much on the price of crude. 

We were lunching before Donald Trump’s tariffs upended the global economy and Opec+ decided to accelerate the return of barrels to the market. But how does Al Azkawi, as a seasoned observer of global markets, see the price going in a turbulent world?

“Demand will either stabilise or continue to increase. A small portion of that demand may eventually be covered by renewables, but it will remain a very small part. The exploitation of oil and gas will not lose momentum. If you look at the total inventories, they have been dropping over the past six months, while demand in China is slowly increasing.

“Many forecasts suggest that demand won’t rise dramatically this year – perhaps an extra 1 million barrels per day, which is actually quite good.” 

He added, presciently: “I don’t expect major changes in overall demand and supply – the price will be driven more by geopolitical sentiments and actions by leaders such as President Trump.” 

Like many oil executives, Al Azkawi is concerned about the direction of US energy policy and the president’s “drill baby drill” mantra.

“I love that phrase, but it seems some people don’t understand the underlying dynamics. The message is that there’s nothing wrong with producing more oil for the sake of production and growth but, in reality, doing so could eventually hurt the market,” he said, as we dug into pappardelle and risotto.

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The president “makes noise, but his statements may hurt American interests in the long run”, he added.

Some oil experts are equally concerned about the supply side of the crude equation. Oman, with an Opec quota of rather less than 1 million barrels per day, still has a significant voice in the deliberations about whether the organisation should put barrels back on the market.

Al Azkawi’s call was that the organisation would need good commercial grounds to continue increasing supply.

Natural gas is increasingly an area of focus for OQEP. It has the largest gas reserves in Oman and a strategic geographical location outside the Strait of Hormuz chokepoint. In this, it has similarities with the storage and bunkering facilities in the UAE’s Fujairah port, but Al Azkawi does not see OQEP in competition with the Emirati hub.

“It’s a different ball game. We’re talking about a very, very low-emission alternative energy bunkering facility. We may actually complement each other rather than compete,” he said.

Many energy experts see gas and liquefied natural gas as the fuel of the future and a bridge in the energy transition. Certainly the US is going all out to increase LNG exports to the world. Does OQEP see American gas as a competitive threat in the global marketplace?

“They are certainly enjoying the market, but I’m not sure which direction it will take. I also know there are projects in Canada. 

“That may be why Europe is emerging as a key market. American exports, along with North African gas, are factors that could influence global prices, but as long as Russian gas doesn’t return to its previous levels, America should continue to benefit,” he said, diplomatically.

Talk of gas as the fuel of the future brings us neatly to what is perhaps the biggest debate in the global energy business. With a climate-change denier in the White House, will the rest of the world follow America’s lead and pull out of the Paris Agreement to limit global warming?

Al Azkawi was adamant: “No, not at all. We believe that you can achieve the goals of the Paris Agreement without switching entirely to renewables and hydrogen. If you can balance affordability, cost and security of supply, that’s the goal.”

OQEP has targets to cut flaring by 2030 and install more solar capacity – and on a national level, a strategy to reach net zero emissions by 2050. 

Al Azkawi, with a nod to his time in the US, is also enthusiastic about the direct air capture technology on which some big American companies are pinning their decarbonisation strategies. Oman’s first hydrogen fuel station opened recently.

“If we believed that our operations harmed people, we would stop immediately. In reality, there is more harm in switching to an unproven fuel that reduces economic growth than in responsibly managing hydrocarbons,” he said.

That was a thoughtful and nuanced approach from an oil executive, I thought, as we shook hands goodbye and I picked up the Il Borro bill. At AED679, it was good value for a crash course in Omani energy.

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