The concept of Local Community Contractors (LCCs) was initiated almost 20 years ago in Oman. Please explain how you started the company and became one of the most successful LCCs in the country?
Up until 1998, the local communities in Oman suffered a lot from the activities of the oil companies. They were disturbing people’s lives and contaminating the environment. At that time, the local communities in the concession areas were not benefiting from the oil production. Their lives were difficult because the infrastructure was not well developed; there were no roads and other facilities that we have today, only very basic things, such as small health centers and schools. So people were complaining to the authorities and they wanted something to be done.
His Majesty has always been very concerned about the wellbeing of his people, so he gave clear instructions to the Ministry of Oil & Gas to initiate a program which would benefit local communities. The Ministry of Oil & Gas then gave directives to the Petroleum Development of Oman (PDO) to go to all the concession areas, meet with the sheikhs of the local tribes and invite them to PDO to discuss different opportunities available and assist them in starting their businesses.
I was one of those people contacted by PDO back in 1998. Up until then, I worked as a civil servant. I was one of the few educated people in my village, so in 1970 I moved to Nizwa, but I always maintained the ties with my people back home.
PDO gave us different options and they let us chose between mechanical works, civil engineering, transportation and logistics. I decided to go for the tougher and more dangerous mechanical works as I knew I would have less competition in that business.
Back then, the Ministry of Oil & Gas divided the local contractors into two types – Class A and Class B. The shareholders of Class A companies were entire tribes, while Class B was a family business. Al Ghalbi is a family company, so we fall under the Class B category. Class A companies were usually given longer and bigger contracts, while Class B companies had to work their way through on their own without much support. Most of our family members either worked in oil and gas industry, or they had the opportunity to observe how other people work from close during many years, so we were familiar with the business.
The PDO and the Minister of Oil & Gas in particular, took the LCC initiative very seriously. They were giving us a lot of support and His Majesty was personally monitoring the progress of the local contractors and following our performance through regular reports.
We started Al Ghalbi in 1998 and we took this opportunity very seriously. We discussed with PDO the best options available according to our capabilities and we put up a five-year plan. The first contract we got from PDO was the cold cutting of pipes. Basically, once the old pipes are removed to be replaced with new ones, they need to be cut as they are very long (around 40 feet). So first the pipes have to be cleaned from the residual oil and then cut for PDO to be able to sell them or take them to a scrap yard. In order to be able to do this job, we employed 10 people with experience and acquired the necessary machinery. During the first year we had PDO’s full support which also included free training, so the pipes business took off very well.
As we were progressing, we began to think what to do next. We decided to look into the construction business. We started by observing how other companies worked and what machineries and procedures they were using. Once we believed we were ready, we went to PDO and asked for a contract in construction. At first, they were very hesitant as construction is much more difficult and risky, but we insisted on being able to deliver and PDO accepted to give us a small job. We completed the job on time and without any issues, so we got a bigger job, and so on. In 2000 we got our first full contract in construction. Today, 50% of all construction works in the South of Oman are done by Al Ghalbi.
Then we started looking at PDO’s vision and strategy for the future in order to identify other opportunities where we could develop our business. We realized that there were some issues with carbon steel pipes, especially in the southern area due to the heat. So we were thinking about using HDB (High Density Bentonite) lines to protect the pipes. In Oman, there were only three companies in this business, most of which had 20 or 30 years’ experience. It was not easy to penetrate the HDB market and at first no one wanted to talk to us. But I was determined to succeed, so I purchased the machines and signed a contract with an experienced subcontractor to do the work at the beginning. My plan was to let them do the first jobs while we learned from them, and then gradually take over. One year later, we started working on HDB lines on our own.
Then in 2004, PDO wanted to demolish some of the old stations. Demolition is not an easy job, because according to PDO’s procedures, all the components have to be removed carefully and put away separately so that they can be reused in other projects. In some cases, that was very difficult to achieve, as the pipes were really big. But we studied the scope of the business, we acquired some of the equipment, and hired the remaining machines. I am proud to say that Al Ghalbi was the first company in PDO’s history to demolish eight old stations in the South of the country.
As our business was growing, we were investing in equipment and in our staff. We also wanted to engage other people from our area and give them jobs. I have 16 brothers and sisters, so I first employed all the available family members. Then I decided to employ other people from our area which was a challenge as we had to educate and train them first. But I knew it was the only way to help them, as they would not be able to get a job anywhere else without training and education. Today, our “Omanization” ratio is about 60% and we have Omanis even in the higher managerial level.
We are also helping the local community by giving donations for different projects, such as water infrastructure, building mosques, and so on. We even have some poor families who receive monthly allowances from us. I believe that if the government is helping us, then we have to be responsible with our people as well and help them in our capacity.
We also faced some difficulties along the way. In 2005, PDO realized that there were too many contractors so they decided to change the strategy and establish 4 new companies – ODC and AMC in the South, and ODC and AMC in the North. ODC was covering all the works outside the station, while AMC was covering the works inside the station. The government said that all the existing companies had to come under these four new companies. That same year, PDO decided that Class B companies were not suitable anymore, so a number of them disappeared from the market as PDO pulled back their support and focused only on Class A companies.
To be honest, I was expecting this to happen since the very beginning, so we were preparing ourselves for the difficult times. When PDO told us they would not support us anymore, we said fine, we will work with other companies. The government was still supporting us in general, but PDO would not give us any more contracts without bidding.
We were told that we had to come under the ODC or AMC, so I offered my services as a subcontractor. They needed our help as we had experience and they needed someone to do the job. But soon the problems started and the big companies wanted to absorb us completely. Our people suffered and a year later, I decided to pull out and continue on my own. We diversified our business and continued to work as subcontractors with other companies in very small jobs.
In 2007, we entered a PDO bidding process for pipeline maintenance. The experience we acquired over the years helped us show our technical capabilities and as a result, we got the contract for maintenance of a huge 8,000km pipeline for all of Oman, from north to south. It was the very first time that PDO awarded one contract for both north and south together. This was our first five-year contract with PDO.
I am very grateful to the Minister of Oil & Gas, who has been very supportive with us. He decided to give us an opportunity by awarding us such a big contract. During the first three months, PDO sent many appreciation letters and I took all of them to His Excellency which made him very happy.
Since then we have successfully completed five one-year extensions without any LTI and we have fulfilled all of our key performance indicators (KPIs) without any problems. It was a great challenge, but we succeeded. PDO was happy with us, and as a result, they decided to award us another five-year contract which is starting from today. Pipeline maintenance is a constant challenge, but I like challenges.
I wanted to expand the business further, so in 2010, we started a division for pipeline construction and we got a contract from Daleel Petroleum. Before that, I also had a joint venture with a big company in Thailand (TRC Al Ghalbi) which specialized in engineering, so it was a good match with our expertise in construction. Once you are awarded a contract, you are fully responsible for everything from engineering the pipes to construction.
From 2007, we became direct contractors for PDO and we started working with Occidental Oman, Daleel Petroleum, Shell and Oman Gas. Today, Al Ghalbi is covering all the oil and gas pipelines in the country. Today we are dealing with international companies, so we have to keep up with international standards and meet all the requirements of our clients.
You started with 10 people in 1998. How many employees do you have today?
Currently we employ approximately 700 people out of which over 60% are Omanis. We try to implement the “Omanization” policy as much as we can at all the levels of the company, upper management included. The expatriates have a higher turnover rate, but an Omani with a good salary will be very loyal and work very hard. I have Omanis who have been here with me for the last five years.
How do you see the business climate in Oman today?
Oman is a very good country for doing business. Since His Majesty came to power the entire country was transformed. Today Oman is a very open and transparent country which is important for business. In my opinion, the investment climate is very attractive and it is easy for any investor to do business here.
There are many opportunities in Oman, like for example in Duqm. The government is looking for partners who can do the job. Big companies like PDO and Oman Gas Company are good business partners for both local and international investors.
Two years ago, the government decided to establish five Super LCCs covering all Oman – three in the South and two in the North. How is this new strategy affecting your business?
When I started this company, I knew it was my own company - I was the decision-maker and I did not depend on shareholders, I was working for the benefit of my family. I have the feeling that sometimes people do not take these opportunities seriously enough, as we did back in the days.
The idea of the Super LCC was to expand the number of shareholders and give opportunities to more people in the concession area to benefit from the big value contracts awarded by PDO. Currently, Al Ghalbi has about 80 shareholders, but the SLCCs already have over 1,000 or 2,000 and the number will probably grow in the future.
According to the government’s vision, the LCCs were supposed to join the SLCCS and merge with them. But in reality, things are different. We have ongoing projects and commitments tied up with clients and financial institutions, and we cannot merge with another company so easily. Therefore, I told the government that I would rather continue to run my business on my own. They said they will still support us, but they will give the priority to the SLCCs.
I still believe that the government’s vision for the SLCCS is good for our people on the long run. Our government really takes good care of its people and this project will be seen in a positive light in the future.
What is your vision for Al Ghalbi’s future?
I want Al Ghalbi to become the Al Ghalbi Group and I would like to diversify our activities outside of the oil and gas sector. We are now working with a new In-Country-Value (ICV) strategy in mind. The government initiated the ICV primarily in oil and gas industry, but it is now being implemented in other sectors as well. The idea is to shift the focus from importing manufactured goods or machinery from abroad, to have the local companies produce them here and create in country value.
There are many examples of countries who suffered from economic difficulties and as a result, the investors left the country. The ICV initiative intends to help develop the Omani businesses, industry and services. We don’t want to have investors who just come in, use our resources and then take the money outside.
We are currently planning to build some factories in Duqm and start manufacturing in Oman. I have been working many years and will retire soon, but I don’t want to depend only on the oil and gas contracts. I want to have a more sustainable business for the long term.
What are your proudest of when you look back? What do you consider to be your biggest achievement?
When you are serious about your job and you give things the right importance, then you develop a clear vision. Once you understand what you want, others can help you as well. The government has helped us a lot in developing our business, but people need to understand that the government cannot do everything for them and they need to do things for themselves, too.
I have spent a lot of time with friends from abroad talking about their businesses and their vision for the future. I also attended many conferences in Oman and abroad as I wanted to learn from others in order to avoid making the same mistakes in my company. I like to know what is going on in Oman and the rest of the world.
When I am successful in a business, it makes me very happy, but I also enjoy the challenge of overcoming problems. I have always kept my word in business. It is important to be respectful to your business partners as well as with your staff. I treat my staff as my partners and I have a very personal contact with them. Business success did not change me as a person, and I am no different than in my normal life. I come to work early and work hard day-to-day, like any of my employees.
I take matters very seriously and when I make a commitment to my clients, I don’t take any incidents lightly. When there is a problem, we analyse it from the root to understand why it happened and we can do to avoid it in the future. We are very transparent and honest, and we deliver what we promise. Reputation is very important in business.
When the Minister of Oil & Gas and PDO travel abroad for conferences, they always give Al Ghalbi as an example of a success story in Oman. This makes me truly happy, but it is also puts a great deal of responsibility on us to maintain that standard. Getting to the top is hard, but it is still easier than maintaining that position.