Build local strengthsJuly 14, 2020
Ahmed Al Daraai, executive director of Saih Al Nihaidah Trading & Contracting (Santco), talks to The Energy Year about how Oman’s transportation sector has been impacted by the downturn and the key takeaways from the crisis for energy services companies. Santco provides logistics services and transportation for the downstream sector.
How has Oman’s transportation sector been affected by the downturn?
We have been severely affected by the Covid-19 pandemic and the oil price shock. During the lockdown, our transportation business was operating at 50% capacity due to various reasons. Firstly, our business depends on oil sector companies, and many rigs we were catering rig support services for were shut down. This has caused real hardship in our cashflow, as our manpower and equipment were idle without work. We were lucky that our filling stations were working, wherein we were able to break even on our operating cost.
Secondly, due to the lockdown, in the beginning, it was very difficult to procure spare parts and other materials required for maintenance and repairs of the vehicles/equipment due to the shutdown of all the spare parts shops in Oman. In addition, the exports had also come to a complete halt, which directly affected our business as a logistics and transportation company.
Thirdly, due to this crisis it has been very difficult to collect receivables from our clients, which has affected our cashflow.
Lastly, it has made us realise that due to this pandemic, our country’s economy as a whole has been greatly affected. Collectively, we must learn from this crisis to rise up again and bring the situation back to glory once more.
What are the key takeaways for services companies in the country’s energy industry?
We have learned many lessons due to the Covid-19 pandemic. The first is that to be self-reliant, we cannot continue to depend only on an expatriate workforce. Most of our foreign workers are stuck outside the country, which makes it very complicated to ensure business continuity. We should always have a plan B in place, and we must aim at training and hiring an Omani workforce to be able to cope with similar challenges in the future.
However, first we have to train the local workforce and only after that will we be able to integrate them into the workforce efficiently. The current issue of hiring local employees is that they are asking for higher compensation packages and those payroll numbers are not necessarily favoured by local community contractors.
Lastly, we should also start looking inwards and enhancing our domestic manufacturing capabilities. We have long been importing spare parts and raw materials used in our field of activity from the UAE and other Gulf countries. It has now become very difficult to continue doing that due to various reasons, viz. supply of materials on time, high delivery cost and higher material prices. This crisis has taught us that we need to source materials globally, wherein the rates are competitive and delivery is on time and direct to our Oman ports.