Oman's energy major OQ plans to list methanol and ammonia unit

OQ Base Industries expects to start trading on the Muscat Stock Exchange in December

The offer period for the IPO of OQ Base Industries will start in November. Photo: Syed Basheer Ahmed

Oman’s state-run energy company OQ is planning an initial public offering for its subsidiary, OQ Base Industries – the country's only producer of methanol, ammonia and liquefied petroleum gas products – on the Muscat Stock Exchange, amid a flurry of listings by the energy major.

OQ plans to offer up to 49 per cent of its shares to the public, with OQ Base Industries expected to start trading in December, after the subscription period starts this month, the company said in a statement on Monday.

OQ Base Industries is the latest in a string of OQ subsidiaries that have been listed on the country's stock exchange. It follows the float of OQ Exploration and Production that raised a record $2 billion, as well as OQ Gas Networks and its gas drilling business Abraj Energy Services.

"The offering ... is a pivotal step, advancing OQ’s growth and aligning with its ambitions to expand its product reach to global markets," said Ali Al Lawati, chairman of OQ Base Industries. "The offering opens doors for local, regional, and international investors to invest in a major Omani asset with considerable growth potential in the global market.”

Strong interest

OQ Base Industries is working to "get the fair share price from our advisers and the bankers", Khalid Khalfan Al Asmi, chief executive of the OQ subsidiary unit, told The National on Monday.

The company is already recording strong interest from initial discussions. "Investors are actually approaching us to be part of this IPO journey," Mr Al Asmi said. "There are active discussions that are happening. We are targeting retail and anchor investors, international and local.

"We believe that we will be able to secure investors who are interested enough and believe in our story, looking into our past and projecting into the future, to be part of the IPO journey."

The company has expanded its business to three plants, up from only one when it began operations in 2010. "We are growing quickly and we're aiming to grow even quicker in the future," Mr Al Asmi said. "The IPO is actually a chapter in the big picture."

The planned listing adds to a flurry of listings in the Gulf country. "The market itself is very active and it's been looking for IPOs," Mr Al Asmi said. "This is part of the government's vision to enhance the Muscat stock exchange."

Green and blue ammonia

OQ Base Industries, based near the Port of Salalah, exports all of its produced methanol and ammonia and 87 per cent of its LPG products. It benefits from direct proximity to the main East-West shipping lane, which provides a quick access point to the wider Middle East, Indian subcontinent and East Africa, which are among the fastest demand growth regions for the company’s products.

The company expects potential for future growth amid market projections that, by 2030, methanol demand will grow by 21 million tonnes, free-traded ammonia will grow by five million tonnes and LPG by 39 million tonnes, Mr Al Asmi said.

"All the markets we operate in are expected to grow even further and that will give us a good story when we consider any future projects," he added.

Ammonia exports are being driven particularly by increased demand from African countries for fertilisers, while demand for methanol is boosted by the shipping industry seeking methanol-fuelled vessels and LPG demand buoyed by the petrochemical industry.

The company is also exploring the possibility of expanding into green and blue ammonia production, Mr Al Asmi said. "It will all depend on the demand and supply, and the market transition to green or blue ammonia," he said.

"Our geographical location in Oman, having access to sun and wind, I can confidently say that we are in a very good position to transition to blue or green ammonia if the circumstances allow."

OQ Base Industries reported revenue of $510 million and an adjusted Ebitda margin of 43.1 per cent in the year up to December 2023. It expects by January to pay a dividend of about 24.5 million Omani rials ($63.6 million) for the first nine months of 2024 and then a second tranche of about 8.2 million rials by April.

In the first half of the year, the company recorded revenue of more than $500 million and Ebitda in excess of $200 million, Mr Al Asmi said. In 2024, "we are growing in the same trajectory of strong financials" compared to the previous year.

All proceeds from the offering will be paid to the selling shareholders, OQ Base Industries said.

Bank Dhofar, Bank Muscat and Morgan Stanley International have been appointed as joint global co-ordinators. Kamco Investment Company and BSF Capital have been appointed as joint bookrunners.