ANNUAL REPORT 2022Shell Oman Marketing Company SAOG
POWERING PROGRESS
UNDERPINNED BYOUR CORE VALUESAND OUR FOCUSON SAFETY
Protecting the environment,reducing waste and making
a positive contribution tobiodiversity
Growing value througha dynamic portfolio and
disciplined capital allocation
Powering lives through ourproducts and activities, and
supporting an inclusive society
Working with our customers andsectors to accelerate the energytransition to net-zero emissions
His Majesty Sultan Haitham bin Tarik
CONTENTS
Board of Directors 8
Management Team 10
Directors’ Report 12
Auditor’s Report on Corporate Governance 17
Corporate Governance Report 18
Annual Board Evaluation Report 25
Management Discussion and Analysis 27
Auditor’s Report on Financial Statements 35
Financial Statements 40
SHELL OMAN MARKETINGCOMPANY SAOG PO Box 38, PC 116,Mina Al Fahal,Sultanate of OmanPhone: +968 24 570100Fax: +968 24 570121
www.shelloman.com.om
@oman_shell
oman_shell
Growing value througha dynamic portfolio and
disciplined capital allocation
Working with our customers andsectors to accelerate the energytransition to net-zero emissions
Protecting the environment,reducing waste and making
a positive contribution tobiodiversity
Powering lives through ourproducts and activities, and
supporting an inclusive society
POWERING PROGRESSPowering Progress generates value for our shareholders. It provides the �nancial strength to transform our company as the world makes the transition to cleaner energy.
It focuses on working with our customers and across sectors to accelerate the transition to net-zero emissions, in step with society. A net-zero world is where society stops adding to the total amount of greenhouse gases in the atmosphere.
Powering Progress means powering lives and livelihoods through our products and activities, and by supporting an inclusive society.
It also means respecting nature by protecting the environment, reducing waste and making a positive contribution to biodiversity.
Powering Progress is underpinned by our core values of honesty, integrity and respect for people, and our focus on safety. These include our commitment to doing business in an ethical and transparent way.
CONTENTS
Board of Directors 2
Executive Management Team 4
Directors’ Report 6
Auditor’s Report on Corporate Governance 12
Corporate Governance Report 14
Management Discussion and Analysis 24
Auditor’s Report on Financial Statements 32
Financial Statements 36
SHELL OMAN MARKETING COMPANY SAOGPO Box 38, PC 116, Mina Al Fahal,Sultanate of OmanPhone: +968 24 570100Fax: +968 24 570121
www.shelloman.com.om
@oman_shell
oman_shell
UNDERPINNED BYOUR CORE VALUESAND OUR FOCUSON SAFETY
Shabib Al Darmaki Deputy Chairman
Walid Hadi Chairman
Richard JoryDirector
Eric Greenlee Director
Ali Al Kharusi Director
Azzan Al Yahmadi Board Secretary
Bushra Al MaskariDirector
Ishaq Al MawaliDirector
Sheikh Faisal Al HasharDirector
Amr Adel Director
Ghalib Al Busaidi Director
Asma Al GhabshiDirector
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BOARD OF DIRECTORS
ANNUAL REPORT 2022 54 POWERING PROGRESS
EXECUTIVE MANAGEMENT TEAM1. Ali Al Amri – Facilities Manager – Oman & UAE2. Sultan Al Shidi – Human Resources & Admin Manager3. Khalid Al Awaisi – Mobility Country Manager4. Lamees Al Lawati – Chief Financial Officer
5. Dr. Mohammed Al Balushi – Chief Executive Officer6. Burair Al Lawati – General Manager – Corporate Relations & Business Development 7. Mahmoud Al Kalbani – Aviation Country Manager
1 2 3 4 5 6 7 1 2 3 4 5 6 7
In its meeting held on 13 February 2023, the Board of Directors approved Shell Oman Marketing Company’s (the Company)
audited financial results for the year ended 31 December 2022.
SUMMARY FINANCIALS
In OMR’000 Quarter 12 Months
Q4/22 Q4/21 % 2022 2021 %
Revenue 126,564 110,323 15% 499,912 398,429 25%
Gross profit 8,357 7,424 13% 35,367 30,039 18%
Add: Other income 1,083 880 23% 4,146 4,035 3%
Less: Selling, distribution and administrative expenses (7,823) (7,560) 3% (30,432) (28,030) 9%
Less: Financing and taxation (875) (516) 70% (3,375) (2,433) 39%
Profit and comprehensive income 742 228 226% 5,706 3,611 58%
¢ Twelve Months Revenue was OMR 499.912 million, 25% higher than the same period last year.
¢ Twelve Months Gross Profit was OMR 35.366 million, 18% higher than the same period last year mainly due to the increase
in volumes and higher sales margins of some products.
¢ Twelve Months Profit and Comprehensive Income was OMR 5.706 million. This is 58% higher than the same period in
2021 mainly due to the increase in overall sales volume and higher gross profit.
DIRECTORS’ REPORT
Twelve Months Revenue was OMR 499.912 million, 25% higher than the same period last year.
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BUSINESS PERFORMANCE
Mobility Business continued its commitment towards offering world class customer experience through its operational excellence with HSSE remaining a core focus area.
In pursuit of its aim to increase network portfolio expansion whilst maximizing returns, the business continued its accelerated growth in volumes in 2022 compared to the previous year and strengthened its presence in the Sultanate by adding six new service stations in prime locations across the Sultanate to bring our total number of sites to 206 Shell service stations.
The business continued its focus on our differentiated fuel by promoting Shell V-Power, for unbeatable keep-clean performance. The Company continued to cater to the evolving motorists needs
with a balanced focus between fuels and Non-Fuel Retailing (NFR). The Company introduced 9 shops in 2022 and converted 3 shops into the Shell Select brand. The Business continued to leverage its partnerships and contract management to maximize return from its integrated and diverse offerings across the network.
Mobility business has already been embarking on the energy transition journey through introducing innovative and sustainable solutions to reduce carbon footprint in its service stations. In addition, by offering alternative energy products and services gradually in the Shell network, the Company continues to showcase its commitment to continuing its energy transition journey especially when it comes to expanding E-mobility footprint. Earlier in the year, the Company launched its first electric vehicle charging point while upgrading a sites energy efficiency through the
installation of solar energy, LED lights, and highly efficient appliances.
Fleet Solutions Business remained a strong contributor to the mobility business; enhancing its customer portfolio with many new deals signed during the year contributing to the steady growth of the business quarter on quarter in 2022. The business continues to focus on increasing its portfolio and enhancing customer value proposition by addressing evolving customer needs by providing enhanced fleet solutions and continuous improvement in operational excellence through better transactional controls and digital value propositions.
Commercial Fuels Business witnessed gradual growth in volumes over 2022 leveraging new wins and mobilization of projects. The overall business landscape continues to be challenging, given the prevailing
Shell Oman’s first service station on Al Batinah Expressway in Liwa.
ANNUAL REPORT 2022 76 POWERING PROGRESS
Business to Business (B2B) market environment with limited mobilization of infrastructure projects. The Company remains committed to support business continuity for its customers through efficient cashflow management, operational excellence and providing innovative mobility solutions to help them achieve operational efficiency and reduce their carbon footprint.
Marine Business continued to serve local and international marine customers at the key ports whilst remaining committed to the highest HSSE and operational excellence standards leveraging on its global expertise to ensure successful delivery of bunkering solutions to its local and international marine customers. The Company is focused on strengthening its position in Marine business and exploring new business opportunities to expand its footprint across all major ports in the Sultanate.
Lubricants Business The business has witnessed positive recovery in the overall market of lubricants demand in 2022, despite the ongoing global supply chain constraints and challenges which directly affected the overall cost of finished lubricants and its profitability. The business showed resilience and maintained strong relationships with key B2B customers and partners ensuring business continuity while growing profitability and securing strategic accounts in various segments. Through our Business to Customer (B2C) distributors, the business continued to lead the B2C market in Oman with enhanced route-to-market strategies and initiated strategic marketing promotions to leverage our leading position and grow our market share in the premium segment. The business continued to leverage its ISO 9001-certified Shell lubricants blending plant in Mina Al Fahal, promoting In-Country Value, and has retained its number one position globally as the leading supplier of
automotive and industrial lubricants for the 16th consecutive year.
Aviation Business compared to the last two years, the global aviation and tourism sectors experienced an increase in air travel. The Company focused on retaining key contracts at Muscat International Airport and Salalah Airport while it continues to apply efficiency and cost optimization solutions to its operations to improve its profitability and to continue serving its customers safely and reliably as commercially feasible.
PROPOSED DIVIDENDThe Board is proposing that the dividend for 2022 be paid at 57 baisa per share for distribution in March 2023. This decision came as a result of the Board’s consideration of the Company’s net income of the year, current and expected market conditions, the liquidity in the money market, existing and anticipated borrowings, and the capital investment programme for the year 2023. This has been put in place to secure the longer-term profitability and competitive position of the Company.
BUSINESS OUTLOOKThe positive economic indicators influenced by higher oil revenue and fiscal discipline are expected to further stabilize the economy in 2023 following a year of steady growth and a gradual
recovery from the impact of the pandemic in the two years preceding 2022.
The Company has retained a robust balance sheet throughout the year 2022 to be able to continue investment in new business opportunities in 2023, where commercially feasible. The Company aims to maximize returns and lead in the energy transition and decarbonization journey together with key stakeholders.
Our people make the difference real. The Company will continue investing in its people across the network of our employees, partners and stakeholders whether by deploying an inclusive learning organization to onboard, build and sustain professional competency and operational excellence or by sustaining the diverse and inclusive organizational culture that we maintain. Our focus will continue to be on maintaing Goal Zero, keeping customers, frontline workers and each other safe and healthy. Reinforcing our core values of honesty, integrity and respect for people, and adhering to Ethics and Compliance without compromise will remain at the heart of what we do.
HEALTH, SAFETY, SECURITY AND ENVIRONMENT (HSSE)With HSSE remaining to be the Company’s top priority, the year ended with 365 days without loss of primary containment and 314 days without harm.
Throughout, the Company continued to focus on developing people’s competencies and enhancing its risk management policy. Safety refresher surveys were conducted across all the businesses as pulse check to collect insights on the safety culture and awareness among employees.
The Company invested in several initiatives including emergency drills in different parts of the Sultanate conducted in collaboration with the relevant stakeholders and partners. This activity was aimed at ensuring the readiness of
the frontline workers and the existing response plans in dealing with such emergencies, as well as sharing best practices and learnings with the wider community.
Furthermore, several workshops and seminars were done on HSSE matters that are critical to the day-to-day activities of employees, contractors, customers and concerned parties. Additionally, the Company led several worker-welfare initiatives to ensure the safety and well-being of our frontline employees, including safe means of accommodation, transportation, and others.
RISK AND CONCERNS
The downstream sector remains highly dependent on consumers and projects as well as disposable income, hence, supply and demand volatility can create profitability swings as external risks and opportunities develop. Similarly, supply chain continuity and access to raw materials at competitive and sustainable levels can be influenced by external economic factors as global indicators evolve.
Liquidity in the market has seen general improvement but receivables in certain segments and delay in collection continues to impose credit pressure on the Company, which it continues to balance by effective working capital management and ensuring balance sheet resilience.
The Company’s forward investment and business plan assume stability in the fixed margin rates in the dominant Mobility segment, and this is dependent on the authorities. The Company tests investments against various scenarios, including changing price structures, forecasted demand and the evolving economic environment to ensure we continue to take robust investment
decisions concerning the shareholders’ available funds.
INTERNAL CONTROL SYSTEMS
The Board of Directors recognises that good corporate governance results from strong internal controls. The Board affirms its overall responsibility for reviewing the adequacy and the integrity of the Company’s internal control and management information systems, including systems for compliance with applicable laws. There was no material loss reported during 2022 as a result of weaknesses in internal controls. The management of the Company continues to take measures to strengthen the overall internal control environment.
BOARD CHANGES
In the latest Directors elections held at the March 2022 AGM, the shareholders elected two new Directors; Bushra Al Maskari and Eric Greenlee replacing Directors Zain Hak and Adriaan Ritskes, respectively. Furthermore, effective July 2022 Asma Al Ghabshi was appointed as board member replacing Mooi-Fung Farm post her resignation.
CORPORATE SOCIAL RESPONSIBILITY
Shell Oman Marketing Company SAOG remains committed to Powering Progress together with more and cleaner energy solutions in line with the Sultanate’s 2040 Vision and Shell’s powering progress strategy, leveraging its access to global know-how and expertise. The Company shares benefits with the local society through its Corporate Social Responsibility program, with road safety, environment and community and enterprise development being its main pillars. In addition, there has been an ever increasing focus on creating in-country value through strategic and sustainable initiatives, to support
increasing retained value within the country.
The Company strives to reinforce its collaboration with all stakeholders, whether government, private or even NGOs, to deliver its role as a responsible corporate citizen in Oman.
IN APPRECIATION
We, in Shell Oman Marketing Company SAOG, would like to reaffirm our commitment as part of this nation to stand shoulder to shoulder with our partners and stakeholders in the Sultanate and work to power its progress together and build on its achievements. We will continue to serve Oman and the people, under the leadership of His Majesty Sultan Haitham Bin Tarik, and to support his vision for the Sultanate.
On behalf of the Board of Directors, I would like to express my sincere thanks to our shareholders, the management, our employees, customers, contractors and all our other stakeholders for their loyalty, perseverance, dedication, and effort in the face of an ever growing and challenging business environment. The Board of Directors remains committed to pursuing all opportunities with a view to maintaining the Company’s growth while enhancing shareholders’ value. We are grateful for your constant support as we work to power its progress together.
Walid HadiChairman, Shell Oman Marketing Company SAOG
Muscat, February 13, 2023
The Board is proposing that the dividend for 2022 be paid at 57 baisa per share for distribution in March 2023.
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ANNUAL REPORT 2022 98 POWERING PROGRESS
DIRECTORS’ REPORT
Growing value through a dynamic portfolio and disciplined capital allocation.
GENERAT INGSHAREHOLDERVALUE
Powering Progress creates wealth for our shareholders through our shares and dividends. Oman Shell will continue to provide the energy Oman needs today, while increasing our investments in clean energy. We will also maintain financial discipline and a strong balance sheet, so that our company remains strong, resilient, and ready to realise the opportunities in the energy transition journey of Oman.
Our many strengths include the depth of our customer relationships, our world-class trading activities and our integrated business model that produces, buys, trades, transports and sells energy around Oman. We are building on these strengths to transform our company across our three business pillars of Growth, Transition and Downstream.
Our Growth pillar focuses on working with our customers to accelerate the transition to net-zero emissions. Our Transition pillar comprises our Chemicals and Products businesses and produces sustainable cash flow. Our Downstream pillar delivers the cash and returns needed to fund our shareholder distributions and the transformation of our company, by providing vital supplies of energy solutions.
ANNUAL REPORT 2022 1110 POWERING PROGRESS
AUDITOR’S REPORT ON CORPORATE GOVERNANCE
ANNUAL REPORT 2022 1312 POWERING PROGRESS
In accordance with the Capital Market Authority (“CMA”) guidelines, we are pleased to present the Corporate Governance Report of Shell Oman Marketing Company SAOG (“the Company”) for the year ended 31 December 2022. The company’s external auditors, Moore Stephens LLC has issued a separate Factual Findings Report on the Company’s Corporate Governance Report for the year ended 31 December 2022.
Company’s PhilosophyCorporate Governance at Shell Oman Marketing Company SAOG envisages the Company’s commitment towards the attainment of the highest levels of transparency, accountability and business propriety with the ultimate objective of increasing long term shareholder value, keeping in view the needs and interests of all other stakeholders.
Shell Oman Marketing Company SAOG is committed to adopting the best global practices of Corporate Governance and fully supports the code of Corporate Governance issued by the CMA and all other relevant regulations. This Report has been prepared pursuant
to the CMA’s circular no. E/4/2015, dated 22 July 2015 and its application of the Corporate Governance practices in accordance with amendments to CMA’s Code of Corporate Governance issued under circular no. E/10/2016 dated 1 December 2016 (collectively the “Code”), The Commercial Companies Law (“CCL”), Royal Decree No18/2019 issued on 13 February 2019 and CMA’s Decision 27/2021 issued on 25 February 2021 regarding the Regulations for Public Joint Stock Companies (the “Regulation”). In addition, the following new decisions and circulars issued by the CMA in 2022 has been followed:
n Rules for Interaction between Public Joint Stock Companies, the Media, Investors and Analysts, Decision No. E/109/2022 issued on 13 July 2022.
n Information Security Guidelines for Public Joint Stock Companies, Circular No. E/1/2022 issued on 5 January 2022.
n Rules for Attending General Meetings and Voting Via Electronic Systems CMA decision E /129/2022 issued on 14 September 2022.
Board of DirectorsThe Board comprises entirely of Non-Executive Directors. The present strength of the Board is eleven Directors comprising of six Non-Independent Directors and five Independent Directors. The Chairman and Directors are accomplished professionals and experts in their respective corporate fields. The existing composition ensures that the Board is adequately balanced in terms of expertise and backgrounds to enable proper direction and steer on the Company’s activities.
Functions of the BoardThe company in general complies with the functions of the Board as per the CCL, the Code and the Regulation. With respect to the selection of the key executives, a transparent and a professional selection process that is applied within the Shell Group is used with the steer and involvement of the Board’s Nomination and Remuneration Committee as appropriate and agreed with the Board.
The same applies for evaluation of staff where a comprehensive performance and appraisal system of the Shell Group is implemented and is endorsed
Dr. Mohammed Al Balushi, CEO, Shell Oman Marketing Company receiving “Best Brand” award for Shell V-Power in the “Fuel” category during Alam Al-Iktisaad Top Omani Brand Awards ceremony.
by the Board and its Nomination and Remuneration Committee.
Process of Nomination of DirectorsThe last election was carried out in the ordinary general meeting in March 2022, where two directors have been
elected for the remaining board cycle. In case of vacancies, such vacant seats will be filled in accordance with the Company’s Articles of Association, Commercial Companies Law and CMA Regulations. During the term, the Company filled a vacant seat that opened after the AGM in March
following the mentioned guidelines. The company has an induction programme for Directors, which covers the wider business environment, company’s specific businesses as well as specific corporate governance elements (e.g. Code of Conduct and confidentiality).
Non-Independent Directors Independent Directors
Walid Hadi Shabib Al Darmaki
Amr Adel Sheikh Faisal Al Hashar
Richard Jory Ishaq Al Mawali
Zain Hak (up to 15th February 2022) Ali Al Kharusi
Bushra Al Maskari (from 15th March 2022) Ghalib Al Busaidi
Adriaan Ritskes (up to 15th February 2022)
Eric Greenlee (from 15th March 2022)
Moo-Fung Farm (up to 30th June 2022)
Asma Al Ghabshi (from 19th July 2022)
During the year 2022, the Company held five Board meetings. The dates are 15 February, 26 April, 28 July, 31 October and 6 December. The intervals between the meetings are in line with the CMA required interval of a maximum of 120 days between each meeting.
Director’s attendance record and directorships held during the financial year 2022
Name of Director PositionBoard
meetings attended
Last AGM attended
Directorship in other Companies
Walid HadiChairman, Board of Directors, Non-Independent Director
5 Yes • Director at Petroleum Development Oman• Director at Oman LNG
Shabib Al Darmaki Independent Director 5 Yes
• Board Member at Omani Qatari Telecommunications Company SAOG
• Chairman at Oman National Investments Development Co.
Sheikh Faisal Al Hashar Independent Director 5 Yes
• Director at Authority for Public Services Regulation (APSR)
• Partner at Urbaser LLC• Owner of Sustainable Environment LLC• Partner at Al Rauda Quarries Co. LLC
Ghalib Al Busaidi Independent Director 5 Yes None
Zain HakNon-Independent Director (Up to 15th February 2022)
1 No None
Bushra Al Maskari Non-Independent Director (From 15th March 2022) 4 N/A • Board Member at Oman Airports
Management Company
Adriaan RitskesNon-Independent Director (Up to 15th February 2022)
1 No None
Eric Greenlee Non-Independent Director (From 15th March 2022) 4 N/A • Director at Private Oil Holdings Oman Ltd
Mooi-Fung Farm Non-Independent Director (Up to 30th June 2022) 2 Yes None
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CORPORATE GOVERNANCE REPORT
Name of Director PositionBoard
meetings attended
Last AGM attended
Directorship in other Companies
Asma Al Ghabshi Non-Independent Director (From 19th July 2022) 3 N/A None
Amr Adel Non-Independent Director 5 Yes • Board Director at JOSLOC JV• Director/Commissioner at P.T. Shell Indonesia
Ali Al-Kharusi Independent Director 5 Yes
• Board Member at Oman Tourism Investment Company
• Board Member at Nizwa Integrated Real Estate
• Board Member at Emdad Logistics SAOC
Ishaq Al-Mawali Independent Director 5 Yes • Board Member at Bank Nizwa, • Board Member at Oman Cement SAOG
Richard Jory Non-Independent Director 5 Yes None
The Board of Directors manages and supervises the business and affairs of the Company in a stewardship role. The day-to-day management is delegated to the executive management of the Company. Any responsibilities that have not been delegated to the management or to a committee of the Board remain with the Board.
In order to facilitate proper governance, the following information amongst others is provided to the Board:
n Review of operating plans of business, capital budgets and updates;
n Quarterly/annual results of the Company and its business segments;
n Quarterly performance on Health Safety Security and Environment (HSSE);
n Reports of fatal, serious accidents or dangerous occurrences;
n Directors’ fees and remuneration;n Minutes of the subcommittees of the
Board;n Material default in financial
obligations to or by the Company;n Issues involving possible public or
product liability claims of substantial nature;
n Any significant industry related problems;
n Senior management changes;n Policies / procedures as deemed
important to place before the Board; n Material notices of penalties and
causes, n Non-compliance with any regulatory
requirements; andn Related party transactions.
As required by the Code, the Board of Directors have adopted Internal Regulations. These include adoption of principles, policies, procedures and practices for doing business and conducting affairs that are commonly used in the Shell Group. As part of this, the Shell Group Statement of General Business Principles, HSSE and Code of Conduct Policies are in place. The Board in general is informed of any changes as advised by the Shell Group. The Board has adopted a specific Related Party Transaction procedure to ensure compliance with the CCL and Code of Corporate Governance and controls are applied in devising the process to manage such transactions.
Board Profiles Walid HadiWalid Hadi is Shell’s Country Chairman in Oman and is a Dutch citizen of Venezuelan and Lebanese origins. He is an American University of Beirut graduate and a CFA charter holder. Walid started his career in Andersen’s Oil and Gas practice in Qatar then moved to Schlumberger, before joining Shell in 2005. He started his Shell career in the regional planning and reporting unit in Dubai, responsible for Shell’s portfolio in the Middle East, North Africa, Russia and Eastern Europe. He was then posted to the Mergers and Acquisition team, based in the Hague, working on a variety of acquisitions, divestment and corporate transactions spanning Africa, Middle East, Far East, Australia, and Eastern Europe. In 2012, he joined Shell’s Middle East
government relations team where he worked to establish new country entry positions and business development opportunities across the region. He was appointed as GM Commercial for Shell in Kazakhstan in 2015 where he also served as Shell’s shareholder representative for the Caspian Pipeline Company and was a member of its Board of Directors. In 2017, Walid was appointed as Vice President Finance for the Upstream Joint Venture business, he was subsequently appointed as Shell’s country chairman in Oman in 2019.
Shabib Al DarmakiShabib Al Darmaki is an Omani national and is currently the Director General in the Civil Services Employees’ Pension Fund in Muscat. Mr Al Darmaki has over 28 years of experience in the Pension Fund and comes in with a wide experience in the areas of finance, audit and pension fund management. He has a Master of Science degree in Accounting from Oklahoma University, USA and a BSc degree in Business from Hilwan University, Egypt. Shabib Al Darmaki is a Director in Oman National investment and Development Company (TANMIA) and Omani Qatari Telecommunication Company SAOG. He has also held various directorship positions in other entities throughout his career including Oman Housing Bank, Al-Batina Hotels and Al Izz Islamic Bank SAOG.
Sheikh Faisal Al-HasharSheikh Faisal Al-Hashar holds a B.Sc. degree in Marketing from Northwest Missouri State University, U.S.A and
has solid experience in both Public and Private Sectors. In the Public Sector, he held the position of a Director General until September 1997. As for the Private Sector, his last position was the Managing Director of Shell Oman Marketing Co. SAOG until June 2010. Sheikh Faisal is currently managing his own businesses/JVs in waste management and quarries. His current capacities are as follows: Honorary Consul of Austria in Oman, JV partner Urbaser LLC, in partnership with Urbaser (Spain), currently holding a concession for the waste collection in South Batinah and Director of Shell Oman Marketing Co. SAOG.
Ghalib Al-BusaidiGhalib Al Busaidi was the General Manager and Group Head of Wholesale Banking at Alizz Islamic Bank leading the team that advised the Ministry of Finance on the first global USD Sukuk issue for the Sultanate of Oman. Before this he worked in the State General Reserve Fund currently known as Oman Investment Authority (OIA) responsible for the private equity and direct investments as Deputy CEO having already established the Fixed Income and Money Markets division at the Fund. Ghalib holds several roles in both advisory and board membership positions locally as well as in Asia and Europe. Ghalib began his career with PWC in London where he qualified as a member of the Institute of Chartered Accountants in England and Wales (ICAEW) since 1991 and was eventually awarded his fellowship FCA credentials. He is also a qualified member of the Association of Corporate Treasures (AMCT) in the UK and has successfully completed the Investment Management Programme (London Business School), High Performance Boards (IMD, Switzerland) and Interest Rate Risk Management (New York Institute of Finance). He holds a BA “Honours” in Finance from Middlesex University, Business School in London.
Amr AdelAmr Adel’s career in the Oil and Gas industry spans 30 years, with an experience profile that covers Sales, Marketing, Operations, Strategy and Business Development cutting
across different classes of Business in Marine, Retail, Commercial, Global Commercial Fuels & Lubricants in the Middle East, Pakistan, Central & South Asia and recently South Africa. Amr was previously appointed as LSDR Downstream for UAE and CEO for Shell Vivo Lubricants. Amr is currently the Senior Vice President Mobility Asia effective 1st January 2019 and is based in Singapore. Amr has extensive experience growing business ventures and managing challenging turnarounds under multiple business structures: Joint Ventures, Public limited companies, Distributors and Direct businesses.
Ishaq Al-MawaliIshaq Al-Mawali, is an Omani national and is currently employed as the Head of International Assets Management at the Public Authority for Social Insurance (PASI). Mr Al-Mawali holds Masters and BSc degrees in Finance and has around 20 years of work experience mostly in PASI. He is also a member of the board of directors of Bank Nizwa SAOG since 2019, and National Gas SAOG since 2020.
Richard Jory Richard is Shell’s Vice President (“SVP”), Distribution Operations for Shell’s Trading & Supply business worldwide. His focus is to ensure the safe, compliant and competitive distribution of energy products to Shell’s customers across the globe. He is also accountable to deliver Downstream and small-scale gas projects. He serves as a member of Shell Trading’s leadership team.
Prior to his current role, Richard was SVP, Supply Chain for Global Lubricants where he drove the competitiveness of the global supply chain, improving sourcing, manufacturing and logistics whilst delivering sustainability and digital objectives.
Richard was Vice President Global Key Accounts & Global Businesses from 2017, where he successfully grew Shell’s commercial relationships with major global customers, started the digital transformation of the Shell Marine Products business and drove Sales Excellence across Shell’s marketing businesses. He has previously worked
in strategy and marketing roles based in the Czech Republic, Romania, Russia, The Netherlands, the UAE, Singapore and the UK.
Richard holds a BSc in Economics from Bath University.
Ali Al KharusiAli Al Kharusi is a Deputy Director of Financial Affairs at Ministry of Defence – Pension Fund since 2019. Mr. Ali Al Kharusi holds bachelor’s degree as an Accountant in CCE and MBA from Sultan Qaboos University. He is also an ACCA candidate. Mr. Al Kharusi holds current board membership at Emdad logistics with previous board memberships in Oman Growth Fund and Al Madina Insurance Company SAOG.
Bushra Al MaskariBushra Al Maskari has had a diversified career pursuing the sustainable growth of Oman while working closely with government authorities and agencies, state owned entity and most recently joined Shell Development Oman LLC in a senior commercial role. Her areas of specialization are strategic planning of renewable energy, energy efficiency, sound regulatory and governance frameworks, overseeing contracting of IPPs, and national fiscal balance plans. She was also formerly appointed as a director in the boards of Oman LNG and Qalhat LNG and is currently a director to the board of Oman Airports Management Company. Bushra holds a Masters in Public Policy from Oxford University, and a Bachelors in Business Law from Monash University, with a minor in Economics and Econometrics. She also completed a certificate in Transitioning to Business Leadership from IMD and graduated from the National Collaborative Leadership Program offered by the Royal Academy of Management and Oxford University.
Eric Green LeeEric Green Lee is a Finance leader in Shell with more than 16 years of experience spanning Commercial Finance, Financial Planning & Analysis, Controlling & Accounting, Business Performance Management, and Governance, Risk & Assurance. He has worked in Trading & Supply, Upstream,
ANNUAL REPORT 2022 1716 POWERING PROGRESS
CORPORATE GOVERNANCE REPORT
Shell Oman recognized and awarded in CSR Awards ceremony organized by Ministry of Social Development under the patronage of HH Sayyid Kamil bin Fahad Al Said.
Chemicals, and Manufacturing in the United States and Singapore, with the majority of his experience focused in the Downstream within operated assets. In February 2022, Eric was appointed as Country Finance Manager for Shell Development Oman LLC. Eric holds a Bachelor’s degree in Economics from Carleton College, USA.
Asma Al Ghabshi
Asma Al Ghabshi is a highly experienced HR professional with almost 20 years of local and international experience. Asma occupied different HR leadership roles including being the HR Manager for Shell Oman Marketing Company SAOG, Global Talent Manager for Upstream Non-operated, Change Manager, and HR Director positions. She was posted in Oman, Qatar, Egypt and the Netherlands and worked in both the Energy and Aviation industries. She currently occupies the position of Oman HR Manager in Shell Development Oman LLC.
Asma holds an MBA from the University of Manchester, and a Bachelors in English Language and Literature from Sultan Qaboos University. Asma is passionate about driving delivery, celebrating diversity and inclusion and
The annual performance bonus is determined by taking into account the market condition, the employee’s individual performance and the Company’s overall performance against agreed targets, which take into account financial, HSSE and operational parameters.
All Company employees have employment contracts that are in line with the regulations specified by the Ministry of Labour. The minimum notice period for termination of employment contracts is 1-month.
Audit & Risk Committee of the BoardThe Audit & Risk Committee is composed of three Independent Directors and one Non-Independent Director. Shabib Al-Darmaki who is an Independent Director is the Committee’s Chairman. The committee held four meetings during 2022, all of which had been minuted. The dates of the meetings were 14 February, 25 April, 28 July, and 27 October.
The audit charter approved by the Board includes the main responsibilities of the Audit & Risk Committee as follows:n Reviewing the annual audited
financial statements and the Auditors’ Report on the statements prior to submission to the Board for approval;
n Reviewing and approving the interim financial statements prior to public release and filing;
n Reviewing the scope of external and internal audits;
n Reviewing and discussing accounting and reporting policies and changes in accounting principles;
n Assessing the effectiveness of the Company’s internal control systems and procedures, and the process for identifying principal business risks;
n Reviewing compliance with the Code of Conduct;
n Reviewing legal matters with the counsel;
n Reviewing of related party transactions; and
n Meeting with the internal and external auditors independently of management of the Company.
Attendance record of the Audit & Risk Committee Members
Name of Director
No. of meetings
Meetings attended
Shabib Al-Darmaki 4 4
Ali Al-Kharusi 4 4
Ishaq Al-Mawali 4 4
Adriaan Ritskes (up to 15th Feb 2022) 4 1
Eric Greenlee (from15th March 2022) 4 3
Chief Internal AuditorMurad Al Bulushi was the Chief Internal Auditor and Audit & Risk Committee Secretary reporting to the Audit & Risk Committee since March 2020*. He is a Certified Internal Auditor with over 17 years of experience and knowledge in the field of Internal Audit across both the public and private sector companies in Oman.
Along with a MBA from Griffith University Australia, Murad is a Certified Fraud Examiner (CFE), a Certified Internal Auditor (CIA), a Certified Information Systems Auditor (CISA), and holds the Certification in Risk Management Assurance (CRMA). He also serves as a Board member of Association of Fraud Examiners, Oman Chapter.*Murad Al-Balushi submitted his resignation early 2023 and the Company is in the process of appointing his successor.
Audit and Internal ControlIn consultation with the Audit & Risk Committee, the Board of Directors recommended the appointment of external auditors to the Annual General Meeting. The shareholders have, therefore, appointed Moore Stephens as the external auditors for the financial year 2022.
In accordance with the Corporate Governance Code, the services of Moore Stephens are not used where a conflict of interest might occur. The Audit & Risk Committee has reviewed, on behalf of the Board, the effectiveness of internal controls by meeting the internal auditor, reviewing the internal audit reports and recommendations and meeting the external auditor,
reviewing the audit findings report and the management letter. The Audit & Risk Committee and the Board are pleased to inform the shareholders that, in their opinion, an adequate and effective internal control system is in place.
Nomination & Remuneration Committee (NRCO)The Nomination and Remuneration Committee is composed of two Independent Directors and two Non-Independent Director. Ghalib Al Busaidi who is an Independent Director is the Committee’s Chairman. The committee held two meetings during 2022, all of which had been minuted. The dates of the meetings were, 26 April, 2 December.
NRCOs’ key responsibilities include:n Establishing a remuneration &
incentive policy for Directors and Executive Management;
n Defining the basis for bonus payment to Executive Management;
n Monitor the structure and level of remuneration for Executive Management;
n Support the process for appointment of skilled persons to the Board of Directors;
n Succession Planning for Directors and Executive Management;
n Assist in selecting highly skilled personnel to fill Executive Management positions;
n NRCO operates within its terms of reference issued by the Board of Directors.
Attendance record of the NRCO Committee Members
Name of Director
No. of meetings
Meetings attended
Ghalib Al Busaidi (Committee Chairman) 2 1
Sheikh Faisal Al Hashar 2 2
Walid Hadi 2 2Zain Hak (Up to 15th February 2022) 2 0*
Bushra Al Maskari (From 15th March 2022)
2 2
* All meetings held were subsequent to February 2022
playing a leading role in the growth of the teams and organizations that she works with.
Company Secretary and Legal AdvisorThe Board Secretary and the Legal Advisor is Azzan Al Yahmadi. He has 12 years of experience in Muscat, Abu Dhabi and Dubai. He worked in a number of sectors including international law firms, energy, construction and aviation.
Remuneration MattersEach Non-Executive Director is awarded RO 800 as a sitting fee for every Board meeting and Annual General Meeting attended, and RO 400 for every Audit & Risk Committee and Nomination & Remuneration Committee meeting attended. Annual remuneration is awarded as long as the sum of sitting fees does not exceed RO 10,000 and the total remuneration does not exceed RO 17,000 per Director. The total sittings fees and remuneration for year ended 31 December, 2022 was RO 83,000.
Details of Directors’ RemunerationThe details of Director’s remuneration for the year 2022 is as follows:
Director’s RemunerationAnnual
Remuneration (OMR)
Sitting Fees (OMR)
Grand Total
Chairman, Board of Directors 0 0 0
Board Members 53,000 30,000 83,000
Grand Total 53,000 30,000 83,000
In line with Shell PLC’s global policy, Shell Board Directors waved their sitting fees and remuneration.
The total remuneration such as salaries, benefits, bonuses, stock options, pension contributions & perquisites paid to the top five officers of the Company was RO 796,064 in 2022.
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CORPORATE GOVERNANCE REPORT
Annual General Meetingn The company’s Annual Report
contains written clarifications on each item on the agenda of the Annual General Meeting (AGM) so that shareholders are suitably briefed on matters that are to be discussed to enable their effective participation thereat. The AGM is held both physically and virtually following the regulations and guidelines issued by CMA via:
n Decision No E/25/2020 dated 16 April 2020 on Rules for Convening General Meetings of Public Joint Stock Companies and Investment Funds Via Electronic Mean
n Circular No E/4/2021 dated 24 January 2021 on Procedures for Convening General Meeting
The Directors encourage shareholders to attend and participate in the Annual General Meeting. Questions posed are, where possible, answered in detail either at the Annual General Meeting itself or thereafter. Shareholders are welcome to raise queries by contacting the Company at any time throughout the year and not just at the Annual General Meeting.
Means of Communication with the Shareholders and InvestorsThe company has its own website and all vital information relating to the Company and its performance, including quarterly results, official press releases, annual reports and governance-related policies and procedures are posted on the website for all interested parties. The Company’s website is https://www.shelloman.com.om
Following MSX Circular MSM/379/ 2019 on appointing an Investor Relations Officer, the Company appointed Burair Al Lawati to cover this role. Burair is holding the position of General Manager of Corporate Relations and Business Development.
In accordance with Decision No. E/109/2022 issued on 17 July 2022 on Rules for Interaction between Public Joint Stock Companies, the Media, Investors and Analysts, the Company held its Investor Relations session where it presented to the investor community the unaudited financial results for
the period ended 30th September 2022 outlining its key strategic and business performance highlights, as well as key points discussing the Company’s goals and values. The session was led by the Investor Relations Officer along with the CFO and the Mobility Business Country Manager.
Information Risk Management (IRM) compliance activityIn pursuant to Capital Market Authority’s (CMA) circular No. E/1/2022 the published Information Security Guidelines for Public Joint Stock Companies, Shell Oman developed, endorsed and implemented its internal IRM manual in alignment with CMA’s expectation. In addition to leveraging the wider control framework and processes adapted by the Shell group, Shell Oman implemented a number of local assurance activities and campaigns to raise organizational awareness on the associated risks and to get assurance on the effectiveness of the IRM controls in place. Some of the activities that were completed in this space include; conducting an Information security awareness event in collaboration with internal and external stakeholders, conducting penetration test and a vulnerability assessment on high risk and exposure platforms. Findings from these assessments are being addressed through gap closure plans and actions.
The company remains committed to promote information risk management and enhance its control framework to ensure the integrity and adequacy of its systems and platforms.
Financial ReportingThe company presents quarterly public financial announcements that include details of the Company’s business performance and current issues and concerns. As per the legal requirements and policy, quarterly and annual results of the Company’s performance are disclosed on MSX and the Company’s website. In addition to that, the Company’s performance is published in the leading newspapers in both Arabic and English. The company is filing the financial reports via the XBRL Portal that was launched by CMA in 2021. The Directors review the quarterly financial results at their Board Meetings prior to publication to ensure that they are accurate and present a clear assessment of the Company’s affairs.
Dividend PolicyThe company’s dividend policy is to remit the optimum amount of profit, in any operating year, to shareholders. Several factors will be considered whilst making this recommendation such as future investment plans, working capital requirements, access to liquidity, and other constraints. If, in accordance with the business plans, excess funds and profits are available, the Board may recommend payment of an interim dividend. In line with this policy, the Company is expected to pay a dividend for the year 2022 in March 2023.
Market Price DataMonthly high / low share price data for the financial year 2022
Month 2022 High Low VolumeJanuary 0.912 0.860 10,919 February 0.920 0.860 1,649,941 March 0.920 0.840 162,151 April 0.884 0.840 11,728 May 0.860 0.812 1,507,653 June 0.840 0.800 59,382 July 0.880 0.820 1,005,737 August 0.944 0.880 502,808 September 0.924 0.884 60,069 October 0.880 0.800 721,506 November 0.872 0.808 89,977 December 0.900 0.852 726,079
Performance in Comparison to the Broad-Based Index of the MSX
Share Price Relative Performance
2021 20222018 2019 2020
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The Shell Group holds, through 5 wholly owned Shell subsidiaries, 49 % of the shares, whereas 51% of the shares are held by other investors and traded in the MSX. In line with the Commercial Companies Law and the Company’s Articles of Association, 5,000,000 shares of the Company have a preferential characteristic, in that they are multi-vote shares. The Shell Group owns those multi-vote shares thereby is able to cast 54,000,000 votes at the ordinary general meeting. This will not itself enable them to control an Extraordinary General Meeting of the Company.
Major Shareholders (as on December 31, 2022)
Shareholder Name No of shares held Shareholding %B.V. Dordtsche Petroleum Maatschappij 18,700,000 18.70Shell Overseas Investment BV 20,000,000 20.00Shell Petroleum NV 10,100,000 10.10Civil Service Employees Pension Fund 9,895,567 9.90Public Authority for Social Insurance 9,035,062 9.04Oman Investment Authority 7,428,878 7.43Ministry of Defence Pension Fund 7,170,287 7.17
Details of Non-Compliance by the CompanyThere have been no instances of non-compliance on any matter relating to the Commercial Companies Law No18/2019 of the Sultanate of Oman, as amended, the Code, CMA regulations or the MSX listing agreements during the past three years.
Professional Profile of the Statutory AuditorThe shareholders of the Company appointed Moore Stephens as the Company’s auditors for the year 2022.
Moore Stephens LLC, Oman is part of the Moore Global network, which is regarded as one of the world’s major accounting and consulting networks, with its headquarters in London, consisting of more than 233 independent firms with 502 offices and more than 30,000 people across 114 countries.
The Oman office commenced practice in the Sultanate of Oman in 1988. Over the years, the practice has developed considerably and now services a number of clients, including major listed companies, Groups, government organisations and Ministries providing either audit, tax or management consultancy services. The local staff strength is around 65, most of whom are qualified Chartered Accountants, internal auditors and information systems auditors towards professional services rendered to the Company. During the year 2022, Moore Stephens billed an amount of RO 12,000 towards professional services rendered to the Company.
Acknowledgement by Board of DirectorsThe Directors are required by the Commercial Companies Law No. 18/2019 to prepare financial statements for each financial year which have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) to fairly reflect the financial position of the Company and its financial performance during the relevant financial period.
In preparing the financial statements, the Directors have:
n Selected suitable accounting policies and applied them consistently;
n Made judgments and estimates that are reasonable and prudent;
n Ensured that all applicable accounting standards have been followed; and
n Prepared financial statements on the going concern basis as the Directors have a reasonable expectation, having made enquiries, that the Company have adequate resources to continue in operational existence for the foreseeable future.
The Directors have responsibility towards ensuring that the Company keep accounting records which disclose, with reasonable accuracy, the financial position of the Company and which enable them to ensure that the financial statements comply with the Commercial Companies Law No. 18/2019.
The Board affirms its overall responsibility for the Company’s systems of internal controls and risk management, and for reviewing the adequacy and integrity of those systems. It should be noted, however, that such systems are designed to manage rather than eliminate the risk of failure to achieve business objectives. In addition, it should be noted that any system can provide only reasonable, and not absolute, assurance against material misstatement or loss.
Walid HadiChairman, Board of Directors
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Working with our customers and across sectors to accelerate the transition to net-zero emissions.
ACHIEV INGNET-ZEROEMISSIONS
It remains our endeavour to collaborate with the relevant authorities and stakeholders to realise the goals of Oman’s national strategy and accelerate the orderly transition to a net zero carbon economy.
Tackling climate change is an urgent challenge. We will contribute to a net-zero world, where society stops adding to the total amount of greenhouse gas emissions in the atmosphere. That is why we have set a target to become a net-zero emissions energy business by 2050, in step with society and our customers. This supports the more ambitious goal to tackle climate change laid out in the UN Paris Agreement and in line with Oman’s National Strategy for an Orderly Transition to Net Zero.
Becoming a net-zero emissions energy business means that we are reducing emissions from our operations, and from the fuels and other energy products we sell to our customers. It also means capturing and storing any remaining emissions using technology or balancing them with offsets. We are transforming our business and finding new opportunities – providing more low-carbon energy such as biofuels, hydrogen, charging for electric vehicles and electricity generated by solar and wind power.
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Health, Safety, Security and Environment (HSSE)Shell Oman Marketing Company SAOG (Company) ended 2022 with 365 days without loss of primary containment and 314 days without harm, reflecting our continued and strong commitment to HSSE.
Stimulating a learner mindset, in the aftermath of the COVID-19 pandemic, the Company completed a refresher assessment, evaluating its safety culture, and developing a robust plan to address and close gaps in its HSSE practices across its businesses and functions. In 2022, the Company continued to focus on developing people’s competencies and enhancing its risk management policy for day-to-day operations.
Throughout the year, the Company invested in a number of initiatives to ensure readiness for any crisis, including emergency drills in Dhofar, Dakhiliya, Sharqiya South, Batinah North, Dhahirah and Muscat. These activities were completed by the emergency response team, in collaboration with
Civil Defence and Ambulance Authority, and the Royal Oman Police (ROP). The activities aimed at ensuring our frontline recovery plans were in place and equipped to deal with any emergency, as well as sharing best practices with the wider community. We conducted various seminars on worker wellbeing, security, line-of-defence, process safety, environmental management, health, road safety, frontline accreditation, permit to work, working at heights, contractor safety management, food safety accreditation, and the annual safety day.
Additionally, the Company led several worker welfare initiatives in order to ensure the safety and wellbeing of frontline employees, including safe means of accommodation, transportation, wages, and the freedom to speak-up.
In line with Shell’s net-zero emissions ambition, the Company also launched its first electric vehicle charging station in a mobility service station, to demonstrate its commitment to a
sustainable environment with plans to further expand. The Company also installed 271 solar lights, 367 LED lights, 25 highly efficient chillers, and solar panels at four service stations this year.
Human Resources (HR)
Business EnvironmentThe Company continued to showcase its commitment towards sustaining a value proposition that attracts and retains the best talents, by keeping them engaged and motivating them to perform. This has been achieved through the demonstration of the highest level of care for their physical, mental, and social wellbeing; coupled with providing them with meaningful, challenging and rewarding roles. Furthermore, the Company continues to groom them to become future leaders, by having active succession plans and staff retention practices in place.
PerformanceIn 2022, HR successfully supported businesses and functions undergo an
Global Leadership team with Shell Oman team at the new head office.
MANAGEMENT DISCUSSION AND ANALYSIS
organisational change programme, to accelerate the delivery of the Company’s ambitious ‘Powering Progress’ strategy.
In addition, as part of the Company’s long-term energy transition strategy, to provide more and cleaner energy solutions and reduce the carbon footprint associated with electricity consumption, the Company continued investing in solar panels at its facilities and Lubricants Blending Plant. The Company’s work/life efforts also encapsulated providing assistance to staff for better integration of their career and personal lives, so that employees felt more productive, engaged and satisfied in their work environment. In line with this, the Company has also broadened the medical insurance coverage of employees and their families.
From an In-Country Value (ICV) perspective, the Company continued to sustain a high level of Omanisation, with 96.1% of the workforce comprising of high-calibre Omani talents. The year also witnessed the successful initiation of the EIDAAD Internship programme;
that enables Omani youth to share our purpose of ‘powering progress’ and our culture of inclusion, collaboration, and care in preparing them to be active contributors to achieving Oman Vision 2040. The internship programme offers on-job learning opportunities to 7 aspiring talents. Simultaneously, 33 summer interns were also given an opportunity to develop themselves in different disciplines including technical, commercial business and corporate functions.
It has been yet another significant year for the Company as employees delivered the highest participation rate ever of 100% in the annual ‘Shell People Survey’. The results of all the parameters in the survey outcome continued to be ahead of the Shell group top quartile benchmarks.
The overall results showcase the Company as an organization with a highly engaged workforce that values interesting and challenging work; that puts their skills to good use and empowers them in a working
environment characterised by respect, diversity, equity and inclusion.
Continuing to be the nation’s ‘Employer of Choice’, the Company has emerged stronger by embracing, and where necessary, adapting to strategic business changes.
Mobility
Business EnvironmentThe Mobility business remains the largest segment of the Company. Despite a challenging start due to market conditions and the continuing impact of COVID-19 on Mobility and commercial activities in Q1 of 2022, the business showed strong recovery in the subsequent quarters; and continued its focus on delivering its mission to make life’s journeys better – by providing an evolving range of quality fuels, a welcoming and comfortable break or a retail experience that offers customers convenience, quality and choice. The Company continues to focus on safety, operational excellence, developing world-class people, and introducing
Inauguration of the first ShellRecharge unit for EV charging at inaugurated at Shell Al Bandar service station by Istvan Kapitany – Executive Vice President of Mobility in Shell.
ANNUAL REPORT 2022 2524 POWERING PROGRESS
innovative Customer Value Propositions (CVPs), including carrying on the growth strategy for the Non-Fuel Retail (NFR) segment and strengthened the CVP of its differentiated fuel, Shell V-Power whilst leveraging evolving customer trends and reprioritising its infrastructural investments.
Business Performance The Mobility business recorded strong volume growth compared to 2021. This was driven by various marketing campaigns that were designed to deliver integrated offers and provide differentiated experiences for our customers, including Shell V-Power, our best performance and efficiency fuel, to customers across Oman at a promotional price.
This year the Company continued its network expansion by opening six new mobility sites including four integrated service stations along the Batinah Expressway and two prime locations in Muscat.
The Mobility business continued its focus on our differentiated fuel – Shell V-Power – which was recognized as the ‘Best Omani Brand’ in the fuel category at the ‘Alam Al Iktsaad Awards’, locally. Through the introduction of new products in our Shell Select stores and the enhancement of existing offers, the growth of the NFR segment continues to be a key focus for the Mobility business.
Moreover, the Company expanded its social and digital media presence through engaging content and promotions as a strategic step to extend its reach. The Company has launched a number of Shell Electric Vehicle (EV) Recharge units, marking the start of its journey in the field of charging electrical vehicles and energy transition. As a pioneer in the sector, the Company will continue to share its expertise to support the Sultanate’s ambitious plan for reducing carbon emissions. We remain steadfast in our endeavours to cooperate with the concerned authorities and relevant parties to achieve national
strategic goals in relation to energy and accelerate Oman’s gradual transition to a low-carbon economy.
Fleet Solutions Business maintained its strong contribution to the overall Mobility business, diversifying its customer portfolio through signing many new deals during the year. Due to an increase in market activity, the business-to-business (B2B) market has generally shown recovery signs and positive economic indicators resulting in year-on-year volume growth. The main focus of the business is to continue enhancing on the increase of its already diverse portfolio, whilst strengthening its customer value proposition. This is done through addressing the evolving customer needs and embarking upon new initiatives. The business realizes the importance of digitalization, hence aims to achieve better transactional controls and digital value proposition through an accelerated digitization journey by providing enhanced fleet solutions and continuous improvements in operational excellence.
Shell Technology Seminar 2022 organized to highlight Shell’s innovation in lubricants solutions.
Commercial Fuels Business witnessed growth in volumes over the last quarter leveraging on new wins and mobilization of projects. The overall business landscape continues to be challenging, given the prevailing B2B market environment with limited mobilization of infrastructure projects. The Company remains committed to support business continuity for its customers through efficient cash-flow management, operational excellence and providing innovative mobility solutions that help our customers in attaining operational efficiency and reducing their carbon footprint.
Marine Business through its commitment to the highest HSSE and operational excellence standards, continued to serve local and international marine customers at key ports. The business leveraged its global expertise to ensure successful delivery of bunkering solutions to its local and international marine customers. The Company remained adamant on strengthening its position in the Marine business and exploring new business opportunities to expand its footprint across all major ports in the Sultanate.
Shell Lubricants
Business Environment:The Lubricants business remained solid in 2022 and delivered growth in volume in local as well as export markets, compared to the previous year; despite global geopolitical circumstances which impacted supply of base oil and other raw materials. Even with the disruption, the business continued supplying its customers as per agreed delivery time through effective supply chain management. The business also experienced some recovery in the market, which resulted in an increase of demand in both, Business to Customer (B2C) sector and exports.
The construction sector, however, remained challenging due to delay in mobilizing existing projects, as well as the limited number of infrastructure
projects. The business enhanced its product portfolio in the B2C premium segment by upgrading the specification of the current Shell Helix portfolio to meet global standards.
The Lubricants business also launched a couple of premium campaigns with distributors and resellers aimed at increasing its footprint, which resulted in higher penetration in the premium segment. The business also continued to promote its newly introduced Shell Helix Ultra 0W carbon neutral product. This launch was part of the largest carbon neutral program in the lubricants industry reflecting Shell’s focus and commitment towards playing a key role in the market’s energy transition. The commercial lubricants segment maintained its market leadership and grew volumes by winning extra market share with existing customers. Furthermore, the focus continues to be on winning new accounts in the construction and independent workshops sectors.
Performance:In 2022, the ‘indirect channels’ business and ‘Oil & Gas’ sector were able to deliver growth in volumes compared to 2021. Moreover, the ‘car dealers’ sector delivered more volume, as compared to the previous year, because of business recovery in the automobile industry, and the winning of new accounts.
In addition, the Company’s Lubricant Blending Plant in Mina Al Fahal was able to deliver higher volumes for the local and export markets without any Lost Time Injury (LTI) or leak. The plant also started delivering new volumes to Central Asia markets in 2022. In both B2B and B2C indirect channels, the business grew its volume by investing in targeted marketing activities, focusing on premium grades, and selling of new line of products.
The business maintained its strong footprints in the Oil & Gas sector and renewed long-term partnerships with valuable existing accounts. It
also enhanced its pricing strategy to proactively address the unprecedented base oil price increase and avoid margin erosion while continuing to create beneficial deals with customers and partners. This has been in line with the Company’s Lubricants’ stance of being a competitive player in the market that maintains its market leadership position. The business grew its premium volume during the year, resulting from key accounts and increased premium penetration in the indirect channels, franchise workshops, and significant independent workshops.
Outlook:The Lubricants business’ strategy to continue leading the market in all sectors will remain a priority while committing to provide the most innovative products and services. The Company will continue to leverage its strategic advancement as the only downstream company with an ISO-certified Lubricant Blending Plant in Oman and will continue to expand volume growth into new markets in the region. The business is targeting entering new service sectors in 2023 that will focus on premiumisation and digitalisation pillars, to drive more volume and value and to differentiate the Company’s Lubricants in the market. Furthermore, the business is determined to grow from a volume and margin perspective, and is committed to its partners, distributors, and customers to maintain high safety standards and ensure operational excellence and customer satisfaction.
The business will continue to offer products and services that are designed to help organizations embed sustainability into their business strategies. We realize that satisfying commercial or societal obligations is no longer a binary choice and cannot be achieved without the other.
Aviation
Business EnvironmentIn 2022, the aviation sector was a
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MANAGEMENT DISCUSSION AND ANALYSIS
recovery segment for the economy in Oman. However, industry demand remained low during the first quarter due to continuing challenges caused by COVID-19 and various travel constraints across different parts of the world.
PerformanceThe Company’s Aviation business managed to win new deals in the cargo sector, and retained important contracts at Muscat International Airport, which contributed significantly to its overall performance.
Operationally, the track record of commitment to excellence continued with the Company operating fuel farms in both Muscat and Salalah airports. With high standards of safety and operational excellence, the business also continued operating at Petroleum Development Oman’s (PDO) oil fields airport.
OutlookThe tourism sector in Oman was impacted negatively due to the pandemic, especially Khareef season in Salalah. Both the tourism sector and the aviation industry are expected to recover fully within the coming two years, in terms of passenger traffic and volume witnessed before the pandemic. The opening of new cargo facilities at both Muscat and Salalah airports is expected to contribute positively to the recovery journey. The Company is positioning itself to play a significant role in supporting the recovery and growth of the aviation industry in Oman in the years ahead.
Trading and Supply (T&S)
Business Environment HSSE remained a top priority for the Trading and Supply business; with full focus on road transport safety and process safety to ensure – “Goal Zero” – no harm, no leak, in the face of challenging business disruptions experienced in 2022.
Performance The business demonstrated a robust performance in 2022 and continued to deliver a strong safety culture with Zero process safety and road transport incidents, ensuring the delivery of “No Harm, No Leak” while carrying out operations efficiently and effectively. The business continued to develop people for assessment certification in operational safety, in different areas within the Company’s facilities. Furthermore, the business consistently assessed and explored different options and arrangements to efficiently increase the utilization of storage tanks at the Company’s Mina Al Fahal Terminal. It also took steps to further review, test and optimize its supply chain options.
To improve road transport standards, after completing the installation of in-cab cameras in all our fleets in 2021, artificial fatigue detection devices (AFDD) have been installed in all our contracted fleets this year, as part of ongoing efforts to keep our drivers and community safe. In addition, we continue focusing on the reduction of carbon footprint, by working in collaboration with our hauliers. In line with that, we have added a new fleet of trucks with aluminium tankers that deliver higher capacity and have additional new safety and environment-friendly features.
Outlook HSSE remains a top priority within the business. In road transport, the focus will continue to be on investing and building competency and capability, developing professional hauliers, and working with hauliers on the Omanisation of fleet drivers. In terms of On-Process Safety compliance, the aim will continue to be improving and maintaining best-in-class reliability and asset integrity programme in our facilities, as well as the other sites we operate in.
Customer Operations
Performance and Business EnvironmentCustomer Operations continued
to be the core department for the Company’s customer-related processes, which encompasses the entire chain of customer-facing activities in our Business-to-Business (B2B) and Business-to-Customer (B2C) operations through three customer journeys: “Deal-Making”, “Order to Delivery” and “Bill to Cash”. With a strong commercial mindset in place, the Customer Operations function worked towards delivering innovative customer experience solutions through digitalization new technologies. This, in turn, helped deliver a strong customer experience across our operations.
OutlookCustomer Operations is central to delivering a best-in-market customer experience for the Company. The organisational structure of the function has been designed to address the needs of our existing and emerging business partners; to support the Powering Progress strategy and the Company’s strategic energy transition ambitions. The function will continue to support business partners across the Company and nurture existing business relationships. From digitalisation perspective, the drive will continue towards enhancing efficiencies through automation at scale, data analytics, machine learning, and end-to-end capability development.
Corporate Social Responsibility
Business Environment As a responsible corporate citizen, the Company continued to build on its strategic corporate social responsibility themes: Road Safety, Environment and Community, and Enterprise Development. This was done through the delivery of planned initiatives as well as regularly addressing requests from local entities and charitable organisations, with more face-to-face interactions and events as the pandemic restrictions started lifting early in the year.
PerformanceThe Company continued to explore
MANAGEMENT DISCUSSION AND ANALYSIS
avenues to support initiatives in the society, with a focus on in-country value (ICV), enterprise development, road safety and environment. This included supporting Omani Small Medium Enterprises (SMEs) from the sector with first-hand experience, inter-organisational knowledge transfer and promotional support in collaboration with subject matter experts. In addition, the Company collaborated with Shell Development Oman (SDO) on various internal and external programmes, including the Oman Science Festival that was held in partnership with the Ministry of Education, which received exceptional feedback and recognition from different stakeholders. Internally, the two companies celebrated National Day, Omani Women’s Day, Ethics and Compliance Day, HSSE Day and others; thereby capitalizing on a shared brand and resources.
The Company also joined hands with Royal Oman Police (ROP) and other energy leaders to raise awareness on road safety and promote safe driving behaviours during the Khareef season
in Salalah, through the Road Safety Exhibition and its allied activities.
By providing fuel support, as well as undertaking the annual tradition of distributing ration packages to hundreds of families during Ramadan, the Company’s support to local Non-Governmental Organizations (NGOs) continued in 2022. Great focus was also directed towards providing training and development opportunities for Omani youth in Science, Technology, Engineering and Mathematics (STEM) fields, that were particularly related to energy transition.
Social Investment Theme
Amount Spent (OMR)
Road Safety 5,000
Environment 15,000
Community and Enterprise Development 55,000
Total 75,000
OutlookThe Company is committed to collaborating and working with all stakeholders to reinforce its role as a responsible corporate citizen, serving Oman and its people under the leadership of His Majesty Sultan Haitham bin Tarik; and doing its duty by supporting His Majesty’s vision for the Sultanate. The Company will continue to play a role in Oman’s energy transition journey and align the Company’s long-term strategy and direction with the Group’s Powering Progress strategy as well as Oman Vision 2040.
Oman Shell signed an MoU with the Ministry of Education to be the gold sponsors of Oman Science Festival in its third edition.
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Protecting the environment, reducing waste and making a positive contribution to biodiversity.
RESPECT INGNATURE
We are stepping up our environmentalambitions and shaping them to contribute to the UN Sustainable Development Goals and Oman Vision 2040. These include protecting and enhancing biodiversity, focusing on using natural resources more efficiently across all our activities and reusing as much of them as we can.
We are reducing waste from our operations and increasing recycling of plastics. We are helping to improve air quality by reducing emissions from our operations and providing cleaner ways to power transport and industry. Working with our partners and suppliers and developing new collaborations is key. We will join with others across industry, the government, our customers and supply chain to protect nature.
Our long-term environmental ambitions are supported by focused short-term goals. We will continue to look for opportunities to move forward, reporting our progress with transparency.
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AUDITOR’S REPORT ON FINANCIAL STATEMENTS
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AUDITOR’S REPORT
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Powering lives through our products and activities, and by supporting an inclusive society.
POWER INGL IVES
Oman Shell helps to power lives by operating in multi-downstream businesses such as mobility, lubricants and aviation by providing more and cleaner energy solutions in a responsible manner to Oman. The supply of affordable, reliable, and sustainable energy is also crucial for addressing global and local challenges, to help society and the industry tackle their pressing challenges related to climate change and the environment.
We make a positive difference to the local community by providing training and skills. This supports local economic development and livelihoods. We help strengthen the local economy by promoting entrepreneurship, innovation and meaningful employment through different programmes and initiatives.
As a responsible corporate citizen, Shell Oman Marketing Company continues to build on its strategic corporate social responsibility themes which are road safety, Environment, and Community & Enterprise Development. This is done through the delivery of its planned initiatives and regularly addressing requests from local entities and NGOs.
ANNUAL REPORT 2022 3736 POWERING PROGRESS
STATEMENT OF FINANCIAL POSITIONAt 31 December 2022
FINANCIAL STATEMENTS
2022 2021 Notes RO’000 RO’000
ASSETSNon-current assetsProperty, plant and equipment 5 60,527 56,843Intangible assets 6 186 49Right-of-use assets 7 c) 38,849 27,986Deferred taxation 23 101 –Total non-current assets 99,663 84,878
Current assetsInventories 8 10,695 8,551Trade and other receivables 9 47,207 39,222Cash and cash equivalents 10 6,928 8,796Total current assets 64,830 56,569Total assets 164,493 141,447
EQUITY AND LIABILITIESEquity Share capital 11 a) 10,000 10,000 Legal reserve 12 3,587 3,587 Retained earnings 42,019 39,913 Total equity 55,606 53,500
LiabilitiesNon-current liabilitiesNon-current portion of term loan 17 – 3,334Non-current portion of lease liabilities 7 d) 35,975 24,216Deferred taxation 23 – 38Employees’ end of service benefits 22 b) 187 280Total non-current liabilities 36,162 27,868
Current liabilitiesCurrent portion of term loan 17 3,334 3,333Current portion of lease liabilities 7 d) 2,773 3,063Bank borrowings 16 5,000 –Trade and other payables 14 60,430 52,890Taxation 23 1,176 667Provision for employee retention scheme 15 12 126Total current liabilities 72,725 60,079
Total liabilities 108,887 87,947
Total equity and liabilities 164,493 141,447
Net assets per share 25 0.556 0.535
These financial statements were authorised for issue and approved by the Board of Directors on 13 February 2023 and were signed on their behalf by:
Chairman Director
The attached notes 1 to 29 form part of these financial statements.
STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31 December 2022
2022 2021 Notes RO’000 RO’000
INCOMERevenue from contracts with customers 19 499,912 398,429 Cost of sales (464,545) (368,390)Gross profit 35,367 30,039
Other income 20 4,146 4,035 Selling and distribution expenses (24,989) (22,705)General and administration expenses (5,443) (5,325)Operating profit 9,081 6,044
Finance costs 21 (2,366) (1,797)Finance income 22 20 Profit for the year before taxation 6,737 4,267
Taxation 23 (1,031) (656)
Net profit and total comprehensive income for the year 5,706 3,611
Basic earnings per share 24 0.057 0.036
Note: The Company has no items of other comprehensive income.
The attached notes 1 to 29 form part of these financial statements.
ANNUAL REPORT 2022 3938 POWERING PROGRESS
STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2022
Sharecapital
Legalreserve
Retainedearnings Total
RO’000 RO’000 RO’000 RO’000
[note 11 a)] (note 12)
At 31 December 2020 10,000 3,587 36,302 49,889
Net profit and total comprehensive income for the year — — 3,611 3,611
At 31 December 2021 10,000 3,587 39,913 53,500
At 31 December 2021 10,000 3,587 39,913 53,500
Net profit and total comprehensive income for the year — — 5,706 5,706
Dividend paid during the year — — (3,600) (3,600)
At 31 December 2022 10,000 3,587 42,019 55,606
The attached notes 1 to 29 form part of these financial statements.
FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS For the year ended 31 December 2022
2022 2021 Notes RO’000 RO’000
CASH FLOWS FROM OPERATING ACTIVITIESProfit for the year before taxation 6,737 4,267Adjustments for:Depreciation of property, plant and equipment and right-of-use-assets 5 a) & 7 g) 8,466 8,545Amortisation of intangible assets 6 32 20Provision for employee retention scheme 15 5 42Provision for employees’ end of service benefits 22 b) 32 40Allowance for expected credit losses (net) 21 186Loss / (gain) on write off / disposal of property, plant and equipment 139 (5)Finance costs 21 2,366 1,797 Finance income (22) (20)Operating cash flows before working capital changes 17,776 14,872Working capital changesInventories (2,144) (1,905)Trade and other receivables (8,006) (5,588)Trade and other payables 5,396 11,512Cash generated from operations 13,022 18,891Employee retention scheme paid 15 (119) (105)Employees’ end of service benefits paid 22 b) (125) (61)Income tax paid (661) (284)Net cash generated from operating activities 12,117 18,441
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (6,458) (5,359)Additions to intangible assets (169) –Proceeds from disposal of property, plant and equipment – 5 Finance income received 22 20 Net cash used in investing activities (6,605) (5,334)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (3,600) –Finance charges paid 21 (2,366) (1,797)Net movement from term loans (3,333) (3,333)Net movement in bank borrowings 5,000 –Payment of principal portion of lease liabilities paid (3,081) (3,788)Net cash used in financing activities (7,380) (8,918)
Net (decrease) / increase in cash and cash equivalents during the year (1,868) 4,189
Cash and cash equivalents at the beginning of the year 8,796 4,607Cash and cash equivalents at the end of the year 10 6,928 8,796
The attached notes 1 to 29 form part of these financial statements.
ANNUAL REPORT 2022 4140 POWERING PROGRESS
Living by our core values of honesty, integrity, and respect for people, with a relentless focus on safety.
OUR CORE VALUES AND OUR FOCUSON SAFETY
Integrity
Respect
Honesty
Be
champion
a
Dothe
Openness
Decency
Fairness
right thing
Speak
Empower
Improve
Protect
Up
The Shell General Business Principles, Code of Conduct and Code of Ethics help everyone at Shell to act in line with our values.
These business principles are based on our core values and indicate how we promote trust, openness, teamwork, professionalism and pride in what we do.
ANNUAL REPORT 2022 4342 POWERING PROGRESS
NOTES TO THE FINANCIAL STATEMENTSFor the year ended 31 December 2022
1 LEGAL STATUS AND PRINCIPAL ACTIVITIES
Shell Oman Marketing Company SAOG (‘the Company’) is a public joint stock company registered under the Commercial Companies Law of the Sultanate of Oman. The principal activity of the Company is the marketing and distribution of petroleum products and blending of lubricants. The principal place of business is located at Mina Al Fahal, Muscat, Sultanate of Oman.
The financial statements of the Company are consolidated in the financial statements of Shell plc (the ultimate parent company), a company incorporated in the United Kingdom.
2 BASIS OF PREPARATION AND ADOPTION OF NEW AND AMENDED IFRS
2.1 Basis of preparation
a) Going concern basis
At 31 December 2022, the Company’s current liabilities exceeds the current assets by RO 7,895 thousand (31 December 2021 – RO 3,510 thousand) primarily due to liabilities related to capital expenditure. These financial statements are however prepared on a going concern basis which primarily assumes that the Company will continue to generate adequate funds from operations to meet its financial obligations as and when they fall due. The Company has generated positive operating cash flows of RO 12.12 million (2021 – RO 18.44 million) during the year and operating cash flows expected to remain positive for a foreseeable future.
b) Statement of Compliance
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), the relevant requirements of the Commercial Companies Law of the Sultanate of Oman and the relevant disclosure requirements issued by the Capital Market Authority.
The financial statements are presented in Rial Omani (RO) and rounded off to the nearest thousand.
2.2 New and amended IFRS adopted by the Company
The financial statements have been drawn up based on accounting standards, interpretations and amendments effective at 1 January 2022. The Company has adopted the following new and revised Standards and Interpretations issued by International Accounting Standards Board and the International Financial Reporting Interpretations Committee, which were effective for the current accounting period:
• Amendments to IFRS 3 ‘Business combinations’ update a reference to the Conceptual Framework for Financial Reporting without changing the accounting requirements for business combinations.
• Amendments to IAS 16 ‘Property, plant and equipment’ require an entity to recognise the sales proceeds from selling items produced while preparing property, plant and equipment for its intended use and the related costs in profit or loss, instead of deducting the amounts received from the cost of the asset.
• Amendments to IAS 37 ‘Provisions, contingent liabilities and contingent assets’ specify the costs that an entity includes when assessing whether a contract will be loss-making.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
2 BASIS OF PREPARATION AND ADOPTION OF NEW AND AMENDED IFRS (Continued)
2.2 New and amended IFRS adopted by the Company (Continued)
• Annual Improvements to IFRS Standards 2018–2020 amend:- IAS 41 ‘Biological assets’ to remove the requirement to exclude cash flows from taxation when measuring fair
value, thereby aligning the fair value measurement requirements in IAS 41 with those in other accounting standards;
– IFRS 1 ‘First time adoption of International Financial Reporting Standards’ to simplify the application of IFRS 1 by a subsidiary that becomes a first-time adopter after its parent in relation to the measurement of cumulative translation differences;
– IFRS 9 ‘Financial instruments’ to clarify the fees an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability; and
– IFRS 16 ‘Leases’ illustrative example 13 to remove the illustration of payments from the lessor relating to leasehold improvements.
The Management believes the adoption of the above amendments has not had any material impact on the recognition, measurement, presentation and disclosure of items in the financial statements for the current accounting period.
2.3 New and amended IFRS which are in issue but not yet effective
At the end of the reporting period, the following significant new and revised standards were in issue but not yet effective:
• IFRS 17 ‘Insurance contracts’ establishes principles for the recognition, measurement, presentation and disclosure of insurance contracts issued. It also requires similar principles to be applied to reinsurance contracts held and investment contracts with discretionary participation features issued. IFRS 17 is effective for annual periods commencing on or after 1 January 2023.
• Amendments to IAS 1 (classification of liabilities as current or non-current) clarify the requirements for presentation of liabilities in the statement of financial position as current or non-current. The amendments clarify that if a liability is subject to covenants, the Company may only classify a liability as non-current if it meets the covenant tests as at the reporting date, even if the lender does not test compliance until a later date. The meaning of settlement of a liability is also clarified. This amendment has been further amended by non-current liabilities with covenants and should be considered together.
The mandatory application date of this amendment has been deferred from 1 January 2023 to 1 January 2024.
• Amendments to IAS 1 ‘Presentation of financial statements’ require an entity to disclose its material accounting policy information rather than its significant accounting policies. The amendments are applicable for annual periods commencing on or after 1 January 2023.
• Amendments to IAS 8 ‘Accounting policies, changes in accounting estimates and errors’ introduce the definition of accounting estimates. The amendments also help entities distinguish changes in accounting estimates from changes in accounting policies. The amendments are applicable for annual periods commencing on or after 1 January 2023.
• Amendments to IAS 12 ‘Income taxes’ narrow the scope of the recognition exemption so that it no longer applies to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. The amendments are applicable for annual periods commencing on or after 1 January 2023.
ANNUAL REPORT 2022 4544 POWERING PROGRESS
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
2 BASIS OF PREPARATION AND ADOPTION OF NEW AND AMENDED IFRS (Continued)
2.3 New and amended IFRS which are in issue but not yet effective (Continued)
• Amendments to IFRS 10 ‘Consolidated financial statements’ and IAS 28 ‘Investments in associates’ clarify the accounting treatment for sales or contribution of assets between an investor and its associates or joint ventures. Where the non-monetary assets constitute a business, the investor will recognise the full gain or loss on the sale or contribution of assets. Otherwise, the gain or loss is recognised by the investor only to the extent of the other investor’s interests in the associate or joint venture. The amendments have been deferred until IASB has finalised its research project on the equity method.
• Amendments to IFRS 16 (Lease liability in a sale and leaseback) clarify how a seller-lessee subsequently measures sale and leaseback transactions that satisfy the requirements in IFRS 15 to be accounted for as a sale. The amendments are applicable for annual periods commencing on or after 1 January 2024.
The Management believes the adoption of the above amendments is not likely to have any material impact on the recognition, measurement, presentation and disclosure of items in the financial statements for future periods.
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In preparing the financial statements, the Management is required to make estimates and assumptions which affect reported income and expenses, assets, liabilities and related disclosures. The use of available information and application of judgement based on historical experience and other factors are inherent in the formation of estimates. Actual results in the future could differ from such estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods effected. In particular, estimates that involve uncertainties and judgements which have significant effect on the financial statements are as follows:
• Allowance for expected credit losses (ECLs)
The Company applies the IFRS 9 simplified approach to measuring ECL which uses a lifetime expected loss allowance for trade receivables. To measure the ECLs, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the settlement of trade receivables over a number of years and the corresponding historical credit losses experienced within this period.
The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables.
At every reporting date, the default rates are updated and changes in the forward-looking estimates are analysed. The assessment of the correlation between default rates, forecast economic conditions and ECLs require the use of estimates. The Company’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default rates in the future.
ECL on bank balances and call deposits is determined using credit rating information supplied by independent rating agencies, where available. ECL on bank balances and other receivables is provided if the amount is deemed material.
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
• Useful lives of property, plant and equipment
Estimation of useful lives of property, plant and equipment is based on Management’s assessment of various factors such as operating cycles, maintenance programs and normal wear and tear using its best estimates.
• Provision for slow and non-moving inventories
Provision for slow and non-moving inventories is based on Management’s estimates of the realisable value of the inventories based on the Company’s provisioning policy and historical experiences considering the usage of the inventories.
• Incremental borrowing rate
The Company cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Company would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Company ‘would have to pay’, which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Company estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates.
• Estimation of lease term and right of use asset
The Management determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Management applies judgement in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease by considering all relevant factors that create an economic incentive (e.g., change in business strategy, construction of significant leasehold improvements or significant customization to the leased asset) for it to exercise either the renewal or termination. Further, estimates that involve uncertainties and judgements which have significant effect on the financial statements includes the determination of the appropriate rate to discount the lease liabilities in accordance with IFRS 16 and assessment of whether a right-of-use asset is impaired in accordance with IAS 36.
• Impairment of non-financial assets
At the end of the reporting period, the Management has assessed if there is any indicators of impairment of non-financial assets (property, plant and equipment, intangible asset and right of use assets). Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The computation of value in use and fair value less costs to sell require the use of estimates.
The Management has concluded based on assessment of available evidence, that impairment has not arisen in the carrying values of property, plant and equipment, intangible assets and right of use assets at the end of the reporting period.
• Estimating variable consideration for volume rebates
The Company’s expected volume rebates are analysed on a per customer basis for contracts that are subject to a single volume threshold. Determining whether a customer will be likely to be entitled to a rebate will depend on the customer’s historical rebate entitlement and accumulated purchases to date.
ANNUAL REPORT 2022 4746 POWERING PROGRESS
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
4 SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been consistently applied in dealing with items considered material to the Company’s financial statements:
a) Accounting convention
These financial statements have been prepared under the historical cost convention.
b) Property, plant and equipment
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Where an item of property, plant and equipment comprises major components having different useful lives, they are accounted for as separate items of property, plant and equipment. Following initial recognition at cost, expenditure incurred to replace a component of an item of property, plant and equipment which increases the future economic benefits embodied in the item of property, plant and equipment is capitalised. All other expenditures are recognised in the statement of income as an expense as incurred.
Items of property, plant and equipment are derecognised upon disposal or when no future economic benefit is expected to arise from the continued use of the asset. Any gain or loss arising on de-recognition of the asset is included in the statement of income in the year the item is derecognised.
Capital work in progress is not depreciated. Otherwise, depreciation is charged on property, plant and equipment so as to write off their cost less their estimated residual values over their estimated useful lives using the straight line method. The estimated useful lives of the assets are as follows:
YearsBuildings 5 – 40Plant and equipment 5 – 30Motor vehicles 3 – 5
c) Intangible assets
Intangible assets comprises the cost of the ERP system and other computer software. Computer software costs that have probable economic benefit exceeding more than one year are recognised as an intangible asset. Intangible assets are amortised using the straight line method over their estimated useful life of 5 years and any impairment losses are recognised in profit or loss for the period.
d) Inventories
Inventories are stated at lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs to sell.
The cost of petroleum products and raw materials is determined on a first in first out basis and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Provision is made where necessary for slow and non-moving inventories.
e) Trade receivables
Trade receivables are amounts due from customers for goods transferred and services rendered in the ordinary course of business and represent the Company’s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). They are generally due for settlement within 30 days and therefore are all classified as current.
4 SIGNIFICANT ACCOUNTING POLICIES (Continued)
e) Trade receivables (Continued)
Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing component, when they are recognised at fair value. The Company holds the trade receivable with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost.
f) Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of the goods and services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services.
Revenue from sale of goods is recognised at the point in time when control of the asset is transferred to the customer, generally on their delivery. The normal credit term is 30 days upon delivery.
Variable consideration
The Company considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated (e.g., fixed and progressive rebates). In determining the transaction price for the sale of goods, the Management considers the effects of variable consideration and consideration payable to the customer (if any).
If the consideration in a contract includes a variable amount, the Management estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. Some contracts for the sale of petroleum products provide customers with volume rebates which give rise to variable consideration.
Volume rebates
The Company provides volume or progressive rebates to certain customers once the quantity of products purchased during the period exceeds a threshold specified in the contract. Rebates are offset against amounts payable by the customer. To estimate the variable consideration for the expected future rebates, the Company applies the most likely amount method for contracts with a single-volume threshold and the expected value method for contracts with more than one volume threshold.
The Company then applies the requirements on constraining estimates of variable consideration and recognises a refund liability for the expected future rebates. The Company reviews its estimate of expected returns at each reporting date and updates the amounts of the asset and liability accordingly.
g) Financial assets
Recognition and initial measurement
The Company’s financial assets comprise trade and other receivables (including amounts due from related parties) and cash and cash equivalents. These financial assets are classified, at initial recognition, as subsequently measured at amortised cost.
ANNUAL REPORT 2022 4948 POWERING PROGRESS
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
4 SIGNIFICANT ACCOUNTING POLICIES (Continued)
g) Financial assets (Continued)
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Company’s business model for managing them.
In order for a financial asset to be classified and measured at amortised cost, it needs to give rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
The Company’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.
Financial assets at amortised cost:
The Company measures financial assets at amortised cost if both of the following conditions are met:- The financial asset is held within a business model with the objective to hold financial assets in order to collect
contractual cash flows; and – The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding
Interest income from financial assets, if any, is included in finance income using the effective interest rate method. Impairment losses are presented as separate line item in the statement of income.
h) Impairment
Financial assets
A financial asset is assessed at each reporting date to determine whether there is objective evidence that it is impaired. The Company measures the impairment using the expected credit loss (ECL) model for different categories of financial assets.
Trade receivables
The Company recognises allowance for expected credit losses (ECLs) applying a simplified approach for trade receivables, at an amount equal to lifetime ECLs. The Company has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the trade receivables and the economic environment.
Other financial assets
For other financial assets, which are subject to impairment, the ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL).
For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a lifetime ECL is recognised for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default. For bank balances, term deposits and other receivables, the ECL adjustments are made only if they are material.
4 SIGNIFICANT ACCOUNTING POLICIES (Continued)
h) Impairment (Continued)
Write off
The gross carrying amount of a financial asset is written off when the Company has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof.
The Company individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Company expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Company’s procedures for recovery of amounts due.
Non-financial assets
At the end of each reporting period, the Management assesses if there is any indication of impairment of non-financial assets. If an indication exists, the Management estimates the recoverable amount of the asset or cash generating unit (CGU) and recognises an impairment loss in the statement of income.
The recoverable amount is assessed as higher of asset’s or CGU’s value in use (VIU) and fair value less costs to sell. In assessing the VIU, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects market assessments of the time value of money and other asset specific risks. The Management also assesses if there is any indication that an impairment loss recognised in prior years no longer exists or has reduced. The resultant impairment loss reversals are recognised immediately in the statement of income.
i) Cash and cash equivalents
For the purpose of statement of cash flows, cash and cash equivalents consist of cash, call deposits and bank balances, with an original maturity of three months or less, net of short term bank borrowings, if any.
j) Employees’ end of service benefits
Payment is made to the Oman Government’s Social Security Scheme as per Royal Decree number 72/91 (as amended) for Omani employees.
Provision is made for amounts payable under the Sultanate of Oman’s Labour Law as per Royal Decree number 35/2003 (as amended) applicable to non-Omani employees’ accumulated periods of service at the end of the reporting period.
k) Employees retention scheme
A retention scheme is defined as a financial incentive offered to existing staff, either individually or collectively to remain in continued employment generally, or in a particular business or role, over a given period. The form of payment is generally in the form of a one-off cash payment made at the end of a specified period. This is recognised as an employee expense in profit or loss over the period specified. In case, the relevant employee leaves the Company before the specified period, the corresponding expense is reversed through profit or loss.
l) Trade and other payables
Liabilities are recognised for amounts to be paid in future for goods or services received, whether billed by the supplier or not.
ANNUAL REPORT 2022 5150 POWERING PROGRESS
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
4 SIGNIFICANT ACCOUNTING POLICIES (Continued)
m) Taxation
Taxation is provided for in accordance with the Sultanate of Oman’s fiscal regulations.
Deferred taxation is provided using the liability method on all temporary differences at the reporting date. It is calculated at the tax rates that are expected to apply to the period when it is anticipated the liabilities will be settled, and it is based on the rates (and laws) that have been enacted at the end of the reporting period. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.
n) Financial liabilities
All financial liabilities are initially measured at fair value and are subsequently measured at amortised cost.
o) Contract liabilities
A contract liability is the obligation to transfer goods to a customer for which the Company has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Company transfers goods to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Company performs under the contract.
p) Provisions
A provision is recognised in the statement of financial position when the Company has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.
q) Foreign currency transactions
Transactions denominated in foreign currencies are translated into Rials Omani and recorded at rates of exchange ruling at the date of the transaction. Liabilities denominated in foreign currencies are translated into Rials Omani at exchange rates ruling at the end of the reporting period. Foreign exchange differences arising on translation are recognised in the statement of income.
r) Dividend
The Board of Directors recommends to the Shareholders the dividend to be paid out of profits. The Directors take into account appropriate parameters including the requirements of the Commercial Companies Law of the Sultanate of Oman, and other relevant directives issued by CMA while recommending the dividend. Dividend distribution to the Shareholders is recognised as a liability in the Company’s financial statements only in the period in which the dividends are approved by the Shareholders.
s) Leases
Lessee
The Company leases its filling stations, depots, office and bulk storage facilities under various leasing arrangements. Contracts may contain both lease and non-lease components. The Company allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices unless it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component.
4 SIGNIFICANT ACCOUNTING POLICIES (Continued)
s) Leases (Continued)
A lease is recognised as a right of use asset and a corresponding liability at the date at which the leased asset is available for use by the Company. Lease liabilities include (wherever applicable) the net present value of the following lease payments:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable;• variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the
commencement date;• amounts expected to be payable by the Company under residual value guarantees;• the exercise price of a purchase option if the Company is reasonably certain to exercise the option; and• penalties for terminating the lease, if the lease term reflects the Company exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, the Company’s incremental borrowing rate is used.
Lease payments are allocated between the principal and interest cost. The interest cost is charged to the statement of income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right of use assets are measured at cost comprising the following:• the amount of the initial measurement of lease liabilities;• any lease payments made at or before the commencement date less any lease incentives received;• any initial direct costs; and• restoration costs, if applicable.
Right of use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the Company is reasonably certain to exercise a purchase option, the right of use asset is depreciated over the underlying asset’s useful life.
Payments associated with short-term leases and of low-value assets are recognised on a straight-line basis as an expense in the statement of income.
Lessor
Lease income from operating leases where the Company is a lessor is recognised as income on a straight-line basis over the lease term. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognised as expense over the lease term on the same basis as lease income. The respective leased assets are included in the statement of financial position based on their nature.
t) Operating segments
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. The results of the operating segments are reviewed by the Board of Directors to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.
ANNUAL REPORT 2022 5352 POWERING PROGRESS
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
4 SIGNIFICANT ACCOUNTING POLICIES (Continued)
u) Directors’ remuneration
The Company follows the Commercial Companies Law of the Sultanate of Oman, and other latest relevant directives issued by CMA, in regard to determination of the amount to be paid as Directors’ remuneration. Directors’ remuneration and meeting attendance fees are charged to the statement of income in the year to which they relate.
v) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use.
w) Offsetting
Financial assets and financial liabilities are only offset and the net amount reported in the statement of financial position when there is a legally enforceable right to set off the recognised amounts and the Company intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously.
5 PROPERTY, PLANT AND EQUIPMENT
a) The movements of property, plant and equipment during the years 2022 and 2021.
Year 2022 BuildingsPlant and
equipmentMotor
vehicles
Capital work in
progress TotalRO’000 RO’000 RO’000 RO’000 RO’000
Cost At 31 December 2021 27,259 83,329 275 11,275 122,138 Additions during the year — — — 8,602 8,602Transfers during the year 9,058 1,284 — (10,342) –Written off during the year (341) (914) — — (1,255)At 31 December 2022 35,976 83,699 275 9,535 129,485
DepreciationAt 31 December 2021 6,929 58,091 275 — 65,295 Charge for the year 1,625 3,154 — — 4,779 Relating to write-offs (275) (841) — — (1,116)At 31 December 2022 8,279 60,404 275 — 68,958
Net book valueAt 31 December 2022 27,697 23,295 — 9,535 60,527
At 31 December 2021 20,330 25,238 — 11,275 56,843
5 PROPERTY, PLANT AND EQUIPMENT (Continued)
Year 2021 BuildingsPlant and
equipmentMotor
vehicles
Capital work in
progress TotalRO’000 RO’000 RO’000 RO’000 RO’000
Cost At 31 December 2020 25,303 82,928 313 6,898 115,442Additions during the year — — — 6,734 6,734Transfers during the year 1,956 401 — (2,357) — Disposals during the year — — (38) — (38)At 31 December 2021 27,259 83,329 275 11,275 122,138
DepreciationAt 31 December 2020 5,671 54,576 313 — 60,560Charge for the year 1,258 3,515 — — 4,773 Relating to disposals — — (38) — (38)At 31 December 2021 6,929 58,091 275 — 65,295
Net book valueAt 31 December 2021 20,330 25,238 — 11,275 56,843
At 31 December 2020 19,632 28,352 — 6,898 54,882
b) The Company’s depots, buildings and lubricant blending plant are constructed on land leased from the Ministry of Energy and Minerals based on a lease agreement renewed on 1 November 2019 expiring in 25 years [note 7 a)]
c) Capital work in progress at the end of the reporting period mainly pertains to amounts incurred towards construction of filling stations.
6 INTANGIBLE ASSETS
2022 2021RO’000 RO’000
CostAt the beginning of the year 5,511 5,511Additions during the year 169 –At the end of the year 5,680 5,511
Amortisation At the beginning of the year 5,462 5,442Charge for the year 32 20At the end of the year 5,494 5,462
Net book valueAt the end of the year 186 49
ANNUAL REPORT 2022 5554 POWERING PROGRESS
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
7 LEASES
a) The Company enters into leasing arrangements for filling stations, depots, office and bulk storage facilities at various locations across the Sultanate of Oman [note 5 b)]. The lease terms are typically between 3 to 50 years (2021 – 3 to 25 years). A plot of land leased from Ministry of Energy and Minerals is valid for the duration of the Company. The Company’s obligations under its leases are secured by the lessor’s title to the leased assets.
b) The Company also enters into short term leasing arrangements and has opted to recognise the related lease expenses on a straight-line basis as permitted by IFRS 16.
c) The movement in the right-of-use assets during the year is as follows:31 December 2022 Land Ship Total
RO RO RO
At the beginning of the year 26,091 1,895 27,986Additions during the year 14,340 — 14,340 Remeasurement during the year 210 — 210 Depreciation for the year (2,982) (705) (3,687)At the end of the year 37,659 1,190 38,849
31 December 2021 Land Ship TotalRO RO RO
At the beginning of the year 27,154 2,601 29,755Additions during the year 456 — 456 Remeasurement during the year 1,547 — 1,547 Depreciation for the year (3,066) (706) (3,772)At the end of the year 26,091 1,895 27,986
d) At the end of the reporting period, lease liabilities are analysed as follows:
2022 2021RO’000 RO’000
Non-current portion 35,975 24,216Current portion 2,773 3,063
38,748 27,279
e) The movement in lease liabilities during the year is as follows:
2022 2021RO’000 RO’000
At the beginning of the year 27,279 29,145Additions during the year 14,340 456 Other movements/ remeasurements during the year 210 1,466 Interest on lease liabilities 1,698 1,302 Paid during the year (4,779) (5,090)At the end of the year 38,748 27,279
7 LEASES (Continued)
f) The contractual maturity analysis of the undiscounted cash flows of the lease liabilities is as follows:
2022 2021RO’000 RO’000
Upto 1 year 4,804 4,508Between 1 year to 5 years 14,976 12,435Above 5 years 49,615 25,969
69,395 42,912
g) The amounts included in the statement of income relating to leases comprise:
2022 2021RO’000 RO’000
Depreciation 3,687 3,772
Interest on lease liabilities (note 21) 1,698 1,302
Expense related to short term lease 226 98
Variable lease payments not included in the lease liabilities 39 23
h) The total cash outflow for leases amounted to RO 4.78 million (2021 – RO 5.09 million).
8 INVENTORIES
2022 2021RO’000 RO’000
Petroleum products 3,929 3,399 Raw materials 6,086 3,382Other inventories [note b) below] 881 1,867
10,896 8,648Less: provision for slow and non-moving inventories [note a) below] (201) (97)
10,695 8,551
The following further note applies:
a) The movement in provision for slow and non-moving inventories is as follows:
2022 2021RO’000 RO’000
At the beginning of the year 97 112Written back during the year – (15)Provided during the year 104 –At the end of the year 201 97
b) Other inventories pertain to electronic vouchers of local telecommunication operators.
ANNUAL REPORT 2022 5756 POWERING PROGRESS
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
9 TRADE AND OTHER RECEIVABLES
2022 2021RO’000 RO’000
Trade receivables 42,783 34,641Less: allowance for expected credit losses [note b) below] (1,719) (1,698)
41,064 32,943Amounts due from related parties [note 18 d)] 3,619 3,923Prepayments 1,049 1,243Other receivables 1,475 1,113
47,207 39,222
The following further notes apply:
a) Trade receivables are generally non-interest bearing and are on terms of 30 days credit.
b) The movement in allowance for expected credit losses against trade receivables is as follows:
2022 2021RO’000 RO’000
At the beginning of the year 1,698 1,512Provided during the year 106 186Written off during the year (85) –At the end of the year 1,719 1,698
c) The increase in allowance for expected losses is mainly due to changes in the macroeconomic environment.
d) The estimation for allowance for expected credit losses has been detailed under note 28 b).
10 CASH AND CASH EQUIVALENTS
2022 2021RO’000 RO’000
Call deposit accounts 4,746 5,499 Other bank balances 2,182 3,297
6,928 8,796
Note:
Call deposits are placed with local commercial banks in the Sultanate of Oman and earn interest at commercial rates. At the reporting period, call deposits amounting to RO 0.3 million (2021 – RO 1.6 million) denominated in Rial Omani and RO 4.5 million (2021 – RO 3.9 million) are denominated in US Dollars.
11 SHARE CAPITAL
a) The Company’s authorised, issued and paid-up share capital consists of 100,000,000 shares (2021 – 100,000,000 shares) of RO 0.100 each (2021 – RO 0.100 each). The composition of the shares are as follows:
2022 2021RO’000 RO’000
5,000,000 multi-vote shares of RO 0.100 each 500 50095,000,000 ordinary shares of RO 0.100 each 9,500 9,500
10,000 10,000
In accordance with Article 6 of the Company’s Articles of Association, the holder of each multi-vote share is entitled to two votes at the annual general meetings of the Company.
b) The details of shareholders who own 5% or more of the Company’s share capital are as follows:
2022 2021Number of
shares %Number of
shares %
Multi-vote shares:Shell Overseas Investments BV 5,000,000 5.0% 5,000,000 5.0%
Ordinary shares:BV Dordtsche Petroleum Maatschappij 18,700,000 18.7% 18,700,000 18.7%Shell Overseas Investments BV 15,000,000 15.0% 15,000,000 15.0%Shell Petroleum NV 10,100,000 10.1% 10,100,000 10.1%Civil Service Employees Pension Fund 9,895,567 9.9% 9,904,952 9.9%Public Authority for Social Insurance 9,035,062 9.0% 9,050,662 9.1%Oman Investment Authority 7,428,878 7.4% 5,791,570 5.8%MOD Pension Fund 7,170,287 7.2% 7,171,278 7.1%
12 LEGAL RESERVE
In accordance with Article 132 of the Commercial Companies Law of Oman, an annual appropriation of 10% of the net profit for the year is to be made to the legal reserve until the reserve equals one third of the Company’s share capital. The reserve is not available for distribution but can be utilised to set off against any accumulated losses or to increase the Company’s share capital by issuing shares.
No transfer has been made in the current year as the Company has already achieved the minimum amount required in the legal reserve in an earlier period.
13 PROPOSED DIVIDEND AND DIVIDEND PER SHARE
The Board of Directors has proposed a cash dividend of 57 baisa per share (2021 – 36 baisa per share) amounting to RO 5,700,000 (2021 – 3,610,760) which is subject to Shareholders’ approval at the forthcoming Annual General Meeting.
Dividend per share is determined by dividing the proposed dividend for the year by the weighted average number of ordinary shares outstanding of 100,000,000.
ANNUAL REPORT 2022 5958 POWERING PROGRESS
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
14 TRADE AND OTHER PAYABLES
2022 2021RO’000 RO’000
Trade payables 42,589 39,429 Accrued expenses 8,942 7,897 Advance received from customer (contract liabilities) 2,145 819 Other payables 2,984 3,113 Amounts due to related parties [note 18 d)] 3,770 1,632
60,430 52,890
15 PROVISION FOR EMPLOYEE RETENTION SCHEME
2022 2021RO’000 RO’000
At the beginning of the year 126 189Expense for the year 5 42 Settled during the year (119) (105)At the end of the year 12 126
16 BANK BORROWINGS
Bank borrowings comprise of import post shipment loans obtained from a local commercial bank in the Sultanate of Oman which carries interest at commercial rates. The interest rate on bank borrowings is subject to periodic re-negotiation with the banks upon renewal of facilities.
The facility agreement the bank contains certain restrictive and financial covenants which, if violated, could lead to outstanding amounts under the facility becoming immediately repayable [note 28 d)].
17 TERM LOAN
2022 2021RO’000 RO’000
Term loan 3,334 6,667Less: current portion of term loan (3,334) (3,333)Non-current portion of term loan – 3,334
The following further notes apply:a) The term loan was obtained from a local commercial bank, carries interest at 1.5% plus Central Bank of Oman’s 1
month T bill rate and is unsecured. The term loan is repayable in equal annual installments of RO 3.333 million each which commenced from March 2021.
b) The facility agreement with the bank contains certain restrictive and financial covenants which, if violated, could lead to outstanding amounts under the facility becoming immediately repayable [note 28 d)].
c) The maturity profile of the non-current portion of term loan is as follows:
2022 2021RO’000 RO’000
Due between 1 to 2 years – 3,334Due between 2 to 5 years – —
– 3,334
18 RELATED PARTY TRANSACTIONS
a) The Company enters into transactions in the ordinary course of business with the ultimate Parent Company, subsidiaries of the ultimate Parent Company, key management personnel (including members of the Board of Directors) and entities in which the key management personnel / significant Shareholders of the Company have significant influence or control. Prices and terms of payments for these transactions are approved by the Management and the Board of Directors. These transactions are entered into on terms and conditions approved by the management and Board of Directors, and are subject to shareholders’ approval at the Annual General Meeting.
The nature and volume of significant related party transactions and the amounts involved during the year were as follows:
2022 2021RO’000 RO’000
Group Companies:Revenue from contracts with customers 42,967 23,743 Purchase of goods and services 25,352 12,430 Service and trademark license fees 2,276 1,772
Other Related Parties:Revenue from contracts with customers 411 5,342 Purchase of goods and services 938 105
Related party sales associated with companies controlled or have significant influence by the ultimate Parent Company (Group Companies) relate to sales of lubricants and aviation fuel. Other related party sales relate to sales to entities that are controlled by members of the Board of Directors of the Company. Related party purchases were from companies controlled or have significant influence by the ultimate Parent Company and were primarily for purchase of raw materials and finished products for supply of petroleum products.
b) The key management personnel compensation for the year comprises:
2022 2021RO’000 RO’000
Short term employment benefits 750 673Share-based compensation 22 20End of service benefits 24 25
796 718
Directors’ remuneration and meeting attendance fees 83 82879 800
c) During the year, none (2021 – none) of the Company’s directors were employees of the Company.
d) The amounts due from and due to related parties are generally interest free and based on normal credit terms (2021 – same terms).
e) Certain senior management are also eligible to receive variable numbers of the Company shares based on annual performance. During the year, the number of shares granted and vested under the share based compensation scheme were 14,950 (2021 – 23,000).
ANNUAL REPORT 2022 6160 POWERING PROGRESS
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
19 REVENUE FROM CONTRACTS WITH CUSTOMERS
2022 2021RO’000 RO’000
Mobility 441,990 361,131 Aviation 23,199 10,345 Others 34,723 26,953
499,912 398,429
20 OTHER INCOME
Other income mainly consists of Shell fuel cards income, aviation commission, operating income from filling station dealers, convenience stores franchisee fees, reversal of unallocated bank receipts and throughput and product handling fees for use of the Company’s assets.
21 FINANCE COST
2022 2021RO’000 RO’000
Interest on lease liabilities [note 7 g)] 1,698 1,302 Interest on term loan and other bank borrowings 668 495
2,366 1,797
22 SALARIES AND EMPLOYEE RELATED COSTS
a) Salaries and employee related costs included under selling and distribution and general and administration comprise the following:
2022 2021RO’000 RO’000
Salaries and employee related costs 8,665 8,088 Contributions to defined contribution retirement plan for Omani employees 620 591 Cost of end of service benefits for expatriate employees 32 40
9,317 8,719
b) Movements in expatriate employees’ end of service benefits liability during the year is as follows:
2022 2021RO’000 RO’000
At the beginning of the year 280 301Expense for the year 32 40 Settled during the year (125) (61)At the end of the year 187 280
23 TAXATION
2022 2021RO’000 RO’000
Statement of comprehensive incomeCurrent year [note c) below] 1,176 667Prior year (6) 2Deferred tax credit [note d) below] (139) (13)
1,031 656
Statement of financial position
Non-current assetDeferred tax asset 101 —
Non-current liabilityDeferred tax liability – 38
Current liabilityCurrent year 1,176 667
The following further notes apply:
a) The Company is subject to tax at 15% (2021 – 15%) on the profit for the year adjusted for tax purposes.
b) The Company’s taxation assessments for the years 2019 to 2021 have not been finalised by the Tax Authority. The Management believes that additional tax assessed, if any, in respect of the unassessed tax years would not be material to the financial position of the Company at the end of the reporting period.
c) The reconciliation of taxation on the accounting profit with the current taxation charge for the year is as follows:2022 2021
RO’000 RO’000Tax charge on accounting profit at applicable rates 1,011 640 Add tax effect of:Non-deductible expenses 165 27
1,176 667
d) The movement in deferred tax asset / (liability) in the statement of financial position at the end of the reporting period is as follows:
Accelerated capital
allowances Provisions Others TotalRO’000 RO’000 RO’000 RO’000
At 31 December 2020 (411) 284 76 (51)(Charged) / credited to the statement of income (15) 4 24 13At 31 December 2021 (426) 288 100 (38)
At 31 December 2021 (426) 288 100 (38) Credited to the statement of income – 2 137 139At 31 December 2022 (426) 290 237 101
ANNUAL REPORT 2022 6362 POWERING PROGRESS
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
24 BASIC EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net profit for the year by the weighted average number of shares outstanding during the year as follows:
2022 2021
Net profit for the year (RO’000) 5,706 3,611
Weighted average number of shares outstanding during the year (thousands) 100,000 100,000
Basic earnings per share (in Rials Omani) 0.057 0.036
As there are no dilutive potential shares, the diluted earnings per share are identical to the basic earnings per share.
25 NET ASSETS PER SHARE
Net assets per share is calculated by dividing the net assets at the end of the reporting period by the number of shares outstanding as follows:
2022 2021
Net assets (RO’000) 55,606 53,500
Number of shares outstanding at 31 December (thousands) 100,000 100,000
Net assets per share (in Rials Omani) 0.556 0.535
26 OPERATING SEGMENTS
Management has determined the Company’s operating segments based on the reports reviewed by the Chief Executive Officer that are used to make strategic decisions.
The Chief Executive Officer identifies operating segments based on a business perspective. Performance is measured based on revenue earned, as included in the internal management reports that are reviewed by the Board of Directors. Segment revenue is used to measure performance as Management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.
The reportable operating segments derive their revenue largely from the sale of refined petroleum products in the Sultanate of Oman. Mobility sales amounting to RO 441,990 thousand (2021: RO 361,131 thousand) represent the most significant component of revenue for the Company whilst other segments are deemed less significant.
27 CONTINGENCIES AND COMMITMENTS
a) Contingent liabilities
i) At the end of the reporting period, the Company had outstanding bank guarantees and performance and bid bonds amounting to RO 7.198 million (2021 – RO 5.468 million)
ii) The Company is subject to litigation in the normal course of business. The Company, based on independent legal advice, does not currently believe that the outcome of these court cases will have a material impact on the Company’s results or financial position.
b) Commitments
At the end of the reporting period, the Company had capital commitments amounting to RO 6.601 million (2021 – RO 5.086 million).
28 FINANCIAL RISK AND CAPITAL MANAGEMENT
The Company’s activities expose it to various financial risks, primarily being, market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Company’s risk management is carried out internally in accordance with the approval of the Board of Directors.
a) Market risk
Currency risk
The Company is exposed to foreign exchange risk arising from various currency exposures, primarily on sale, purchases, and bank deposits that are dominated in US Dollar. As the Rial Omani is effectively pegged against the US Dollar, the Management does not believe that the Company is exposed to any material currency risk.
Interest rate risk
The Company is exposed to interest rate risk on its interest bearing liabilities (term loan and bank borrowings). The Management manages the interest rate risk by constantly monitoring the changes in interest rates. For every 0.5% change in interest rate, the net impact on the statement of income will approximate to RO 41,670 (2021 – RO 33,335) based on the level of interest bearing liabilities at the end of the reporting period.
b) Credit risk
Credit risk primarily arises from credit exposures to customers, including outstanding receivables, amounts due from related parties and bank balances and call deposits held with commercial banks.
The carrying value of trade and other receivables and amounts due from related parties approximate their fair values due to the short-term nature of those receivables.
Trade receivables
The Company has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount.
ANNUAL REPORT 2022 6564 POWERING PROGRESS
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
28 FINANCIAL RISK AND CAPITAL MANAGEMENT (Continued)
Trade receivables (continued)
The credit exposure of trade receivables is further analysed as follows:
• At the end of the reporting period, trade receivables amounting to RO 14.48 million are past due but not impaired (2021 – RO 14.49 million).
• At the end of the reporting period, trade receivables amounting to RO 9.3 million (2021 – RO 9 million) are secured by bank guarantees.
Concentration of credit risk arises when a number of counter-parties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations of credit risk indicate the relative sensitivity of the Company’s performance to developments affecting a particular industry or geographical location.
The Company has significant concentrations of credit risk with the Government sector. At 31 December 2022, Government organisations in Oman accounted for 37% (2021 – 31%) of the outstanding trade accounts receivables. At the end of the reporting period, there were no other significant credit risks.
Expected credit losses (ECL)
The Company applies the IFRS 9 simplified approach to measuring ECL which uses a lifetime expected loss allowance for all trade receivables. The Company derives its expected credit loss based on Shell’s historical observed default rates.
The historical rates are then adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables.
On that basis, the loss allowance was determined as follows for trade receivables:Year 2022
Non – Government Trade receivables Expected loss rate Loss allowanceRO % RO
Current 19,866 0.02% 3 Past due by:0 – 30 days 1,923 0.05% 1 31 – 180 days 2,965 1.69% 50 Above 180 days 2,097 74.25% 1,557
26,851 1,611
Government Trade receivables Expected loss rate Loss allowanceRO % RO
Current 6,745 0.33% 22 Past due by:0 – 30 days 372 1.34% 5 31 – 180 days 6,058 0.28% 17 Above 180 days 2,757 2.32% 64
15,932 108
28 FINANCIAL RISK AND CAPITAL MANAGEMENT (Continued)
b) Credit risk (Continued)
Year 2021
Non – Government Trade receivables Expected loss rate Loss allowanceRO % RO
Current 18,703 0.09% 17 Past due by:0 – 30 days 1,264 0.08% 1 31 – 180 days 1,737 1.21% 21 Above 180 days 2,135 75.74% 1,617
23,839 1,656
Government Trade receivables Expected loss rate Loss allowanceRO % RO
Current 3,057 0.20% 6 Past due by:0 – 30 days 210 0.48% 1 31 – 180 days 4,963 0.10% 5 Above 180 days 2,572 1.17% 30
10,802 42
Unimpaired receivables are expected, on the basis of past experience, to be fully recoverable. ECL on other receivables has not been provided as the amounts involved are not considered to be material to the financial statements.
Amounts due from related parties
Amounts due from related parties are expected to have low credit risk. Accordingly, no expected credit losses on such dues have been provided.
Bank balances
Credit risk from bank balances maintained in call and current accounts with local commercial banks is managed by ensuring balances are maintained with reputed banks only. The ECL on these balances are not expected to be material to the Company’s financial position at the end of the reporting period and have accordingly not been provided.
c) Liquidity risk
The Management monitors liquidity requirements on a regular basis and ensures that sufficient funds are available including unutilised credit facilities to meet all liabilities as they fall due. The Company manages liquidity risk of maintaining adequate reserves, banking facilities and borrowing facilities by continuously monitoring forecast and actual cash flows.
The maturity analysis in respect of the lease liabilities and term loan has been provided in notes 7 f) and 17 c) respectively. All current financial liabilities are expected to be repaid within six to twelve months from the end of the reporting period.
ANNUAL REPORT 2022 6766 POWERING PROGRESS
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)For the year ended 31 December 2022
28 FINANCIAL RISK AND CAPITAL MANAGEMENT (Continued)
d) Capital management
The Company’s objectives when managing capital are:
• to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and
• to provide an adequate return to shareholders by pricing services and goods commensurate with the level of risk.
The Company sets capital in proportion to risk and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to the shareholders, return capital to shareholders, raise additional capital or sell assets to reduce debts. No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2022 and 2021.
The Company monitors capital using a range of financial ratios including a regular assessment of the Company’s debt to equity position. The Company includes within net debt, term loans and borrowings, lease liabilities, trade and other payables, less cash and call account deposits.
2022 2021RO’000 RO’000
Term loan (note 17) 3,334 6,667Lease liabilities [note 7 d)] 38,748 27,279Trade and other payables (note 14) 60,430 52,890Less: cash and call deposit accounts (note 10) (6,928) (8,796)Net debt 95,584 78,040
Equity 55,606 53,500Capital and net debt 151,190 131,540
Gearing ratio 1.72 1.46
In the context of managing capital, the Company has covenanted, with banks providing external debt to maintain debt to equity ratio, maintain average utilisation of the committed facility and restriction on dilution of share capital held by the ultimate Parent Company. At the end of the reporting period, the Company is in compliance with the covenanted level.
29 COMPARATIVES
Comparatives have been regrouped or reclassified where necessary, in order to conform to the presentation adopted in these financial statements. Such reclassifications did not result in changes to the previously reported comprehensive income or equity.
ANNUAL REPORT 202268
