ESG and Energy Transition: What Oil and Gas Companies in Oman Must Know Legally
As the global energy sector moves toward sustainability, Environmental, Social, and Governance (ESG) considerations have become central to responsible corporate conduct. For oil and gas companies in Oman, the pressure to align with ESG standards comes not only from international investors and financiers, but also from government policy and domestic market expectations. With the Sultanate committing to net-zero emissions by 2050 and introducing regulatory frameworks to support that goal, companies in the energy sector must integrate ESG into their legal and contractual structures.
Environmental obligations are anchored in the Law on the Protection of the Environment and Prevention of Pollution (Royal Decree 114/2001). This law requires permits for emissions, waste management, and environmental impact assessments (EIAs). Oversight is carried out by the Environment Authority, which has the power to suspend activities, impose administrative penalties, or initiate criminal proceedings for violations. Oil and gas projects must therefore ensure that their agreements—from exploration to decommissioning—include clear environmental obligations, permit deadlines, and compliance monitoring mechanisms.
Social considerations are strongly shaped by Oman’s labor and local content policies. The new Labour Law (Royal Decree 53/2023) emphasizes fair employment terms, health and safety standards, and training. In parallel, Omanisation policies issued by the Ministry of Labour impose hiring quotas and skills development requirements. Companies working with Petroleum Development Oman (PDO), OQ, or OQGN are also bound by In-Country Value (ICV) obligations, which are designed to strengthen the local supply chain and workforce participation. To comply, legal teams must ensure that employment contracts, procurement terms, and subcontracting agreements reflect these social and community-based requirements.
Governance has become equally important. The Corporate Governance Code issued by the Capital Market Authority (latest update in 2022) is mandatory for listed companies, but its principles are now widely adopted as best practice by private firms, particularly those seeking international partnerships or funding. Boards must implement robust compliance policies covering transparency, anti-bribery, and ethical conduct. Key legislation also includes the Anti-Money Laundering and Combating Terrorism Financing Law (Royal Decree 30/2016) and the Commercial Companies Law (Royal Decree 18/2019), both of which impose obligations for due diligence, risk management, and avoidance of illicit transactions. These requirements are particularly relevant for oil and gas companies involved in joint ventures and cross-border procurement.
The government has also begun embedding ESG into its energy strategy. Through the Hydrogen Oman (HYDROM) initiative and Royal Decree 10/2023, a regulatory framework has been established for green hydrogen projects, signaling a national shift toward renewable energy and carbon-reduction technologies. Companies diversifying into renewables, carbon capture, or hydrogen will encounter new licensing, land use, and permitting rules that differ from the hydrocarbon sector. Continuous monitoring of ministerial decisions and energy transition protocols is therefore essential.
From a contractual perspective, oil and gas companies must update their agreements to reflect ESG commitments. Traditional contracts rarely address sustainability metrics, but financiers, insurers, and joint-venture partners increasingly require ESG-linked provisions. These can include obligations to report greenhouse gas emissions, commitments to training and local hiring, and warranties on ethical procurement. Breach of these obligations may give rise to penalties, termination rights, or reputational harm, which makes careful drafting and negotiation a legal necessity.
Conclusion
ESG in Oman is no longer an optional standard for oil and gas companies. It is becoming a binding legal and commercial requirement that spans environmental law, workforce regulation, and governance practices. Companies that embed ESG obligations into their compliance systems and contractual frameworks will not only avoid legal risk, but also enhance their competitiveness in an energy market that is rapidly shifting toward sustainability.
