Executive summary
- After years of declining production, crude output has increased y-o-y since 2008 due to:
- Oman's EOR project at the Mukhaizna field; and
- Stabilisation of production at PDO's Block 6 (Oman's main producing area)
- PDO has also implemented a number of EOR initiatives to maintain its own production of c.550mbopd over the next 5 to 8 years
- The success of these EOR projects will largely dictate the level to which Oman can maintain liquids production over the medium term
- Increasing focus on gas production in response to projected shortfalls
- Encourage the appraisal and development of tight gas reserves
- Large part of these volumes will depend on success of BP-operated Khazzan Makarem project
- Oman viewed as a stable operating environments
- Has collaborative government offering PSCs with relatively favourable terms relative to regional peers
Key companies
- Petroleum Development Oman ("PDO") is dominant player: Government of Oman 60%, Shell 34%, Total 4%, Partex 2%
- PDO produces over 75% of Oman's hydrocarbons from over 100 fields
- BP's reserves come solely from its Khazzan-Makarem project
- Occidental, Mubadala and Oman Oil Company reserves largely from the redevelopment of Mukhaizna
Licensing
- Majority of licensing activity is onshore, accounting for 95% of active licences
- 5 active offshore licences
- New licensing opportunities for IOCs constrained by fact that PDO has operated a vast concessino area covering much of the country
- much of the acreage outside of PDO's concession area has been licensed, relinquished and re-licensed several times
- Licensing activity has increased significantly over the last 10 years
- re-licensing of PDO relinquished acreage
- response to falling oil production and rising gas demand
Reserves
- Main oil fields now mature
- remaining reserves depend on how successful PDO and Occidental's EOR is
- Remaining gas reserves estimated at 30-35tcf
- vast majority held in PDO areas; 85% of Oman's remaining gas reserves are contained in 10 fields operated by PDO, most of which are in Qarn Alam area of Block 6
- Gas reserves will increase significantly if BP's Khazzan-Makarem field and Oman Oil Comapny's Abu Butabul field are successful appraised
Production
- Between 2000 and 2008, Oman experienced production decline - PDO ageing fields
- In response, PDO shifted focus on EOR from existing fields
- Since 1999, PDO has increased sales gas significantly as the giant Qarn Alam fields were brought onstream to supply Oman's new LNG plants
- Demand for gas expected to grow to support growing industrial and domestic gas markets
Infrastructure
- Highly developed network, almost exclusively owned and operated by PDO; c.2,200km of pipeline
- Oman's main terminal is located near Muscat - all crude is either exported or processed at the refinery for domestic use
- Gas pipeline network owned by Oman Gas Company ("OGC"): Government of Oman 80%, Oman Oil Company 20%
- Network of c.2,500km
- Gas supplies Qalhat LNG terminal or domestic use
Key issues
- Largest non-OPEC producer in the Middle East
- Crude production has increased since 2008, following previous declines
- Relatively attractive fiscal regime has drawn international investors
- Leading proponent for EOR developments in the Middle East
- Challenging geology has resulted in relatively high cost developments
- PDO carries out 3 types of EOR in its contract area: Polymer, Steam and gas injection
- Other operators developing small scale, cost effective EOR techniques designed for small to medium sized fields
- Reduced availability of gas has led to innovative use of solar panels to produce steam required to mobilise heavier crudes in the south of Oman
- Gas supply remains an issue
- Khazzan-Makarem needs to realise a higher gas price to proceed
