Related Articles
Forward article link
Share PDF with colleagues

Oman's gas drive goes up a gear

Success in the country's first major non-associated gas project, and continued pent-up demand, are propelling efforts to increase output

Oman has confirmed a provisional agreement with BP and Italy's Eni to explore and exploit reserves in an area in the country's north-west, close to the former's landmark tight-gas discovery. The development is a further endorsement of Oman's strategy of enlisting majors to develop onshore non-associated gas reserves.

Total selected participants in a design competition for an LNG facility planned to process any gas from an upstream concession awarded to the French firm and Shell last year. Despite early entry to the global LNG export industry, Oman has suffered an increasing shortage of gas over the past decade, forcing it to resort to imports and putting a brake on the government's downstream and industrial development ambitions.

10.4mn t/yr - Oman LNG exports

BP and Eni have signed an exploration and production-sharing agreement (EPSA) with the government for Block 77, a 2,700km² area in the north-west, with each taking a 50pc stake and Eni designated operator during the exploration phase. The salient point in the brief notices issued by each signatory is that the licence lies only 30km (19 miles) east of the estimated $16bn BP-led Khazzan tight gas project. This is the largest single upstream investment in Oman's history, the 1bn ft³/d first phase of which added a third to scarce national gas supplies when commissioned in late 2017.

No hints were offered as to the potential resources being targeted but the involvement of two large international oil companies (IOCs) implies they may be substantial. After a heads of agreement in mid-January, Omani energy minister Mohammed al-Ruhmy claimed that Block 77 contained discovered reserves of 2-4tn ft³, and potentially held up to 10tn ft³, while BP said that the economics of any development could potentially be assisted through use of parts of the Khazzan infrastructure.

BP's interest in the venture is thus unsurprising, while Eni has been on a regional expansion drive over the past two years—signing EPSAs for Oman's offshore Block 52 in late 2017 and onshore Block 47, in the north-east, in January.

PDO's oil focus

Shell and Total are stalwarts of Oman's oil and gas industry—present since the 1930s and founding shareholders of government-led Petroleum Development Oman (PDO), producer of nearly two-thirds of the sultanate's oil from the giant Block 6, which sprawls across some 900,000km² of onshore territory.

PDO's current focus is on maintaining crude production from Oman's typically complex and geographically-challenging oilfields, and the energy ministry has increasingly hived-off and assigned to third parties areas of the concession considered prospective for gas.

Shell and Total answered a call in late 2017 for companies to propose integrated upstream and downstream gas projects exploiting reserves in the Greater Barik area in the north-west. In May 2018, they signed a memorandum of understanding on the development of several discoveries in the area to feed, respectively, gas-to-liquids and LNG bunkering projects. Interim upstream gas agreements were inked in February. Potential production is estimated at an initial 500mn ft³/d, later rising to 1bn ft³/d, with Shell taking a 75pc share and Total 25pc.

From the outset, the LNG project has appeared the more concrete—with the intended capacity of the modular facility stated as 1mn t/yr and the location as Sohar, an industrial city in the north. Total will execute the scheme in joint venture with government-owned firms Oman Oil and refinery and petrochemicals company Orpic—and in July launched a front-end engineering and design contract tender.

Oman's existing LNG export facility, based at Sur in the north-east, had been running well below capacity until Khazzan supply became available. Since then production has ramped back up to around 10.4mn t/yr.

Also in this section
Myanmar LNG projects overcome pandemic and sceptics
3 July 2020
China and Hong Kong-led consortium has started operating first of three planned facilities as Yangon targets nationwide electrification
Letter from China: Pipeline reform heats up
2 July 2020
The signs are positive that Beijing is getting serious about opening up its gas network
India sets out multi-faceted reform to support gas
2 July 2020
New Delhi is set to implement a new pipeline tariff policy to complement its first trading exchange and under-construction distribution network, to further boost the use of gas