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Oman advances on multiple fronts

Both offshore oil and onshore gas projects are progressing with the backing of several international firms

Amid the gloom engulfing world oil markets over the past month the Omani government has received very positive domestic industry news. 

After decades of fruitless exploration, and years of delay in developing its debut discovery, production has finally began from waters off the mainland and a major joined the search for more. Onshore, Total has deepened its commitment to the sultanate's drive to boost scarce gas supplies from unconventional reserves in the country’s north-west region. 

Masirah Oil, majority-owned by Singapore-based exploration-technology specialist Rex International, struck offshore oil in 2014. It made the discovery in Block 50, a 16,500km² licence off the central-east coast, but the onset of a prolonged oil price slump starting just months later stymied plans to fast-track its development. 

Investment resumed last year as the operator abandoned farm-down attempts, and a second appraisal well was spudded at the newly-named Yumna field in December. On 17 February, the landmark announcement was made that the well had flowed at 11,843 bl/d and would henceforth be put on an extended production test. 

Shell, Total and Eni have all signed-up to explore for onshore gas

The volumes are minor in the context of the country's total crude capacity—which stands at roughly 1mn bl/d—but are a huge fillip to the government's hopes that fresh resources might be unearthed offshore to offset the long decline of maturing main onshore fields, which already require costly enhanced oil recovery techniques to maintain output. 

The Yumna find was seized-upon as a marketing tool to persuade other foreign firms to take-on offshore acreage. It met with little success until, in November 2017, Eni—enjoying the kudos of discovering Egypt’s giant offshore gas Zohr field five years before—signed an exploration and production-sharing agreement (EPSA) for block 52, a 90,790km² concession south of block 50. 

Seismic acquisition was completed early last year and drilling began on 10 February —precisely two weeks after the Italian major announced the first gas strike for more than three decades in the Gulf emirate of Sharjah. 

Despite long-running efforts to diversify, Oman remains economically and fiscally dependent on oil. Efforts to increase output through discovery and development of acreage outside the vast block six concession—covering much of the onshore mainland and the historic bedrock of production—are continuous. Regular bid rounds held offering comparatively benign terms for firms willing to try where, typically, a string of operators have failed to find commercially-viable reserves. 

Search for gas 

The more urgent priority than oil over the past decade has been the search for non-associated gas. A shortage of gas, even with imports of 200mn ft³/d from Qatar, imposes a brake on the government's downstream and industrial expansion ambitions. 

Eni's decision to invest in block 52 was also symptomatic of another fortuitous trend for the authorities—of growing interest in the country from the majors, which has manifested chiefly in the gas sector. The attention was sparked to a large extent by BP's on-budget and on-schedule commissioning of a multi-billion-dollar unconventional gas development at block 61, in the north-west, in September 2017. It produces 1bn ft³/d from 7tn ft³ of tight reserves and a second 500mn ft³/d phase is due on-stream in 2021. 

11,843 bl/d Oil flow rate from second appraisal well at Yumna

Since then, Shell, Total and Eni have all signed-up to explore for onshore gas. The Italian firm teamed-up with BP on a gas EPSA signed in July for central block 77 but the more-noteworthy deal was initialled in February last year for Shell and Total jointly to develop unconventional gas in blocks 10 and 11, carved-out of the north of block 6. Blocks 10 and 11 encompass the so-called Greater Barik area–using their shares to feed respectively a 45,000-bl/d gas-to-liquids plant at Duqm and a 1mn-ts/y LNG-bunkering facility at the northern port of Sohar. In late February, one of the French firm’s senior executives said during a conference in Muscat that FID was anticipated by year-end. 

Total has a historic place in Oman’s upstream sector stemming from a 4pc stake in Petroleum Development Oman, the government-led block 6 operator and—after a temporary retrenchment that saw it exit from an offshore exploration block in 2015—appears embarked upon a wider gas-based expansion. 

On 19 February, Total inked an EPSA for onshore block 12, a 10,000-km² area considered to have high gas potential, located not far from blocks 10 and 11. Thailand’s PTTEP, which inherited minor stakes in block 6 and in the prolific Mukhaizna heavy oilfield in the south-east on acquiring Portugal’s Partex last year, is the major’s 20pc partner in the new concession.

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