OVERVIEW
Proven Oil Reserves (1/1/00E): 5.3 billion barrels.
Proven Gas Reserves: officially set at 850 billion cubic metres (nearly 30 trillion cubic feet).
OIL AND GAS INDUSTRIES
Organizations: Petroleum Development Oman Ltd. (PDO) controls all oil resources. PDO is a partnership between the Omani government (60 percent), Royal Dutch/Shell (34 percent), Total (4 percent), and Partex (2 percent). Oman Oil Company (OOC) is the overseas investment arm of the Ministry of Petroleum.
Major Foreign Oil Company Involvement (non-PDO): Arco, IPC, Itochu, Japex, Occidental, Mitsubishi, Mitsui, Neste Oy, Nimir, Phillips, Sumitomo, Triton, Wintershall.
Major Oil Fields: Roughly 1.8 billion barrels in reserves are located in the large northern structure containing the Yibal, Natih, Fahud, al-Huwaisah, Lekhwair, and Shibkah fields. Other key fields are the southern Marmul and Nimr fields as well as Occidental's 120-million barrel Safah field and the estimated 400-million barrel Amal Eastern High field, which contains heavy crude oil.
Major Refinery: Mina al-Fahal (85,000 bbl/d).
Major Oil Terminal: Mina al-Fahal.
With relatively modest oil reserves, Oman is important to world oil markets due to its strategic location overlooking the Strait of Hormuz. Oman also opened a facility for the export of liquefied natural gas (LNG) in April 2000.
OIL
In many ways, Oman is atypical of Persian Gulf oil producers. Oil was not discovered in commercial quantities until 1962—decades after most of its neighbors. Oman's oil fields also are generally smaller, more widely scattered, less productive, and more costly per barrel than in other Persian Gulf countries.
The average well in Oman produces about one-tenth the volume per well compared to neighboring countries. Oman continues to use a variety of Enhanced Oil Recovery (EOR) techniques in order to minimize the costs of exploration and further development at new and existing oil fields. Using these technologies, Oman has succeeded in bringing down the cost of oil production to $3 per barrel in some fields and $4 per barrel in others—but these figures are still substantially above most other Persian Gulf oil fields.
Oman is not a member of OPEC or OAPEC (The Organization of Arab Petroleum Exporting Countries). In March 1999, however, Oman pledged to undertake production cuts of 63,000 barrels per day (bbl/d) from its production of 910,000 bbl/d in cooperation with OPEC's attempt to raise prices. The cuts were not fully implemented, though, and Oman's production has fluctuated in a range between 890,000 bbl/d and 910,000 bbl/d since April 1999.
OPEC reversed its production cuts in March 2000, and Oman announced that it would again begin raising production. During Oman's next 5-year plan, which runs from 2001 through 2005, the country plans to increase production to 1 million bbl/d.
Most of Oman's 5.28 billion barrels in proven oil reserves are located in the country's northern and central regions. In the North, the Yibal, Natih, Fahud, al-Huwaisah and Lekhwair fields combined account for almost half of total Omani oil production.
Yibal, which produces around 180,000 bbl/d, is the largest oil field in the country. Crude oil found in this region is mainly medium or light, with gravities in the 32o-39o API range. Northern oil is mostly found along with natural gas. Heavier oil is found in southern Oman, particularly in the Nimr and Amal fields, with gravities averaging 20o API, and normally not associated with natural gas. Oman's main oil export blend is a medium sour crude.
Petroleum Development Oman (PDO), the country's second-largest employer after the government, holds over 90 percent of the country's oil reserves and accounts for about 94 percent of production. PDO is a consortium comprised of the Omani government (60 percent), Shell (34 percent), Total (4 percent), and Partex (2 percent).
However, Shell operates most of Oman's key fields, including Yibal and Lekhwair. As part of a strategy to increase its oil reserves, PDO has set out to develop additional exploration and recovery techniques. PDO aims to increase the amount of oil it recovers to 34 percent (from 27 percent in early 1998). Recent exploration has been successful in southern Oman, where PDO reportedly discovered 2 major oil fields, at Al-Noor and Al-Shomou, with an estimated combined 340 million barrels of reserves. PDO hopes to increase reserves from Al-Noor and Al-Shomou to 1.8 billion barrels by 2003 and 2.7 billion barrels by 2011.
Yibal, discovered in 1962, is Oman's largest producing oil field, supplying around one-quarter of PDO's total production. In 1986, the field's output was boosted from 120,000 bbl/d to more than 140,000 bbl/d with the installation of water injection facilities. Production was increased further following the completion of a $200-million development project, called Yibal Shusiba Phase II, in 1994.
The project involved drilling 96 wells, mostly horizontal, and modifications to production stations B, C, and D, which included the installation of gas injection facilities. Yibal currently produces around 180,000 bbl/d. Oman's second largest oil field, Nimr, was discovered in 1980 and is located in the southern part of the country. Nimr currently produces about 178,000 bbl/d from more than 307 wells.
Omani oil projects currently under development include the al-Noor field, under development by PDO, which is expected to commence production of 10,000 bbl/d in the summer of 2000. After two years of production at the field, a review is planned to decide if further investment to increase output would be economical.
Another development project is the Hengam oil-field, which straddles the border between Iran and Oman, is “target” for joint oil exploration between the two countries. The field is a section of the Hengam oilfield, located 12 km off Oman's coast in Hormuz Strait, stretches into Iranian territory. The total volume of the field's reserves is estimated to be about 1,800 billion cubic feet, which includes 400 million barrels of oil.
Foreign companies recently awarded concessions for exploration include Novus Petroleum, which signed an agreement for Block 17 in September 1999. Oil India Limited (OIL) also has entered Oman's upstream sector, purchasing a 20 percent interest in October 1999 in an offshore block held by TotalFina Elf.
REFINING AND PETROCHEMICALS
In 1982, Oman constructed its first refinery, at Mina al-Fahal. Subsequently, the 50,000-bbl/d plant was expanded to 85,000 bbl/d. Output from the facility, which is operated by the state-owned Oman Refinery Company (ORC), is used to meet local product demand.
A second refinery is planned, near the northern city of Sohar. Bids for a feasibility study and initial design work were solicited in early 2000, and plans call for construction of the 75,000-bbl/d refinery to begin in 2002 and to be completed in 2004.
As part of its effort to diversify its economy and to develop value-added industries, Oman has begun to invest in petrochemical production. Oman is moving ahead with plans to contruct a large-scale joint-venture petrochemical project in Sohar for the production of polyethylene and fertilizer.
The project would utilize Omani natural gas and would comprise an ethane cracker and polyethylene unit with total output of approximately 450,000 tons per year. The plant is due to begin operations between 2001 and 2002. Under an agreement in late 1996, British Petroleum is to own 40 percent-49 percent of the project, while 40 percent is to be sold on the Muscat Securities Market. The petrochemical complex will be supplied by an ethane pipeline which is currently under construction.
Oman also is considering a $1.1-billion, Indian-backed project to build a fertilizer plant at Sohur which would use Omani natural gas as a feedstock. The project has been thrown into doubt, however, by low prices for urea and problems arranging financing.
NATURAL GAS
Oman has made natural gas—both for export as well as for domestic gas-intensive industries—the cornerstone of its diversification and economic growth strategy. Official projections call for gas to contribute about 15 percent of Oman's GDP by the year 2002.
Through an extensive exploration program, Oman has consistently increased its natural gas reserves in recent years. As of January 1, 2000, Oman's estimated proved reserves were approximately 28 trillion cubic feet (Tcf), up from only 12.25 Tcf in 1992, mainly of associated gas. Most of these reserves are located in areas owned by PDO, which produces the majority of Oman's gas. More than 10 Tcf of Oman's non-associated gas is located in deep geological structures, many of which are beneath active oil fields.
Oman is planning to extend its existing gas pipeline network. Two contracts have been awarded to separate firms for projects connecting gas deposits in central Oman to the coastal cities of Sohar in the north and Salalah in the south. India's Dodsal Company will build the $124-million line to Sohar. A consortium including Italy's Snamprogetti and Saipem will build the $180-million line to Salalah.
Oman also is one of the intended destinations for natural gas from Qatar's North Dome field under the Dolphin Project. Initially, the project will link gas consumers in the United Arab Emirates with gas supplies from Qatar, but plans include the eventual construction of a line to Oman around 2005. If demand warrants, Oman could also serve as a transit corridor for gas exports from the Dolphin Project to Pakistan through a subsea pipeline, but sufficient demand and financing to make this possible are not expected in the next several years.
Other projects.involve the building of a gas pipelines. Oman has signed contracts with an Indian company and a European-Japanese consortium to build two gas pipelines by the second half of 2002 at a total cost of 304 million dollars.The two pipelines—running from central Oman to Sohar on the coast north of Muscat, and from the northwest to the southern port city of Salalah—will be completed within two years. The Indian company Dodsal signed a contract for the construction of the 700-km (420-mile) Salalah line at a cost of 180 million dollars.Saipem and Snamprogetti of Italy with Athens-based Consolidated Contractors International Company and Mitsubishi signed a contract for the 305-km (185-mile) Sohar line worth another 124 million dollars. Work on both pipelines is expected to start work in late 2000.The northern pipeline is to supply feedstock for a planned aluminium smelter and petrochemical plant in Sohar as well as power plants. As part of Oman's gas-powered industrialisation drive, a 200-megawatt power plant is also planned in Salalah.
Oman recently inaugurated its first LNG venture, which shipped its first cargo to Korea in April 2000. The 6.6-million-ton-per-year liquefaction plant is located at Qalhat, near Sur. The project was developed by the Oman Liquefied Natural Gas Company (OLNGC), a joint venture of the Omani government (51 percent), Shell (30 percent), Total (5.54 percent), Korea LNG (5 percent), Mitsubishi (2.77 percent), Mitsui & Co. (2.77 percent), Partex (2 percent), and Itochu (0.92 percent).
The LNG plant consists of two 3.3-million-ton-per-year LNG trains supplied by non-associated gas from the Saih Nihayda, Saih Rawl, and Barik gas fields. The second train became operational in May 2000.
Korea Gas Corporation (Kogas) is the anchor customer for the LNG project, having contracted for 4.1 million tons per year of Omani LNG over a 25-year period. The second customer is MetGas, the Enron-backed project in India building the Dabhol Power Plant. MetGas will take 1.6 million tons per year starting at the end of 2001, for a period of 20 years.
Japan's Osaka Gas Company is the third client, and will receive 700,000 tons per year for 25 years. Since MetGas has not begun to receive shipments, Oman LNG will be selling some cargoes on the spot market in 2000-2001.
Coral Energy of the United States will be purchasing up to 11 of the spot cargoes for its Lake Charles, Louisiana import terminal during this period.
In an effort to enhance prospects for future gas-based export projects, Oman has signed a number of joint venture agreements to carry out exploration and development activities. Canada-based Gulfstream Resources Ltd. is planning to invest more than $60 million over the next eight years to develop a gas field in Haffar Block 30.
In November 1998, Occidental, Amoco and Neste Oy of Finland announced the establishment of a joint venture firm to develop, explore and produce natural gas reserves in northern Oman. The area consists of five blocks, covering approximately 3,150 square miles. Target markets include the city of Sohar and the northern UAE through the large natural gas supply hub located in Sharjah, UAE. The project will include development, well drilling, construction of a gas collection system and processing plant, as well as building gas transmission lines to Sohar and the Sharjah gas hub.
Oman made an agreement with Iran in 1997 for the development of the Hengam/Bukha offshore field in the Strait of Hormuz, which straddles the line between the two countries territorial waters. The field is currently producing 40 million cubic feet per day (Mmcf/d) of gas.
Sources:
2. United States Energy Information Administration. (Please Note: The US/D.O.E.Information contained in this report is accurate as of May
© 2000 Mena Report (www.menareport.com)
