HE Salim Al Aufi
Ministry of Oil & Gas
If prices continue sliding, the most prominent way to cut spending – without compromising current production levels – is to shelf and call off future projects aimed at exploring and developing new production fields till prices rise.
There is no denying the fact that the continued decline in oil prices around the globe, if the prices stay on the current level or slide to a worse level in 2016, will have its repercussions on spending in general, and on the oil and gas sector in particular. The falling oil prices may put pressure on spending in the public and private sectors for prospecting and exploring potential oil and gas fields, not only in Oman but all over the world.
With regard to the impact of falling oil prices on the current production in the Sultanate, it is not expected to have a direct impact on reducing the volume of production at least during 2015. However, the continued – and even worsening – low prices through 2016, may instigate the government, represented by the Ministry of Oil and Gas in cooperation with oil and gas companies, to increase efforts aimed at rationalizing and cutting costs as much as possible without affecting production levels.
In addition, there are several procedures that can be applied to rationalize and cut increasing expenses before resorting to the option of reducing production. In the current situation, when comparing the cost of producing Omani crude oil with current world prices, we can say that continuing production is still commercially viable for the companies operating in the Sultanate. The average production price is less than $20 a barrel, if we deduct the costs resulting from investments in future projects. If prices continue sliding, the most prominent way to cut spending – without compromising current production levels – is to shelf and call off future projects aimed at exploring and developing new production fields till prices rise. Examples of future projects include seismic surveys, exploratory drilling of wells and technical works preceding commercial production. However, such procedures may have future material implications given that the obsolescence of existing fields may require seeking other new ones in the future to maintain the current production levels.
With regard to repercussions of the oil price decline on oil and gas manpower, the Ministry of Oil and Gas is cooperating with companies operating in this industry to effectively follow up on the condition of labour market and workers. The impact of oil price drop on human resources is dealt with seriously, to continuously ensure minimizing the negative effects that might face employees in this sector.
Given the achievements made since the ICV Committee was set up in late 2011, we are proud of the many concrete achievements we have made over the past few years, especially braving the challenging conditions. We are also satisfied with the progress made by some other oil companies including the various initiatives orchestrated to strengthen ICV under the supervision of the Ministry of Oil and Gas. It is worth mentioning that in addition to the joint efforts exerted by the oil companies, each company is playing its own role through adopting various initiatives to enhance ICV in line with its respecting operational requirements. We should also appreciate efforts made by contractors who actively and positively responded to ICV initiatives. Adding to this are their support to and compliance with ICV standards which constitute the main part of tender documents presented by oil companies. Despite the various achievements we have made at various levels, we still have a long path ahead, which requires more concerted efforts to be exerted to achieve the required targets. The ministry should, in cooperation with oil companies and contractors, seize as many opportunities as possible to achieve the strategic goals which include increasing skills and efficiency of the local manpower, creating job opportunities through promoting and diversifying the production of goods and services that can be manufactured and provided in the Sultanate.