Oil & Gas: Cautious optimism

Oman’s oil& gas industry is negotiating the global decline in fuel prices, by reducing reliance on government funding, staying the course on major strategic initiatives and adjusting to the need to lower output 

Oil & Gas-1

About 110 million barrels have been added to the Sultanate’s oil and condensates reserves in 2016, raising the Sultanate’s total oil and condensate reserves to 5.115 billion barrels as of the end of 2016; a decline by about 257 million barrels compared to 2015, said H.E. Salim bin Nasser al Aufi, Undersecretary of the Ministry of Oil and Gas at the Annual Media briefing held by the Ministry of Oil & Gas in the month of April this year. “In terms of gas reserves, about 0.84 trillion cubic feet of gas has been added. The Sultanate’s total gas reserves stood at 21.15 trillion cubic feet at the end of 2016, down by 1.85 trillion cubic feet from the end of 2015 – a loss of about 0.69 trillion cubic feet of gas due to field appraisals.”

With respect to production, he said that “the average daily production of crude oil and condensates was about 1.4 million barrels (compared to 981 thousand barrels for the year 2015), an increase of 2.4 per cent compared to that in 2015. The average daily production of natural gas – in addition to the quantity of gas imported from Dolphin – is about 112 million cubic meters (109 million cubic meters compared to 2015). This is an increase of 2.3 per cent compared to the year 2015; of which 87 million cubic meters of non-associated gas and 19 million cubic meters of gas associated with the addition of 6 million cubic meters Of the gas imported from Dolphin.”

His Excellency also said that the Omani government is making continuous efforts to encourage the local and foreign private sector companies to venture into oil and gas exploration, production, gas-based projects and supportive services. “The total expenditure on the oil and gas exploration, production and development sector was about US $11.3 billion (compared to US $11.43 billion by 2015), with around 71 per cent as capital expenditures such as drilling, utilities and others, and about 29 per cent in operating expenses.”

Here are a few performance highlights from key players in the industry:


Petroleum Development Oman (PDO)

Petroleum Development Oman (PDO) overcame a number of significant challenges to record many successes in 2016, including record production, improved safety and thousands of new jobs and training opportunities for Omanis. “The key takeaway,” according to Raoul Restucci, Managing Director, “is that you can rely on PDO, no matter what the economic challenge. We will continue to improve, continue to deliver on our promise, and we will continue to serve Oman.”

2017 is a landmark year for the company with Restucci saying: “This year is a very special year for us. 2017 marks the 50th anniversary of the first export of Omani oil and the 80th anniversary of the company’s foundation: 50/80.” Throughout 2017, PDO aims to continue to adapt to the prevailing economic conditions, reduce reliance on government funding and stay the course on major strategic initiatives, while adjusting to the need to lower output as a result of last December’s agreement between OPEC and non-OPEC countries.

With the company fully focused on value creation, PDO established a new total oil, gas and condensate production record of 1.293 million boepd. This total included an average oil daily production of 600,197 bpd, the highest since 2005 and more than 15,000 bpd above the original target. Annual condensate production was 81.325 bpd against a yearly target of 76,800 bpd, helped by an excellent performance from wells at Kauther, Rabab and Khouloud. Government gas production in 2016 was 80.24 million cubic metres/day against the previous years 81.07 million m3/day. The company’s drilling workload rose significantly, as it sought new sources of low unit technical cost hydrocarbons to create value and meet customer needs. The total number of oil and gas production and exploration wells was 644,33 above plan and a 12 per cent  increase on 2015. There were also 19,600 well interventions – a 49 per cent increase on the 2015 total of 13,190 activities.

Exploration: Despite low oil price environment challenges, the Exploration Directorate exceeded delivery targets and reduced the number of health, safety and environment (HSE) incidents and violations. A total of 86.4 million barrels of oil, 0.45 trillion cubic feet (Tcf) of non-associated gas (NAG) and 24.3 million barrels of condensate were booked as Commercial Contingent Resources (CCR) volumes in 2016.

There was a total oil reserves addition of 189.31 million barrels compared to a scorecard target of 119 million barrels. The reserves replacement ratio slipped to under one (0.86), partly as a result of accelerated oil production. However, working with Shell, PDO identified 46 opportunities for incremental development that could yield in excess of 700 million barrels of recoverable reserves. The directorate safely drilled 27 wells and acquired 8,456 km2 of 3D Wide Azimuth (WAz) seismic date in Block 6.

Production from exploration wells was delivered at a daily average rate of 3,414 barrels (with a maximum of 5,280 bpd in July 2016). That was achieved by maintaining close collaboration with key stakeholders and pursuing early monetisation opportunities where possible.


Oman Oil Refineries and Petroleum Industries Company (Orpic)

Oman Oil Refineries and Petroleum Industries Company (Orpic), one of Oman’s largest and most rapidly growing businesses in the Middle East, houses refineries in Sohar and Muscat as well as aromatics and polypropylene production plants in Sohar.

Orpic’s integrated complex includes four industrial plants operating at two locations (Muscat and Sohar) are joined by a 266 km pipeline, delivering feedstock from Mina Al Fahal refinery to the Sohar plants. The plants take raw material, the main one being Omani crude oil, and process them to create a series of important fuels and petrochemicals.

With SRIP, Sohar Refinery will add 82,000 barrels per day to its existing capacity of 116,000bpd – taking the total capacity to 198,000bpd. This indicates a 70 per cent growth in fuel production – 90 per cent for diesel, 37 per cent for gasoline, 93 per cent for kerosene, 93 per cent for jet fuel, 91 per cent for LPG, 175 per cent for naphtha and 44 per cent for propylene. Orpic also celebrated the groundbreaking of its Engineering, Procurement and Construction (EPC) of Liwa Plastics Industries Complex (LPIC) Project- Package 3 this year.



Significant progress has been made towards First Gas which is expected towards the end of 2017,” according to Yousuf Al Ojaili, President of BP Oman. “The Khazzan development in now over 90 per cent complete.” Since then, BP announced that it has reached a significant milestone in the development of the Khazzan gas project with the successful drilling and completion of the 50th well at the large gas field in Block 61. BP is the Operator of Block 61 and holds a 60 per cent interest. The Oman Oil Company for Exploration & Production holds a 40 per cent interest. This is the final well targeted for completion enabling first gas to be delivered later this year.

“These first 50 wells will enable production of 1.0 billion cubic feet of gas a day (bcf/d) to be achieved from first gas onwards and delivered to the Sultanate of Oman. This will rise to 1.5 bcf/d once the second phase of the Khazzan project is fully up and running in 2020. A total of over 300 wells will be drilled over the estimated lifetime of the Khazzan project,” said Al Ojaili.

The Khazzan gas reserves lie at depths of up to five kilometres in narrow bands of extremely hard, dense rock. The amendment to the Oman Block 61 exploration and production sharing agreement (EPSA) announced in 2016 was ratified , with the issue of a Royal Decree [no. 14/2017] on 19 March, 2017 by His Majesty Sultan Qaboos Bin Said. The amended agreement extends the licence area of the block and enables further development of the gas reserves in the area. Block 61 is located around 350km south west of Muscat, with the southern part of it known as the Khazzan field. The newly extended area, which adjoins Khazzan to the southwest, will henceforth be known as ‘Ghazeer’ (which means ‘copious’ in Arabic). It adds approximately 1,000km2 to the block, bringing the total Block 61 size to 3,950km2. Ghazeer is forecast to deliver 0.5 billion cubic feet of gas a day by 2020. With Khazzan due to deliver a billion cubic feet a day by the end of 2017, the two fields will together eventually increase Oman’s natural gas supply by around 40 per cent.


Occidental Oman (Oxy Oman)

Oxy’s major operations are located in northern Oman, primarily in Block 62 and at the Safah Field in Block 9, and at the Mukhaizna Field in the south. In 2016, the company commissioned a new gas plant in the Maradi Huraymah Field, part of Block 62. Occidental received a 15-year extension for Block 9 in 2017.

At the Mukhaizna Field, Occidental has implemented an aggressive drilling and development programme, including a major pattern steam flood project for enhanced oil recovery that utilizes some of the largest mechanical vapor compressors ever built. In 2016, the average gross daily production was approximately 16 times higher than the production rate in September 2005 when Occidental assumed operations.Occidental has also increased production at Safah field in northern Oman through a combination of development wells, waterflooding and successful exploration. Occidental’s exploration program in northern Oman is one of the most successful in the company’s history. More than 100 wells have been drilled to date, resulting in many significant sizable discoveries such as Wadi Latham, Wadi Aswad North, Khamilah and Safah North B fields.

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