$500m to develop new Block 62 gas reserves

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Rumhy signs concession pact today

MUSCAT -- The Government will sign today a major concession agreement aimed at harnessing potentially attractive gas reserves in the Habiba (Block 62) area of central Oman. Capital investments in the exploration and development of the block's gas potential are in the order of $500 million, it is learnt. Dr Mohammed bin Hamed al Rumhy, Minister of Oil and Gas, will ink the concession agreement on behalf of the government with a consortium comprising international energy major Occidental PetroleumOccidental Petroleum, Mubadala Development CompanyMubadala Development Company of Abu Dhabi, and the wholly-government owned energy investment firm Oman Oil CompanyOman Oil Company. Exploration and development of the block's reserves will be undertaken in joint venture with the Government of Oman.

Hitherto part of the sprawling Block 62 concession of Petroleum Development Oman (PDO)Petroleum Development Oman (PDO), the Habiba block, covers an area of around 2,700 sq kms. OccidentalOccidental will be the operator of the Block 62 concession, which is believed to hold sizeable reserves in deep gas fields. Today's concession agreement is the latest in a succession of breakthroughs by the Ministry of Oil and Gas in enlisting international energy majors in the government's continuing quest to explore and develop the country's gas potential to help meet the escalating demand for natural gas.

In February 2007 the government signed up energy giant BP to appraise and develop gas reserves contained within Block 61, a 2,800 sq km area that includes the Khazzan and Makarem gas fields. Successful development of these 'tight' gas reservoirs could open up around 30 trillion cubic feet (TCF) in potential gas reserves. A joint decision by BP and the Oman government to proceed with full field development is expected before early 2013. First gas from BP's Khazzan and Makarem fields is provisionally forecast in 2010 at a rate of 200 million standard cubic feet per day (mmscfd), rising to 1,000 mmscfd, and possibly to 2,000 mmcfd by 2020.

Earlier, in April 2006, the British-based international energy firm, BG, was awarded the Block 60 concession in central Oman containing the gas-rich Abu Butabul field. Potential gas reserves are estimated at 8 TCF in Block 60, which is also believed to hold other exploration prospects. Contingent on a successful appraisal programme, the first commercial gas production could start as early as the end of 2010. However, in a further effort to explore for new reserves and accelerate the development of known deposits, the Ministry of Oil and Gas announced earlier this year plans to offer five gas blocks under a new round of licensing.

Like the Khazzan-Makarem, Abu Butabul and Habiba fields, the proposed blocks are currently within the PDOPDO concession area (Block 6). With Oman increasingly pinning its economic prosperity on gas, exploring and developing new reserves is a top priority for the ministry. Towards this goal, the government is enlisting the support of the world's leading oilfield firms with the financial and technical wherewithal to develop increasingly challenging reserves. Occidental (Oxy)Occidental (Oxy), named the operator of Block 62, is already a major contributor to Oman's oil and gas output. The company's Oman operations are concentrated at the giant Mukhaizna oil field in south-central Oman, the Safah field in northern Oman, and adjacent areas.

OxyOxy's fellow partners in the Habiba Block 62 development -- MubadalaMubadala and Oman Oil CompanyOman Oil Company -- are also among the shareholders in the Mukhaizna project alongside the government of Oman. Liwa Energy, a wholly owned subsidiary of MubadalaMubadala, has a 15 per cent stake in the Mukhaizna project. OxyOxy and the other partners in the project aim to invest over $4.5 billion to implement large-scale steam flood facilities with the objective of increasing production from the Mukhaizna field to 150,000 barrels per day by year 2012.

By Conrad Prabhu

© Oman Daily Observer 2008