Oman is pursuing a gas development strategy that aims to speed up the rate at which discoveries are appraised and brought into production, according to Oil Minister Muhammad al-Rumhy. In an exclusive interview with MEES , Dr Rumhy said Omani policy-makers were now debating how to build on the present strategy of ring fencing gas prospects and discoveries in PDO-operated Block 6 and handing them out to companies such as BG and BP. While BG recently opened a regional office in Muscat to coordinate the development of Block 60 (MEES , 8 May), BP is about to sign for the development of the Khazzan-Makarem gas field (MEES , 13 November). Asked about gas reserves estimates for the field, Dr Rumhy said that an accurate reserves picture would only be available once BP had completed field appraisal. BP is asking for a five-to-six-year appraisal period. We have agreed to this and at the end of the period they will formally declare commerciality that is, the time when we will really know exactly how much gas there is, adding that initial estimates of the tight gas field indicated reserves could range from 2 tcf to 30 tcf. We could double our gas reserves or increase them by just 10%, so you can see the uncertainty here, Dr Rumhy said.
In Block 6 where the government holds gas rights and PDO is the oil concession-holder, the ministry is considering how to build on the two areas outsourced to date. So far we are not intending to offer exploration rights. We want to look for areas that have already been explored and assign them, he said, emphasizing that these were not just prospects but firm discoveries. Outside Block 6, in the open areas, recent awards gave concession-holders gas rights, providing strong incentives for gas development, he said. Asked whether the existing strategy would deliver the gas production required, Dr Rumhy said the government wanted to shorten the period from discovery to appraisal and development: What we really want is the current strategies to speed up what we discover. This field that we are on the verge of signing with BP was discovered more than five years ago. We have not fully developed it. So that is why we decided to bring a big player like BP.
Dr Rumhy acknowledged that growing regional demand for gas and the lack of major regional discoveries in recent years had changed the face of the gas business and the market for domestic gas in the Middle East. But he said Oman accepted the changing realities of gas pricing in the region. When asked how Oman viewed the prospects of importing more expensive Qatari gas under the terms of the Dolphin project, he said: We think its true that the gas price structure will see changes in the future, both for local consumption and exports. A couple of years ago $1.30/mn BTU was perceived to be very expensive. Today, you give me $1.50/mn BTU and I will buy it any time. And I think the price will keep on changing unless a lot more gas is found in the region and we have an abundance.
Dominant EOR Role In Oil Upstream
In terms of oil production, the minister said that enhanced oil recovery (EOR) projects at Mukhaizna and at the Harweel cluster in the south of the country were expected to start bearing fruit from 2009, reversing the output declines that will be seen up until then. Current total liquids production (PDO, plus the smaller operators, plus condensates) is running at 740,000 b/d with exports above 620,000 b/d. Dr Rumhy said the government expected production to go slightly lower in 2007. However, with EOR and other non-conventional methods dominating future oil development, prospects from the end of the decade onwards were better. Noting that PDO was outsourcing its marginal fields for other companies to develop, Dr Rumhy said that driving costs down was a key element of developing marginal fields. On some of these fields, we are looking for a contractor who can drill a well for $500,000 instead of $900,000 we are looking for participants who can do things at a low cost. This is a major objective and at the same time will increase oil production overall, he said. Dr Rumhy added that EOR techniques would likely dominate Omans future oil production. We have come to the conclusion that we need to focus more on unconventional oil production than the conventional methods. At more and more of our oil fields, including the older fields such a Marmul and Omraan, we are looking at how we can use EOR to increase the recovery factor and production, he said.
Al-Duqm Refinery Plans
In terms of the downstream sector, Dr Rumhy said Omans planned refinery/petrochemicals complex at al-Duqm was focused more on petrochemical production than petroleum products (MEES , 11 December). We dont intend to maximize gasoline and gas oil exports, but want to build a refinery that will produce olefins so that we can establish aromatics and polyolefins plants, as we have done at Sohar, he said. Dr Rumhy went on to say that the ministry had recently launched a feasibility study for the project aimed at optimizing the oil barrel whether marketing crude, products or petrochemical products. He said the government had yet to make a decision on the size of the plant and the commercial arrangement. We may let go and let Oman Oil Company (OOC) do it they would normally bring a foreign partner, he said. The planned complex, which will start-up in 2012, will use Omani crude but is not expected to cut present export rates, since the incremental crude produced by the Mukhaizna EOR project and PDOs Harweel cluster will more than cover its requirements, Dr Rumhy said.
