MUSCAT -- Petroleum Development Oman (PDO) aims to press ahead with its planned oil and gas investments despite the sharp downturn in international oil prices, John Malcolm, Managing Director, announced here yesterday. Addressing journalists at PDO's annual media briefing, he said the company, which contributes the lion's share of Oman's oil output and almost all of its gas production, will work to offset the effects of the crisis through a process of cost reductions and improved efficiency.
"The oil and gas business has always been conducted in a volatile market and, as a result, our decision-making has always erred on the side of prudence. Our long range planning naturally goes beyond any short term price fluctuations. We continue to work actively on developing a wide range of new projects which will ensure our ability to continue producing oil and gas at a sustainable level for the coming decades.
These projects represent a portfolio of options for our shareholders as we go forward. To date, no planned project has been cancelled. Quite the opposite," Malcolm declared. The company is hoping to achieve cost savings of as much as 10 per cent partly through internal cost reduction measures, as well as by capitalising on the benefits resulting from lower commodity prices and the changed market conditions, which he noted, would impact positively on PDO's capital and operating costs.
Notwithstanding the oil price slump, PDO is moving ahead with the ongoing implementation of its three big-ticket enhanced oil recovery (EOR) projects, Malcolm said. All three ventures -- the miscible gas project at Harweel, the steam injection project at Qarn Alam, and the polymer injection project at Marmul -- remain economic even at current oil prices, he stressed.
Furthermore, the company's board is also due to meet in the coming months to weigh a proposal for investment in PDO's equally capital intensive Amal steam project, the managing director said. Giving his assessment of PDO's performance during the past year, Malcolm described 2008 as a challenging, but successful year. Oil production was on target at over 556,000 barrels of oil per day (bpd), which was well within the company's target range of 540,000-560,000 bpd, he said.
Combined with condensates -- the valuable hydrocarbon liquids produced along with gas, this output increased to 633,000 barrels per day (bpd) in 2008 compared to 607,000 bpd 2008 a year earlier. PDO's total hydrocarbon production for 2008 was in excess of one million barrels a day of oil equivalent when included with natural gas output. "This was achieved despite difficult operating conditions, notably an overheated contracting market that led to delays in obtaining resources both in terms of manpower and equipment," Malcolm noted.
Among the notable highlights of the year, the managing director said, was the overall increase in natural gas and condensate output, which stood at 467,000 barrels of oil equivalent a day. In 2008, condensate output grew from 48,000 bpd to over 77,000 bpd, an increase of more than 50 per cent. This was largely due to the first full year of operations of the Kauther gas plant, which came on stream in late 2007, he said.
While oil output during 2009 is projected to remain at current levels of 540,000-560,000 bpd, condensate production however is poised to climb to 80,000-90,000 bpd. PDO's Gas Directorate, which in October celebrated three decades of uninterrupted gas supply to the nation, is implementing a range of new projects to sustain the company's gas production capability over the next five years.
Following the commissioning of the giant Kauther gas plant in November 2007, a new field development project at Haban was successfully brought on stream. Three new compression projects were also completed at Barik, Yibal and Saih Nihayda, Malcolm said. In other successes of the past year, PDO completed its upgrade of the Musallim field, resulting in a tripling of the field's oil output. One of many waterflood developments being pursued by PDO, the Musallim project will sustain the company's oil production while the EOR projects are completed and come on stream over the coming years. At Musallim PDO drilled a total of 50 new wells and built a new plant capable of handling 130,000 bpd of oil and water.
Meanwhile, development of its three major EOR projects are progressing at full stream, the Managing Director said. At Harweel in south Oman, PDO is making solid headway in the implementation of the world's biggest miscible gas project. When fully commissioned, the plant will contribute more than 40,000 bpd of additional oil output. Equally ambitious is PDO's steam injection project in Qarn Alam, in central Oman, which will contribute an extra 40,000 bpd of new oil.
The project involves the drilling of some 130 wells and installing facilities to treat water and inject around 18,000 tonnes per day of steam. A key highlight of the project is the installation of waste heat recovery steam generation units, which will help save the company over 50 million cubic feet of gas per day, as well as reduce the project's carbon footprint. At Marmul in south Oman the company is preparing to commission a polymer injection unit, which will add a further 10,000 bpd to its oil output.
By Conrad Prabhu
© Oman Daily Observer 2009
