Oil & Gas sector in Oman
For the last five decades oil and gas has been Oman’s key economic driver and is likely to remain so for the foreseeable future.
Of Oman’s estimated potential of over 60 billion barrels of oil in place only 8.7 billion barrels have been utilised up to December 2011. With current levels of oil price and new technology constantly becoming available, Oman will be able to develop more fields.
The Government has been investing in long-term oil recovery programmes, improving infrastructure and broadening the country’s industrial base. Oman has signed a number of exploration agreements recently, including four offshore blocks.
Oil and gas investments are projected to exceed $100 billion over the next ten years, of which $40 billion will be in gas-related areas. Oman’s long-term sector strategy extends all the way to the year 2044 and even beyond. As a result of these investments, production is expected to be sustained over the long term at approximately 900,000 barrels per day of oil and 3 billion cubic feet per calendar day of gas, in 2012 and beyond.
The sultanate’s oil and gas sector is one of the most mature industries in the region, with the national oil company Petroleum Development Oman (PDO) focusing on enhanced oil recovery (EOR) schemes to maintain output at depleting fields.The company will also build a series of depletion compression projects to enhance flow rates from its gas fields. Operators in Oman are expected to award about $1.59bn in major engineering, procurement and construction (EPC) contracts in last six months 2012, compared with just $390m in the first half.
Future Plans: With its oilfields maturing at a rapid pace, PDO is introducing a range of increasingly complex technologies to extract oil. These include thermally assisted gas/oil gravity drainage and steam injection and polymer flooding, alkaline/surfactant/polymer flooding and microbial EOR. Rising volume of water seeping into reservoirs expected to increase by 35% in the next ten years also presents further challenges. Investment areas approved during the current five-year plan (2006-2010) include drilling of exploratory and developmental oil wells, upgrading facilities and utilities of basic infrastructure, and conducting related studies. PDO’s ambitious savings and production targets over the next few years and will focus on six key priority areas:
Well and reservoir management
Drilling and engineering project
Contracting and procurement
Following is a selection of projects currently underway.
SAIH NIHADYDA CONDENSATE PLANT
$100m plant to handle 4500 CuM/day. Build contract awarded in July 12, completion by end-14.
MUSANDAM GAS PLANT
$480m gas separation and oil treatment plant and a gas fired power plant.
EPC Contractor: Hyundai awarded in March 2011, completion within 36 months.
DUQM GAS PIPLELINE
230 km proposed 36” dia. pipeline from Saih Nihayda in central Oman to Duqm which to cater to demand at DSEZ. Bids currently under evaluation, 25 bidders in the race.
LEKHWAIR GAS FIELD DEVELOPMENT
$250EPC contract for sour gas treatment plant awarded in October 11, completion by late 2014.
GAS LOOPLINE PROJECT
$40m, 32-inch dia, 85 km pipeline to supply gas to the industrial units in Salalah
EPC bids due in by 27 Jul y, award by Nov 12 and completion end-2014.
ZAULIYAH FIELD DEVELOPMENT
EPC contract to process 1.2m cm of raw gas including gas processing trains, sulphur recovery unit and associated works. 14 bids under evaluation.
BARIK LOOP PIPELINE
$50m, EPC contract to build 157 Km, 20” carbon steel pipeline. Bids due in by 15 July, award by end-2012; completion in 30 months.
NIMR-G AND KARIM WEST WATER FLOODING
$96m Water flooding facilities at the two PDO oil fields in Central Oman. Contract awarded in June 2011, completion in 36 months.
ZAULIAH GAS PLANT
$200m (est) Gas handling facilities, process trains, pipelines and associated works. EPC Tender issued in October; award by mid 2012 and completion by 2014.
SAIH RAWL GAS DEPLETION/COMPRESSION PLANT PHASE 2
Project involves installation of 76 MW of Gas Compression with 4 trains and modification of Condensate Handling System. RO 90m EPC contract awarded in Aug 12.
The 2000-hectare Sohar industrial park and the Port of Sohar feature quays specialising in handling GP cargo and liquid bulk cargoes. Those facilities support the following core petrochemical industries among other large industries. The government are looking specifically for downstream industries to feed from these industries, and also for supply industries, or for companies in associated service sectors.
DUQUM PETROCHEMICALS COMPLEX
$6 Bn, 230K BPD Refining and Petrochemicals complex
Promoters (50/50): International Petroleum Investment Company (IPIC), UAE and Oman Oil Company. Consultants: Shaw Energy & Chemicals appointed in Aug 12.
CAUSTIC SODA & EDC COMPLEX AT SALALAH FZ
$500m, 1000 tpd Caustic Lye plant and a1231 tpd Ethylene Dichloride plant.
Construction bids under evaluation, commissioning by mid-2014.
SOHAR REFINERY UPGRADE
$1.8 billion expansion to upsize capacity from 116400 to 187774 bpd. Work to begin in 2013; completion by 2015. EPC Bids from 9 pre-qualified companies under review.
Oman plans to invest more than $40 billion in gas exploration and production activities over the next 10 years. Further demonstrating the ongoing push by the Government to attract new investment in hydrocarbon sector, in November 2012 the Ministry of Oil and Gas invited bids for exploration licenses in a total of seven blocks offshore and onshore Oman; bids are due in by January 31, 2013. These blocks include three deep offshore blocks 18, 41 and 59, while the others 43A, 48, 56, and 57 are all onshore. Significantly, three of the four onshore blocks have either proven hydrocarbon resources or are located in the vicinity of major producing fields.
CC Energy Development (CCED) started producing oil at the rate of 14,000 barrels a day (from block 3 and 4) beginning last year. Occidental and Daleel have also further enhanced their production levels during the past few years.
PetroTel (USA) last year received a license for block 40 offshore Musandam in the north of Oman. This is PetroTel’s second concession here, having acquired the adjoining block 17 two years ago. PetroTel has committed to invest around $35 million during the appraisal phases.
Another production sharing agreement was signed with Allied Petroleum Exploration (APEX) Canada, for the development of block 36 in Dhofar region. This represents Allied’s first hydrocarbon province in the Middle East region.
BP was awarded a concession in January 07 to develop Khazzan and Makaren blocks, two natural gas fields in Block 61 spread over an area of 2500 Kms close to the existing gas fields of Saih Nihayda. Combined gas initially in place of these two fields could run to over 10 trillion cft of tight gas located. BP’s initial output is expected to be around 20 m cft/day which will go up to 50 m cft/day. It will also produce 2000 cft/day of condensate. Pending final negotiations of the Product Sharing Agreement with MoG, Production is due to start by 2013.
Getting into the market
The market place is crowded, but work is available in all segments of the sector. Small, niche area operators tend to take up specialised product lines and work. The country relies heavily on imported products. Most large contractors have developed in-house sourcing or trading capabilities that complement their line of activities. This allows them a degree of control over supply, delivery, pricing and, in general, an edge over the competition.
The market is import-oriented, highly competitive and promotes an ‘agent’ culture. The success of a product, to a great extent, depends on the agent. Several major end-users as well as the Omani Commercial Law encourage vendors to engage a registered local agent. An amendment to the Agency law has removed the requirement for exclusive agents. There is no standard format for agency agreements. However, once in place, representational arrangements can be difficult to get out of.
About a dozen or so business groups – through some 400 or so associates, divisions and subsidiaries- dominate the market and control the trade economy. Prominent among these are: Suhail Bahwan Group, Saud Bahwan Group, Omar Zawawi Establishment (OMZEST), Zubair Enterprises, Khimji Ramdas, W J Towell, Tawoos (Renaissance Group), Mohsin Haider Darwish (MHD), and Galfar.
The UAE is Oman’s largest trade partner accounting for almost 30% of the trade volume. UAE exports include direct imports by Omani traders as well as re-exports by UAE traders. It is believed that both of these have a substantial British content.
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