Oman to woo back Big Oil this year, minister says

Oman, the largest Middle East oil producer outside Opec, plans to award contracts to oil majors such as BP, Shell, Total and Eni for hydrocarbons exploration over the next six months, as the sultanate looks to woo Big Oil back to boost production.

The contracts would be a mix of bilateral contracts signed with the majors as well as awards from a bid round Oman concluded last year, Minister of Oil and Gas Mohammed Al Rumhy told The National.

The sultanate’s Oil Ministry had in 2017 offered four blocks in a licensing round to attract back international oil and gas companies. The country would look to engage with Chinese and Indian energy players to boost domestic output, he said.

Oman saw several major oil companies exit its various concessions in the last few years as low crude prices made profitability challenging in the country’s maturing fields. The sultanate has one of the Arabian Gulf’s highest breakeven prices for oil, with its rough terrain and unconventional reserves making it complicated and expensive to explore for and produce hydrocarbons.

Earlier this month, Indian Oil Corporation picked up a 17 per cent stake in the Mukhaizna oilfield from Anglo-Dutch major Shell for $329m.

The onshore field is one of the country’s largest, and contributes up to 13 per cent of the country’s production.

As low oil prices squeezed budgets, Oman began to shift priorities and invest downstream in order to compensate for the country’s lacklustre upstream sector. It wanted to profit from the sale of complex crude products.

The sultanate began development of greenfield refining and petrochemical projects across its port cities and undertook expansion of its existing downstream facilities.

One such development, the $6 billion Duqm Refinery complex, the country’s largest single-phase project being developed by Oman Oil Corporation in joint venture with Kuwait Petroleum International, will see a foundation ceremony this week, Mr Al Rumhy said.

The planned 230,000 barrel-per-day refinery awarded engineering, procurement and construction contracts in three packages to consortiums last year.

Oman, which has sparse gas reserves, is also looking to ramp up production of the fuel. Its tight Khazzan gas field, which came online last September, is delivering a billion standard cubic feet per day of gas and is set for expansion of phase two of the project this year.

The expansion of the adjacent Ghazeer field will add a further 500 million cf/d of gas to Oman’s grid.

The sultanate is also working on developing a gas pipeline with Iran, which has one of the highest reserves globally.

Work on the pipeline, estimated to deliver 10bn cubic metres of natural gas annually in a 25-year deal, was “progressing”, said Mr Al Rumhy.