Global Arab Network | Oman: Oil and gas investment generates 7.4% production growth

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Oman: Oil and gas investment generates 7.4% production growth

Monday, 22 February 2010 15:06

The Omani oil and gas sector’s significant investment in enhanced oil recovery (EOR) techniques has reaped rewards for the second year running, as newly released figures show the Sultanate’s daily production rose once again in 2009.

Oil output increased to an average 812,500 barrels per day last year, a 7.4% hike on 2008 production. The figures represent the second year of sustained production growth in the sector, reversing a trend of decline which first set in during 2001 when Omani oil production hit its peak of an average 956,000 bpd. According to media reports, the government hopes to increase production in the sector once again in 2010, hitting a production target of between 860,000 and 900,000 barrels per day.

With state-owned Petroleum Development Oman (PDO) – the Sultanate’s largest oil producer – reporting to local media recently that it expects to keep production for 2010 neutral at an average 540,000 to 560,000 bpd, the extra growth will need to come from smaller operators and new concessions. In that spirit, the undersecretary to the Ministry of Oil and Gas, Nasser bin Khamis Al Jashmi, announced February 15 that the government anticipates awarding a total of 11 new oil exploration and production contracts in 2010.

While the lead time of these contracts means any discoveries will not contribute to new production for at least three to four years, contracts signed in recent years are in the process of coming to fruition in 2010. Among some of the smaller companies engaged in specialised exploration in Oman is Harvest Oman, a local subsidiary of Harvest Natural Resources, an independent energy company operating in a number of countries including Venezuela and the US. Harvest signed an exploration and production sharing agreement with the Omani government last April to search for non-associated gas and condensate in the large Al Ghubar-Qarn Alam concession. Harvest announced last week that it intends to drill two exploratory wells in 2011 with a view to beginning production.

The Al Ghubar-Qarn Alam concession area is proving to be a successful venue for EOR techniques and new exploration. PDO announced recently that it had discovered three new fields in 2009 on the basis of four appraisal wells. The most promising of these new discoveries is located at Al Ghubar South, near existing production at the Al Ghubar-Qarn Alam site.

According to local media reports, the reserves at the field could be in excess of 1bn barrels, though they are of a heavy, viscous variety of crude. PDO announced that a successful trial had already been carried out to test the feasibility of production based on EOR techniques (in this case steam injection), and a team was currently being put in place to fast-track the field.

Other fields were discovered at Dafiq West in the north and Anbar in the centre of the Sultanate, while a large gas deposit was found at Khulud in the north concession. The gas deposit again represents a challenge, being located at a depth of more than 5000 metres, though it is apparently in tight reservoirs with low permeability.

As traditional reserves of easily accessible light crude continue to decline throughout the region – and indeed the world in general – Oman’s successful production renaissance, based on targeted exploration and sustained investment in EOR, is likely to be imitated by other oil producers. While often costly to implement, EOR is demonstrating that countries like Oman can delay a rapid decline following the maturation of their major oil fields, avoiding the spectre of a bell-shaped slump predicted by the Hubbert peak oil model.

As the global economy continues to recover, that investment is also likely to prove more profitable in 2010 than it did in 2009; Oman achieved an average price of $56.67 per barrel last year, down 43.9% on 2008 figures. With the spot prices for both WTI and Brent currently above the $75 mark, 2010 will likely see a significant improvement on that figure.

Global Arab Network

This article is published in partnership with Oxford Business Group