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Research Oman Sultanate of Oman Profile Oil & Gas Directory Middle East - 2010 Sultanate of

Sultanate of Oman

Profile
Profile

Oil & Gas Directory Middle East - 2010

Sultanate of Oman

7.04

Gas Directory Middle East - 2010 Sultanate of Oman 7 .04 TABLE OF CONTENTS 1. Oman

TABLE OF CONTENTS

1. Oman in Global Oil Balance

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1.1 Oman Oil and gas resource Endowments

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1.2 Projections of Demand for Oman Oil and Gas

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1.2.1

Production, Consumption Reserves for Oil

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1.2.2

Production, Consumption Reserves for Gas

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2. Upcoming projects in Oil and Gas in Oman

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2.1

Construction projects awarded for oil and gas

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. Construction projects awarded for Pipeline in Oman 3. .

2.2

Pricing

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4. Competitive Overview

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5. Future Outlook of Oman Oil and Gas Sector

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6. CODE of ETHICS

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.1052

LIST OF FIGURES Figure 1: Oman Natural Gas Statistics

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Figure 2: Construction projects awarded value for Oil & Gas in Oman

Figure 3: Oman Blend Crude Prices

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. Figure 4: Percentage share of Key Upstream players

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LIST OF TABLES Table 1: Oman Oil Statistics

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Table 2: Oil & Gas Projects in Oman

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Table 3: Major Players in Oman

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Research Profile Oman Oil & Gas Directory Middle East - 2010 Sultanate of Oman 1. OMAN

Oil & Gas Directory Middle East - 2010

Sultanate of Oman

1. OMAN IN GLOBAL OIL BALANCE

The estimated proven oil reserves in Oman stood at 5.6 billion barrels (bbl) as of H1 2009. Oman's petroleum deposits were discovered in 1962, decades after most of its neighbors. Moreover, Oman's oil fields are generally smaller, more widely scattered, less productive, and pose higher production costs than in other Persian Gulf countries. The average well in Oman produces only around 400 barrels per day (bbl/d), about one-tenth the volume per well of those in neighboring countries. To compensate, Oman uses a variety of enhanced oil recovery (EOR) techniques.

Oman is not a member of the Organization of the Petroleum Exporting Countries (OPEC), though it is a significant exporter of oil. Most of Oman's crude oil exports go to Asian countries, with China, India, Japan, South Korea, and Thailand the largest importers.

The country's proven natural gas reserves are over 30 trillion cubic feet (Tcf). It's looking forward to increase natural gas production to meet rising domestic demand, provide stock for its enhanced oil recovery projects, as well as increase exports of liquefied natural gas (LNG). The late 2008 economic downturn, combined with improved efficiencies in production, have provided more time for Oman to come up with new supplies to meet these goals.

1.1 OMAN OIL AND GAS RESOURCE ENDOWMENTS

Ministry of Oil and Gas - Oman; manages the country's hydrocarbons sector, although all energy sector developments must receive approval from the Sultan of Oman. Petroleum Development of Oman (PDO) is the foremost exploration and production company in the Sultanate. It accounts for more than 90% of the country's crude-oil production and nearly all of its natural-gas supply. The Company is owned by the Government of Oman which has a 60% interest, Royal Dutch Shell which has a 34% interest, Total which has a 4% interest and Partex which has a 2% interest. The first economic find of oil was made in 1962, and the first consignment of oil was exported in 1967.

PDO also dominates Oman's natural gas upstream sector though the government enlists foreign companies in new exploration and production projects, such as BP, Petronas, and Occidental, especially in the more geologically complex natural gas reservoirs upon which hopes for most of Oman's future production growth are placed.

PDO has a total production capacity of 556,686 barrels of oil per day and 77,251 barrels of condensate per day.

Oman's government manages its investments in the downstream sector through the state-owned Oman Oil Company (OOC). The company was established in 1992 as a government-owned vehicle to pursue energy sector investments domestically and abroad. OOC's operations are financed by funds from the State General Reserve Fund (SGRF), which uses oil revenues to help diversify Oman's economy.

The Oman Oil Company directs state investment in downstream projects through such subsidiaries as the Oman Gas Company (OGC), which operates the country's natural gas transmission and distribution lines. LNG activities are primarily carried out by the Oman Liquefied Natural Gas Company (OLNGC), a consortium led by the central government (51 percent equity), Shell (30 percent), and several other foreign companies.

1.2 PROJECTIONS OF DEMAND FOR OMAN OIL AND GAS

Even though Oman is experiencing success with its EOR projects, estimates by the various industrial experts and agencies suggest that the Oman oil production to remain near 2008 levels through 2010, as increased production from EOR projects roughly matches declining production in maturing fields.

Enhanced oil recovery (EOR) projects are the primary reason for Oman's production increase in 2008. Currently underway, the Mukhaizna EOR project, operated by Occidental Petroleum and UAE's Mubadala, began steam-flood operations in 2008. The EOR project has proven successful in raising Mukhaizna's production from 10000 bbl/d in 2006 to approximately 50000 bbl/d in 2008. Current plans call for raising Mukhaizna's production to 150000 bbl/d by 2012.

PDO has plans for several other EOR schemes. Harweel field production could increase by 40000 bbl/d with a miscible gas injection EOR project in 2010. Qarn Alam's steam injection EOR project could increase production by 40000 bbl/d by 2011. The start up dates for these, and other EOR projects, has been delayed several times.

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R e s e a r c h Profile Oman Sultanate of Oman Oil & Gas

Sultanate of Oman

Oil & Gas Directory Middle East - 2010

Oman's long-term oil output targets depend greatly upon the success of its EOR projects. The Mukhaizna development plan involves a steam flooding process to recover heavy, viscous oil reserves difficult to recover with conventional methods. Aside from the substantial costs, the technique uses large amounts of water, a relatively expensive and scarce resource in the Persian Gulf. In addition, EOR schemes use substantial amounts of natural gas as a feedstock, leading Oman to redirect some of its natural gas supplies, formerly designated for export, to use at EOR projects around the country.

Oman's crude refining capacity is approximately 222,000 bbl/d. Mina al-Fahal, in operation since 1982, refines around 106,000 bbl/d of crude oil and is managed by the state-owned Oman Refinery Company. Sohar, in operation since 2007, refines about 116,000 bb/d of crude oil and is managed by Oman Refineries and Petrochemicals Company, which is owned by the Omani Ministry of Finance (75 percent) and OOC (25 percent). Sohar is linked by pipeline to Mina al-Fahal.

Oman continues to pursue the building of a large refinery and petrochemical complex at Al Duqm in southern Oman, which would be geared toward export markets. Under current plans, a joint venture of the Oman government and international investors would build a 200,000-300,000 bbl/d refinery, a crude oil export terminal, and several large petrochemical facilities.

The country also requires increased natural gas supplies to meet the growth in its domestic consumption as well as its enhanced oil recovery and LNG export plans

1.2.1 Production, Consumption Reserves for Oil

The year 2008 saw a slight increase in Oman's oil production Oman produced an estimated 760000 bbl/d of total oil liquids in 2008, about 6% more than 2007 levels. Of 2008's output, roughly 669000 bbl/d was crude oil, 88000 bbl/d was lease condensate, and the remainder consisted of natural gas plant liquids. During 2008, Oman consumed an estimated 80,000 bbl/d of oil, with net oil exports estimated at 680000 bbl/d.

Oman's crude output have increased during the H1 reversing a trend in production after several years of decline. The National Economy Ministry has announced that the Sultanate's average oil production rose 6.6% to 792,700 barrels per day in the first six months of 2009 compared with a year earlier.

Table 1: Oman Oil Statistics

Petroleum (Thousand Barrels per Day)

2007

2008

Total Oil Production

714.67

761.00

Crude Oil Production

710.36

757.32

Consumption

76.00

81

Net Exports/Imports

638.67

680

Refinery Capacity

85

85

Proved Reserves

   

(Billion Barrels)

5.50

5.50

Source: EIA International Petroleum Data - Oman Country Energy Profile (June 2009)

Oman's oil pipeline system is mostly focused on delivering crude oil to the country's only oil export terminal at Mina al-Fahal, near the capital Muscat. PDO operates the Mina al-Fahal facility, as well as the Main Oil Line that runs to the export terminal. PDO operates approximately 1,000 miles of oil pipelines throughout the country, according to industry sources.

1.2.2 Production, Consumption Reserves for Gas

Oman's natural gas production in 2008 is estimated at nearly 848 billion cubic feet (Bcf). By 2013, production volumes could reach 1.2 Tcf. Oman pacts with foreign companies to produce gas from technically challenging fields, such as the tight gas believed to be in the Khazzan and Makarem fields in Oman's central interior. The Khazzan and Makarem fields are estimated to contain significant volumes of natural gas; some estimates indicate that the two fields could nearly double Omani reserves. BP is currently developing the fields with the intent of achieving production in 2010.

Comparing with 2008; the country's gas production saw a modest increase of 0.2% to 530.14 billion cubic feet in the H1 of 2009.

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Research Profile Oman Oil & Gas Directory Middle East - 2010 Sultanate of Oman Figure 1:

Oil & Gas Directory Middle East - 2010

Sultanate of Oman

& Gas Directory Middle East - 2010 Sultanate of Oman Figure 1: Oman Natural Gas Statistics

Figure 1: Oman Natural Gas Statistics

EOR, Oman's economic diversification program, and the 2008 oil price boon to the Omani economy all drove natural gas consumption rates higher. Oman consumption in 2008 is estimated at 475 Bcf of natural gas, almost 25% more than 2007 consumption levels. By 2013 consumption volumes could reach 580 Bcf.

In 2008, liquefied natural gas (LNG) was Oman's sole source of natural gas exports. During 2008, Oman exported approximately

385 Bcf of LNG, nearly two-thirds of which went to South Korea, while the remainder went to Japan, India, Taiwan, and Spain. Oman has three LNG production trains with total annual liquefaction capacity of about 485 Bcf. Oman LNG operates two production trains with a combined capacity of approximately 320 Bcf. Oman's third train, Qalhat LNG, has a capacity of approximately 160 Bcf and is operated by a consortium that includes the Omani government, OLNGC, and several other companies.

A small amount of gas is imported via Qatar from the Dolphin pipeline. October 2008 marked the beginning of its Dolphin

imports, which at the end of H1 2009 amount to about 200 million cubic feet per day. In 2008, Oman imported approximately 12 Bcf from the Dolphin pipeline.

Oman's domestic natural gas pipeline system is controlled by the Oman Gas Company, although OGC has contracted the management of the network to a consortium of private companies. Oman's natural gas network spans about 1,100 miles, bringing supplies from production centers to the country's LNG terminals, power plants, and other domestic end users.

2. UPCOMING PROJECTS IN OIL AND GAS IN OMAN

The budget total of proposed Oil & Gas projects and Pipeline projects in the state of Oman is estimated to be more than $8.5 billion. The estimated value of construction projects awarded in the Oman's oil & gas and the pipeline sector for the year 2005 - 2010 is over $7.3 billion.

2.1 CONSTRUCTION PROJECTS AWARDED FOR OIL AND GAS

Oman is reviving its plans to build a refinery and a petrochemical plant after the projects were shelved last year due to a slowdown

in the global economy. The state-owned Oman Oil Company (OOC) and the Abu Dhabi sovereign wealth fund the International

Petroleum Investment Company (IPIC) have announced that they signed a memorandum of understanding (MoU) regarding the potential development of a US$7 billion refinery and petrochemical complex at Duqm, Oman.

The government announced plans at the end of 2006 to build the Duqm Refining and Petrochemical Complex, which would see the construction of Oman's third refinery at al-Duqm in the southeast of the country. The plan, which struggled to get off the ground because of rising costs, would include a 300,000 - 400,000 bpd refinery and a petrochemicals facility including a polypropylene plant with a capacity of 1.2 million to 1.5 million tonnes a year.

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R e s e a r c h Profile Oman Sultanate of Oman Oil & Gas

Sultanate of Oman

Oil & Gas Directory Middle East - 2010

Figure 2: Construction projects awarded value for Oil & Gas in Oman

projects awarded value for Oil & Gas in Oman Source: Ventures Middle East GCC & MENA

Source: Ventures Middle East GCC & MENA Projects Database (www.ventures-uk.com)

2.2 CONSTRUCTION PROJECTS AWARDED FOR PIPELINE IN OMAN

Five international firms have submitted their final bids for Oil & Gas Pipeline in Musandum; the biggest oil and gas project to be tendered in Oman in 2009. The UK's Petrofac, India's Engineers India Limited, South Korea's Hyundai Heavy Industries, Italy's Saipem, Hungary's OTF Contracting, and China's Sinopec all submitted bids for the estimated USD 500 million engineering, procurement and construction deal on October 2009.

The contract covers the construction of a 1 kilometer long pipeline from offshore production facilities at the West Bukha field, off the Strait of Hormuz to an onshore processing unit at Musandam. The plant is designed to handle 20,000 barrels per day of oil and 45 million cubic feet per day of gas.

Oman Oil Company, the client on the project will also ask the winning contractor to carry out civil works at the onshore site. These include major excavation and ground leveling works because the area is hilly and a 750 meters long jetty.

Contractors expect Oman Oil Company to award the contract in December 2009. If the state oil firm announces a winner, it will be the biggest oil and gas deal to be awarded in Oman in 2009.

The biggest deal to be awarded so far in 2009 came in July when the UK's Petrofac won USD 350 million deal to build a new gas compression system at the Kauther field in northern Oman.

Expansion projects for Oil & gas

Oman is undergoing several upstream and downstream expansion projects in order to capitalize on economic growth and potential demand. Some of the major ongoing/proposed projects in the oil & gas sector include the following:

Table 2: Oil & Gas Projects in Oman

Project Name

Duqm Refinery & Petrochemical Complex

Client

Ministry of Transport & Communications

Scope

Project calls for the construction of a complex that will involve a refinery and petrochemical plant, steam cracker, aromatics, polyethylene, polypropylene, naphtha splitter and other units located in the Wilayat of Duqm in Central Oman.The refinery is expected to be the Sultanate's third and will have dedicated export facilities and a capacity of 300,000 to 400,000 barrels of refined products per day and production capacity of 1.2

Project Value

(US Mn$)

7000

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Research Profile Oman Oil & Gas Directory Middle East - 2010 Sultanate of Oman Mabrouk Field

Oil & Gas Directory Middle East - 2010

Sultanate of Oman

Mabrouk Field Project

Petroleum Development Oman (PDO)

Project entails the full development of the Mabrouk Field. Production from the field will be increased to 15,000-20,000 barrels a day from 8,000 b/d. The scope of work involves drilling of 80 wells and the construction of a new production station and gather system. In addition to the extra crude production, the field will produce 1 million - 2 million cubic feet a day of gas, which will be delivered to the Saih Rawl gas processing plant.

1500

Harweel Cluster Phase - 2

PDO

The projects calls for the design and construction of two gas injection stations for the Zalzala and Sakhiya fields and an 8,000 cubic metre/day enrichment facility for either acid gas removal or as a sweetening plant for gas export.

960

   

The scope of work includes the installation of four

 

Saih Rawl Gas Depletion Project

PDO

electric gas compression trains, condensate recovery separators, a 140-kilometre-long condensate pipeline,

545

120-MW power station and a power distribution system.

a

Oil & Gas Pipeline in Musandum

Oman Oil Company (OCC)

The project calls for the construction of a 1 kilometre long pipeline from offshore production facilities at the West Bukha field, off the Strait of Hormuz, and an onshore processing unit at Musandam. The plant

500

is

designed to handle 20,000 barrels a day of oil and

45 million cubic feet a day of gas.

   

Project calls for the construction of steam injection

 

facilities and associated power at the Mukhaizna field.

It

will increase the output from the field to 150,000

Enhanced Oil Recovery at Mukhaizna

Occidental Mukhaizna, Oman

b/d from 8,000 b/d through extensive enhanced oil recovery programmes by 2011. The scope of works cover central production processing facilities, including eight treating trains due for commissioning between late 2007 and the first half of 2009, water de- oiling facilities with a water treatment plant and power plant, satellite production processing facilities, two of firms scope and two of optional scope, an oil tank farm, import and export pipelines to serve the field development and associated works. Each of the first four trains will have capacity of 18,750 barrels a

450

Depletion-Compression Project at Saih Nihayda

Petroleum Development Oman (PDO)

The scope of work entails the installation of compressor units supplied by the US' GE Oil & Gas, de-bottlenecking of the existing plant and various subsidiary works including the construction of gas substations.

350

Kauther Gas

 

The project calls for the construction of a gas compression system with associated facilities for Kauther gas field depletion compresion project in Oman.

 

Compression Project

Petroleum Development Oman (PDO)

350

Source: Ventures Middle East GCC & MENA Projects Database (www.ventures-uk.com)

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R e s e a r c h Profile Oman Sultanate of Oman Oil & Gas

Sultanate of Oman

Oil & Gas Directory Middle East - 2010

3. PRICING

Official crude oil prices in Oman are set by the Ministry of Petroleum and Gas (MPG). Since the beginning of 1985, a panel of experts has been setting crude prices on a monthly basis, in accordance with a spot market related formula adjusted retroactively to spot transactions during the previous month.

Based on data from the Dubai Mercantile Exchange (DME) the official selling price (OSP) for Oman crude in November will fall by $3.35 to $68.34 a barrel. The monthly OSP is the average of September's daily settlement prices for Oman futures contracts traded on the Dubai Mercantile Exchange in the United Arab Emirates.

the Dubai Mercantile Exchange in the United Arab Emirates. Figure 3: Oman Blend Crude Prices Source:

Figure 3: Oman Blend Crude Prices Source: Company Websites

Based on data from the Dubai Mercantile Exchange (DME) the official selling price (OSP) for Oman crude in November will fall by $3.35 to $68.34 a barrel. The monthly OSP is the average of September's daily settlement prices for Oman futures contracts traded on the Dubai Mercantile Exchange in the United Arab Emirates.

4. COMPETITIVE OVERVIEW

Oman's Ministry of Oil and Gas organizes the state's role in the country's hydrocarbons sector, although all energy sector developments must receive approval from the Sultan of Oman. PDO is the premier hydrocarbon exploration and production company in the Sultanate of Oman. It accounts for more than 90% of the country's crude-oil production and nearly all of its natural-gas supply. The Company is owned by the Government of Oman (which has a 60% interest), Royal Dutch Shell (which has a 34% interest), Total (which has a 4% interest) and Partex (which has a 2% interest). It had a total production capacity of 556,686 barrels of oil per day and 77,251 barrels of condensate per day as of Q1 2009.

day and 77,251 barrels of condensate per day as of Q1 2009. Figure 4: Percentage share

Figure 4: Percentage share of Key Upstream players Source: Company Websites

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Research Profile Oman Oil & Gas Directory Middle East - 2010 Sultanate of Oman The below

Oil & Gas Directory Middle East - 2010

Sultanate of Oman

The below table enlists the major players in the Oil & Gas sector of the Sultanate of Oman

Table 3: Major Players in Oman

   

Year established

Total production

Project Name

Activities

capacity

     

556,686 barrels of oil

Petroleum Development Oman (PDO)

Exploration, drilling and production of crude oil and gas

1937

per day 77,251 barrels of condensate per day

Oman Refineries & Petrochemicals Company (ORPC)

The government-owned Oman Refineries and Petrochemicals Company (ORPC) produces liquefied petroleum gas, kerosene, diesel, bunker fuel oil, propylene, naphtha, low-sulfur gas oil and granulated sulfur.

2007

222,000 barrels of refined products per day

Occidental Mukhaizna

Exploration and production of crude oil.

2005

50,000 barrels of oil per day

Oman Oil Company

Investment in oil and gas companies and projects; operation of power plants and aromatics petrochemical plants; provides oil and gas drilling; oil storage, logistics and well services

1996

2,616,700

Shell Development Oman

It provides a central point for co-ordination of all Royal Dutch Shell activities and interests in the Sultanate of Oman.

NA

NA/

Daleel Petroleum

Production of oil; drilling and exploration of oil and gas

 

25,000 barrels of oil per day

Company

2002

     

It has net proved

Petrogas E&P LLC

Exploration and production of oil and gas reserves

1999

developed and undeveloped reserves of around 35 million barrels

Source: Company Websites

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5. FUTURE OUTLOOK OF OMAN OIL AND GAS SECTOR

Oman needs to boost oil output in order to plug a hole in its revenues from the decline in average oil prices since last year. The average price of the Omani oil fell by 50.5% during the H1 2009 to $45.72 a barrel, against $92.39 a year earlier.

According to Oil and Gas Minister Dr Mohammed bin Hamad al Rumhy Oman's oil output is set to increase significantly during 2010 on the back of the hydrocarbon sector's continuing healthy performance. Production is projected to increase to between 850,000 and 900,000 barrels/day (b/d), maintaining a year-on-year trend in output growth. This jump compares with a current output of around 805,000 b/d for 2009 (at the end of October), entailing a 6.5% increase over the 2008 output of 756,000 b/d, and a 13% rise over the 2007 output of 710,000 b/d.

The upbeat hydrocarbon projections for 2010 made by the country's Oil & Gas Ministry further underscore continuing successes by oil producers in ramping up output. PDO is expected to end the year at 555,000 b/d (excluding condensate), Oxy at around

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Oman

R e s e a r c h Profile Oman Sultanate of Oman Oil & Gas

Sultanate of Oman

Oil & Gas Directory Middle East - 2010

140,000 b/d, and Daleel Petroleum around 22,000 b/d, which is very encouraging for the country's oil sector. Rising production is seen as proof that the government multi billion dollar investment programs to reverse years of declining output is finally paying dividends. Petroleum Development Oman (PDO) is planning to treble production at the Amal oilfields in the southeast through the use of steam-injection technology. It will boost production at Amal East and Amal West by drilling 300 new wells over a 14-year period. The first phase of the development is due to be completed by 2012.

Oman has continued to attract foreign investors, despite the slow global market condition; attributing this appeal to the healthy state of the Sultanate's oil and gas sector and its prospects for growth in the future. The Oil & Gas ministries has floated a few tenders in the middle of the 2009, and are in discussion with some of the interested companies, the results of which will be known before the end of 2009. On the gas front, Oman continues to meet the demand of customers as gas availability is currently (at the end of October 2009) well over 99.8%. However production challenges has continued to remain a barrier to boost gas output. It needs to be smarter in the way it develops the gas fields by selecting the right technology for the right field.

The uptake of gas is projected to increase during end-2009 and early 2010, following a period of lower demand on account of the global slowdown. The gas sector, like oil, is healthy. However, unlike oil, the demand for gas, especially the LNG buyers, was lower in 2009 than that of 2008. For this reason, the country had to reduce our gas production, mainly that of PDO.

An abundant supply of energy, relatively low labor costs and inexpensive long-term use of land for industrial purposes are just a few more reasons to do business in the Sultanate. Natural resources offer a variety of industrial possibilities. Oman has large reserves of natural gas that already feed major projects like Oman LNG. This plentiful supply of gas can be made available as a source of energy to various polyolefin and aluminum projects, or as feedstock to other small industries.

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