oil and gas: Solving the energy crisis

When Muscat announced late last year that it was to offer increased upstream opportunities to international oil companies (IOCs), it represented an acceptance that after years of battling declining oil production, the time had come for a change of approach.

Lacking the abundant hydrocarbon riches of some of its neighbours, Muscat admits to the danger of being caught at a crossroads as it seeks to address a growing gas supply deficit that is expected to top 1,000 million cubic feet a day (cf/d) by 2010. Adding to the tight situation is a sizeable drop in output from the country's maturing oil fields.

Concerns were raised in 2002 following a 100,000-barrel-a-day (b/d) fall in oil production to 770,000 b/d over the preceding two years. Sustaining output remains a real challenge for the state-run Petroleum Development Oman (PDO), which produces 90 per cent of the country's oil.

'This is the fourth year in a row that, for all intents and purposes, we have met our oil production target,' said PDO managing director John Malcolm at a briefing in February. 'Our commercial success rate still ranks among the best in the world. But like all our operations, exploration is becoming more complex.'

PDO's decision this year to abandon specific production forecasts in favour of target ranges reveals much about the uncertainty that hovers over Oman's energy sector.

Oman produces oil and gas from 3,750 wells in 120 fields, operating 16,000 kilometres of pipelines, numerous processing plants and three gas processing plants. In 2006, in a bid to sustain production, it contracted 36 drilling rigs to sink 249 oil wells, more than any other Middle East national oil company (NOC).

Much of the sultanate's hopes revolve around a series of complex projects based on enhanced oil recovery (EOR). EOR technology involves adjusting the fluid properties in the reservoir with steam, gas or chemicals to make oil flow more easily and increase recovery.

Oman's Oil & Gas Ministry plans to spend $10,000 million over the next five years on boosting production from its ageing oil fields, with one-third going on EOR projects.

PDO hopes that the increased investment programme will deliver an average of about 570,000 b/d over the next five years, down from about 600,000 b/d in 2005. PDO's EOR projects at Harwel, Qarn Alam and Marmul will come on stream in 2009 and are expected to account for 20 per cent of that production.

Much of the initiative for the EOR exploration drive has come from the creation of a new research centre in the sultanate, in partnership with the UK/Dutch Shell Group. The centre's creation marks PDO's realisation that one of the biggest challenges facing the company's EOR projects is training its people to operate them efficiently.

PDO spokesman Gregory Greenwell admits there is little expertise for the project from within its own ranks. 'PDO aims to rectify that situation through extensive in-house training programmes set up in co-operation with Shell that will give Omanis the necessary knowledge about EOR,' he says. 'The company has also been sending selected members of its staff to Shell companies to gain specialised knowledge.'

Greenwell says PDO hopes in time for the centre to become a regional hub for countries forced to consider more complex exploratory techniques. 'Oil fields, even prolific ones, are eventually going to need smarter thermal, chemical or gaseous means of extracting oil,' he adds. 'It will not be long before people from all over the region will be beating a path to Oman to learn how to implement and manage EOR-based field development plans.'

The details of the innovative NOC/IOC arrangement are yet to be ironed out. 'The government of Oman feels that if you use PDO facilities and staff [for the project], any revenues should be given to PDO or the government,' the source says. 'Shell says this is a S