Oman’s announcement on 13 May that it has signed two memoranda of understanding (MoU) with Shell and Total for upstream and downstream gas projects provides significant impetus to the sultanate’s gas exportation strategy.
Oman’s MoU with Shell covers upstream gas exploration and development, a gas-to-liquids (GTL) plant in Duqm port, liquified natural gas (LNG) and renewable energy projects. The MoU with Total will see the French energy major partnering with Shell to develop recent gas discoveries in the Greater Barik area of central Oman, a venture that state-owned Petroleum Development Oman (PDO) is expected to enter.
“The separate MoUs signed between the government of Oman, Shell and Total will help secure Oman’s longer-term gas supply,” says Liam Yates, research analyst, Middle East & North Africa upstream, at consultancy firm Wood Mackenzie..
“The proposed upstream development between Shell (75 per cent) and Total (25 per cent) is expected to produce 500 million cubic feet of gas a day (cf/d) initially [from the Greater Barik area], potentially rising to 1 billion cf/d later. This new development will help to offset longer-term decline from Petroleum Development Oman’s existing production in the area.”
Oman has been able to export small quantities of liquefied natural gas (LNG) to customers in Asia, although rising industrial and household demand for power at home has led to Muscat having to import some gas from Qatar through the Dolphin pipeline.
The Greater Barik gas discoveries are located close to BP’s Khazzan gas project in central Oman.
The Khazzan gas project, supplies from which came online in September last year, produces 1 billion cf/d and has proved to be an economic boon for the sultanate.
When brought online in 2020, Khazzan phase 2, which encompasses the Ghazeer field, will add another 500 million cf/d of gas, meaning Oman may be capable of meeting its domestic gas demand and earning revenues through exports.
“Shell and Total will commercialise the gas from Greater Barik separately, with Shell and partner [state-owned firm] Oman Oil Company constructing a gas-to-liquids plant in the port of Duqm on Oman’s east coast,” Yates says.
“Total will construct a small-scale liquefaction terminal at the [northern] port of Sohar, with the intention of establishing a regional LNG bunkering business. This follows the French major’s announcement in December that it would supply the shipping company CMA CGM with 0.3 mmtpa [million tonnes per annum] of LNG over 10 years,” he explained.
While “the new agreement demonstrates Shell and Total’s long-term commitment to Oman through establishing an integrated gas business in the country,” according to Yates, Oman continues to press ahead with its gas development plans.
In March PDO announced a sizable gas find in the northern part of its concession area in Block 6 of Oman’s Mabrouk field, worth an estimated 4 trillion cubic feet (tcf) of recoverable gas and 112 million barrels of condensates.
Five wells have already been drilled in the Mabrouk field, all of which have encountered gas. Of the five, one is already producing and a second will be brought online soon. Work is also progressing on an two additional appraisal wells.
According to Oman’s Oil Ministry, the sultanate’s total oil and condensate reserves stood at 4.74 billion barrels at the end of 2017, along with gas reserves of 24.96 tcf.
If, along with the BP Khazzan gas project phases 1 and 2, gas assets in the Greater Barik and Mabrouk areas come online and start contributing to the country’s gas grid, the surplus output will mean Oman is a net gas exporter in the region – a feat not many Middle Eastern countries have been able to achieve.
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