BP has asked for the contact details of companies interested in building production and export facilities at the Khazzan tight gas project in Oman after the company agreed a retail gas price with the Muscat government.
The UK energy major will select interested companies before tendering engineering, procurement and construction (EPC) contracts for some of the $15bn scheme’s major packages at a later stage.
BP is seeking companies capable of constructing gas production well site facilities, a gas gathering pipeline system, a gas export pipeline, and water disposal pipelines, asking for contact details for the various packages by mid-July.
These requests were issued after the company reached an agreement with Muscat on the overall commercial framework of the Khazzan project as it continues with its ongoing drilling programme at the Block 61 site in north-central Oman.
The two parties have been negotiating for months over the retail price of the gas, which will be more costly to extract than conventional reserves due to the requirement of unconventional drilling and stimulation techniques. Gas from Oman’s existing gas sources, largely produced by government-controlled Petroleum Development Oman (PDO), is sold to the domestic market at artificially low prices.
“This commercial agreement, details of which are confidential, provides a strong basis for BP to move ahead toward a final investment decision on Khazzan, which we hope to accomplish by the end of 2013,” says a BP spokesman. “The next steps include working with the government to award key contracts for full field development.”
The final investment decision will pave way for a 30-year partnership on an operation expected to produce about 1 billion cubic feet a day (cf/d) of sales gas by 2017-18, boosting Oman’s gas supplies by a third. Khazzan, which is located in the Block 61 concession in Ad Dhahirah governorate, west-central Oman, is one of the world’s first greenfield tight gas projects. The reserves are trapped at 4.5-5km below the surface and because the gas does not flow to the surface naturally, BP will have to hydraulically fracture the formations to release the gas.
BP plans to drill about 300 wells at the field over a 15-year drilling campaign and has requested companies interested in fabricating and constructing gas production well site facilities. About 35 well sites will be constructed to support the first gas requirements in the fourth quarter (Q4) of 2016, with an additional 15 needed to support operations through to the end of 2017. The well site facilities include all equipment and utilities needed to deliver well fluids from the well head to the gas gathering system. Construction is expected to start in the Q4 2015.
A separate package for the construction of the gas gathering pipelines will cover a large, dispersed, buried gathering system to transport multiphase gas-condensate from the well sites to the proposed Khazzan central processing facility (CPF). It will comprise of over 400km pipelines, with construction starting on the first 200km in Q1 2014 to support the first gas requirements in 2016.
BP also asked for details from companies interested in building the gas export pipeline to transport sales gas from the CPF to the Omani market. The package will connect Khazzan to the gas network at Saih Nihayda via a 60km, 36-inch pipeline. Construction is expected to start on the export pipeline in Q1 2015 with completion set for Q3 2016.
Additionally, the company plans to build two separate water disposal pipelines to transport produced water and reserve osmosis reject water from the CPF to disposal wells. These pipes will be built between Q1 and Q3 2015.
Once BP has received contract details from companies interested in the four packages in mid-July, the company will issue an expression of interest (EOI) documents before floating tenders at a later stage. BP has already received several bids on the project’s CPF, which is likely to be the largest package awarded for the $15bn megaproject, according to a source close to the bidding process.