BP was one of three international oil companies shortlisted in October for the contract. The other two were Norway's Statoil and Eni of Italy (MEED 1:12:06).

The upstream agreement will cover the development of gas reserves in the central Khazzan and Makarem fields. Both fields are estimated to contain a total of at least 20 trillion cubic feet (tcf) of gas, or nearly 55 per cent of the sultanate's total proven gas reserves of 35 tcf. The two fields contain a mix of sour and sweet gas, which are trapped in four tight reservoirs Barik, Miqrat, Amri and Buah. Khazzan, located to the west of the giant Saih Rawl field, was originally part of the concession area owned by Petroleum Development Oman (PDO).

The project will include the drilling of new development wells to depths of 4,650 metres, construction of a central processing facility and the installation of pipelines for the supply of feed gas. Production from both fields is targeted to start at 300 million cubic feet a day (cf/d) and to be ramped up in stages to 2,000 million cf/d. The first gas should be produced by early 2010.

Gas from the fields will be used to meet rising demand from new petrochemical capacity, additional liquefied natural gas (LNG) capacity and a string of enhanced oil recovery projects. Gas demand in the sultanate is forecast to reach 3,839 million cf/d by 2010, compared with expected production of 2,659 million cf/d, according to latest MOG figures (MEED 15:12:06).