Engineering firms bidding on millions of dollars of contracts to develop the Block 60 gas concession in Oman have been left in limbo after the UK’s BG Group decided to abandon the scheme on 12 June.

The UK gas developer has told the government that it does not intend to continue work at the concession in the west of the country, BG and Oil & Gas Ministry spokesmen confirm to MEED.

“We decided to relinquish the block and we have let the government know,” says Neil Burrows, a BG spokesman. “We are in talks with the government to find the best way forward. We have a global portfolio and the decision has been made to prioritise other areas.”

Under the existing development plans for the project, BG had hoped to build and commission a series of gas production and processing facilities at 350 sites across the 1,500 square kilometre concession by 2013 (MEED 19:2:10).

Contractors in the sultanate say that they are surprised by the news, as they had been bidding on a series of engineering contracts for the development.

Around 15 firms submitted prequalification documents for two engineering, procurement and construction (EPC) contracts on the scheme in February, and were invited to bid on the deals in March, submitting bids in May.

The first contract covered site preparation and construction work at 350 locations at the 1,500 square kilometre concession. The second contract was for flowlines and pipelines across the permit.

The deals were part of wider plans to set up drilling and production facilities at all 350 sites in order to produce an undisclosed volume of gas. This would have required contractors to start work at seven new sites every month.

BG was also tendering a front end engineering and design (Feed) deal to design the facilities, and engineering firms were in talks with BG over this deal as recently as May.

EPC contractors say that they have not been formally notified of BG’s decision to quit the development, while Feed contractors have been verbally informed of the move. It has not been made clear who, if anyone, will take over the development.

Sources within the Ministry of Oil & Gas confirm that a meeting was held on 14 June with BG managers, government ministers and executives from state oil and gas developer Petroleum Development Oman (PDO) in attendance.

The gas reserves in the block are geologically complex, and gas production was likely to prove both difficult and expensive, engineering executives with knowledge of the project tell MEED.

In particular, the Abu Butabul field was seen as key to the economic viability of developing the field. “Abu Butabul is a tight gas discovery and the ability to get gas to flow effectively and efficiently will be key to determining commercial viability,” BG company literature says.

BG signed the exploration and production sharing agreement to develop Block 60 in 2006. It has drilled seven wells at the site, all of which produced gas and condensates, Burrows says. The company declined to comment on whether its decision will incur any penalties from the government.