Muscat’s impending deal to import gas from Iran cannot come soon enough for the energy-hungry sultanate.
While the deal has yet to be finalised, both sides are eager to settle on a contract this year.
A first phase will provide Oman with 1 billion cubic feet a day (cf/d) of gas from Iran’s Kish field by 2012.
Two further phases will triple output to 3 billion cf/d, dwarfing the 200 million cf/d that Oman will soon start receiving from Qatar, via the Dolphin pipeline.
While the scarcity of gas is a common theme throughout the region, the problem in Oman is more acute than most.
The Oil & Gas Ministry forecasts that demand will reach 3.8 billion cf/d by 2010, far outpacing supply of just 2.7 billion cf/d.
The problem for Oman is twofold. Until now, much of the government’s industrial growth was driven by cheap gas supplies.
But with Tehran rumoured to be demanding at least $10bn to settle the Kish gas deal, the era of bargain feedstock is coming to an end, testing the competitiveness of local industry.
The other issue is timing. Oman needs gas quickly, but even the 2012 deadline appears fanciful, given the stuttering progress of Iran’s gas industry.
With the rest of the region facing a similar gas supply squeeze, Oman must still develop its own fields.
The UK’s BP hopes to eventually produce 2 billion cf/d from tight gas blocks in the country, and Muscat hopes to increase production by about 10 per cent this year from its existing gas fields.
While that may just be enough for the next few years, the stakes are high. Any significant delays to the Iran deal will almost certainly put the brakes on the country’s medium-term economic growth.