While Oman has not been blessed with the same hydrocarbon riches as its neighbours in the Gulf region, the country’s leaders are determined to get the most out of its remaining assets. The sultanate has estimated crude reserves of 5.5 billion barrels, compared with the approximately 100 billion barrels each held by fellow GCC members Kuwait and the UAE.
Despite its natural limitations, Oman’s oil industry is in recovery mode. The sultanate’s oil production peaked at 960,000 barrels a day (b/d) in 2001, but sank 26 per cent over the next six years to 715,000 b/d in 2007, according to data from UK oil major BP.
Oil production then slowly recovered to 891,000 b/d in 2011, driven by investments in enhanced oil recovery (EOR) projects. In October, Oil Minister Mohammed al-Romhi said Oman was on track to hit 1 million b/d by the end of 2013 when the Mukhaizna oil field increases production, marking a historic high for the producer, which is not part of oil producers group, Opec.
Oman’s national oil company, Petroleum Development Oman (PDO), is now planning significant investment in EOR technology over the next decade to sustain this higher output.
At the same time, Muscat is negotiating a deal with BP that could see the development of a $15bn-20bn tight gas project at the onshore Khazzan and Makarem fields. PDO, a joint venture of the Omani government, UK/Dutch Shell Group, France’s Total and Portugal-based Partex, plans to spend $30bn over the next 10 years maintaining its current levels of oil production, the firm’s technical director, Amran Marhubi, recently said at the MEED Oman Investment Forum staged in Muscat.
This includes investments of more than $1bn each in three onshore megaprojects – Rabab Harweel Integrated Project, Yibal Khuff and Budour – which will help maintain PDO’s capacity at about 550,000 b/d.
“Those projects are going to be arriving at an investment decision over the next few years,” Marhubi said. The new projects planned by PDO will develop nearly 200,000 b/d of new capacity, offsetting the natural decline of the sultanate’s oil fields.
“Our largest projects will implement groundbreaking EOR techniques,” said Marhubi. “These include steam injection, chemical injection and sour gas injection. By the end of this decade, PDO will be a world leader in EOR.”
EOR covers a range of techniques designed to increase the amount of crude that can be extracted from a field. Also known as tertiary recovery, EOR allows 30-60 per cent or more of a reservoir’s original oil to be extracted, compared with the 5-20 per cent typically achievable with primary and secondary recovery techniques. The techniques are well suited to Oman’s mature and declining oil fields and can be used to prolong the life of an otherwise disused field by up to 30 years.
According to UK-based engineering group Mott MacDonald, only 1 per cent of PDO’s oil output was produced using tertiary methods in 2000. This figure rose to 16 per cent in 2011 and is expected to hit 36 per cent by 2018, with the dominant techniques being thermal EOR and miscible gas injection EOR.
Although thermal EOR is set to become the key process for maintaining the sultanate’s crude production, its development will greatly increase gas consumption, as natural gas is used to create the steam pumped into the oil reservoir.
It is estimated Oman will require 200,000 billion British thermal units (BTUs) of gas by 2015 to feed its planned EOR projects – the equivalent of filling 69 liquefied natural gas (LNG) carriers with an export value of $2bn a year. This could present a significant problem for Oman, which already faces a structural gas deficit.
This challenge is being tackled with new technology under development to reduce the use of natural gas in EOR, such as chemical injection, the injection of carbon dioxide and nitrogen, and solar steam injection.
California-based GlassPoint Solar is constructing the Middle East’s first EOR solar steam generator for PDO at Amal, Dhofar governorate. The pilot plant uses the sun to create steam to be used in PDO’s existing thermal EOR network. GlassPoint is on target to complete the plant on 12 December, according to its chief executive officer Rod MacGregor, having signed the agreement with PDO in August 2011.
The 7MW plant will have the capacity to produce 11 tonnes an hour of steam to be fed directly into PDO’s steam network, expanding its overall EOR capacity. GlassPoint’s technology provides an alternative to the natural gas-generated steam currently used in EOR, which will allow Oman to reassign gas for other end uses. The contract between the two firms runs until the end of 2013, but GlassPoint hopes to expand its operations in Oman to a full-field facility.
“A full-field development would be orders of magnitude bigger, but it is up to PDO how and when they want to do that,” says MacGregor. “There are no contracts or obligations for them to do anything beyond the pilot.” MacGregor says 80 per cent of the steam currently produced using gas can be replaced by solar-generated steam. The remainder would be used to maintain lower volumes of steam overnight.
As well as the first solar steam EOR plant outside the US, Oman is home to the world’s largest polymer chemical EOR project at Marmul. The scheme has increased incremental recovery by about 8,000 b/d, according to Mott MacDonald, which was involved in the project’s construction.
EOR projects in Oman will also likely benefit from BP’s Khazzan tight gas megaproject at the onshore Block 61 concession, which dominates the outlook for gas projects in the sultanate.
BP is negotiating with the government over the development plan and commercial agreements for the estimated $15bn-20bn project. The UK oil major expects to sign the final agreement with Muscat in 2013 and to start production at Khazzan in late 2016 or early 2017.
The proposed gas plant at Khazzan is expected to produce about 1 billion cubic feet a day of sales gas from 275 to 325 wells drilled in the field. BP was prequalifying engineering, procurement and construction bidders in the second and third quarters of 2012.
“Engineering and construction contract awards for major scopes of work need to take place to allow for the final investment decision,” a source from BP said earlier this year.
Packages for the project could include: a gas plant; flowlines; rigs; fracturing equipment; well-testing facilities; waste and water treatment facilities; roads; and an airstrip. BP in 2007 appointed Australia’s WorleyParsons to work on a pre-front-end engineering and design (pre-feed) stage to ready the area for the construction phase.
As well as pursuing new projects with PDO and the Khazzan project, Oman has also significantly enhanced its base of overseas exploration and production groups. Whereas the sector used to be dominated by a small number of international oil companies, the landscape now includes China National Petroleum Corporation, Spain’s Repsol, UAE-based Mubadala Petroleum and Norwegian group DNO.
Meanwhile, local group Petrogas is aiming to boost oil production on its Block 5 concession in Ad Dhahirah governorate to 50,000 b/d using water injection. Significant improvements are being made to the facilities to increase oil production and water injection capacity, according to the company, with $260m earmarked for investment in 2012. After the increase, the Petrogas fields will comprise about 7 per cent of the sultanate’s total oil production.
Oman also chose an external partner to help develop its largest single downstream project – the planned $6bn refinery at the central coastal port of Duqm. The 230,000 b/d facility, along with a petrochemicals complex, is expected to be completed by 2017. The project is a joint venture of the state-owned Oman Oil Company (OOC) and Abu Dhabi’s International Petroleum Investment Company (Ipic).
“The refinery site has been earmarked and the financing elements have been approved between OOC and Ipic,” said Duqm Special Economic Zone chairman Yahya Said al-Jabri at the MEED Oman Investment Forum.
The front-end engineering and design contract for the planned 230,000-b/d refinery is expected to be tendered by the end of 2012, but few details have been disclosed on the scope of the petrochemicals cluster. The project will be the sultanate’s third refinery, with existing facilities located in Muscat and Sohar.
OOC has also completed the feasibility study on a 230-kilometre gas pipeline project to connect Duqm to the Saih Nihayda gas field in central Oman. The pipeline will feed Duqm with natural gas for the refinery and petrochemicals complex, along with power generation, water purification and a cement plant. The pipeline will have a capacity of 25 million cubic metres a day and is expected to be completed in 2015-16.
Oman’s downstream sector in the northern port of Sohar is also gearing up for a major expansion, with Oman Refineries and Petrochemicals Industries Company planning a $1.5bn project. With growth in the projects market forecast to spike over the next two years, Oman’s oil and gas industry is well placed to capitalise on its modest resources.
Oman aims to produce 1 million barrels a day of oil by the end of 2013