Oman revives heavy oil field development

18 May 2017

Petroleum Development Oman looking for risk-service contractor to carry out project at Habhab field

Petroleum Development Oman (PDO) has revived a project to develop its Habhab onshore field to produce bitumen and heavy oil, inviting interested companies to submit bids for the project.

Companies have been asked to submit bids by 10 July for a 27-year risk service contract to recover the oil from the field, which lies within PDO’s Block 6 concession area.

The project is likely to require significant deployment of enhanced oil recovery (EOR) techniques including chemical injection to maximise recovery of the heavy oil products.

In April 2015, Oman’s Oil and Gas Minister Mohammed al-Rumhy said that the project had been put on hold as the low crude price had made the scheme economically unfeasible due to the costs of the technology required.

This decision was reiterated by PDO Managing Director Raoul Restucci in March 2016, who said that “Habhab is one of the high cost EOR projects… and at $30-40 a barrel it would simply not fly”.

“Habhab will take quite some time to develop… we are inviting additional players to take a significant chunk of the field. It was never featuring in our medium term plans,” Restucci added at the time. Brent crude was trading at around $40 a barrel in late March 2016 but is widely expected to average over $50 in 2017.

PDO now expects to award the contract for the Habhab field development by 11 December 2017.

The contract model is unusual for Oman and the rest of the GCC oil sector. The tender is for a risk-service contract for the delivery of all bitumen production to PDO.

The service provider will be required to advance all funds and carry all the risk over the 27-year period. In return, the company will receive a share of the bitumen revenue, which reflects the recoverable costs and the profit share allocated under the contract.

The contractor shall have the right to book reserves and has the right to propose investments in midstream operations integral to the project.

Bitumen typically consists of heavy oil of less than 15 degrees API, which does not flow well using primary recovery methods. The primary use of bitument, also known as asphalt is in road construction.

The recovery will require EOR techniques, which usually require the injection of gas, steam or chemicals to increase the volume of oil that is able to be extracted.

PDO estimates the oil in-place for the area of the Habhab field being tendered at 1 billion barrels.

The contractors invited for the risk service contract is likely to be established international oil companies with a track record of employing EOR technology at complex fields.

PDO is the largest oil and gas producer in Oman accounting for about 70 per cent of crude output in the sultanate. It is 60-per-cent-owned by the Omani government with the UK/Dutch Shell holding 34 per cent, France’s Total 4 per cent and Portugal-based Partex 2 per cent.

Earlier this month PDO awarded OR300m ($770m) worth of contracts to two Omani companies for work on its onshore Fahud, Lekhwair and Yibal oil fields.


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