‘PDO is the operator of upstream oil on behalf of the board,’ says deputy managing director Abdullah al-Lamki. ‘This consists of the government with 60 per cent and the private shareholders with 40 per cent. In the case of gas, the gas is 100 per cent owned by the government. PDO is literally on contract to the government to operate the upstream gas business. Gas started off in the 1970s as a government resource and remains so, but downstream they have gone into partnerships.’
By 2010, demand for gas is set to peak at84 million cubic metres a day (cm/d), up from the current 40 million cm/d. This is supplied from wells mostly in the central Oman gas fields. The area, located at the centre of the giant block 6 concession, is undergoing a significant round of investment to boost output. An additional 20 million cm/d of capacity is scheduled to come on stream by 2005, with the completion of a new processing train at the Saih Nihayda plant.
‘The Saih Nihayda field is the most significant development in central Oman,’ says Tormod Vold, engineering manager, government gas. ‘It will process the gas and send the condensate back to the central processing plant in Saih Rawl. Engineering has just been completed and construction is already under way.’
Gas from the field is destined for the Qalhat LNG project at Sur, which involves building a third LNG train. First it will have to reach the coast and PDO is tendering for a 265-kilometre-long, 48-inch-diameter loopline to deliver the gas. The pipeline may be extended further if the government decides to press ahead with the construction of a fourth liquefaction train. ‘The original concept called for a midway booster compression station. However, trains 1 and 2 have been debottlenecked, and as a result their capacities have increased. That little increment has made [the original concept] unattractive. The pipeline option saves on a small gas field in fuel costs to drive the compressors,’ says Vold.
Oman is one of the most challenging areas in the world for hydrocarbons production and it is showing. PDO has encountered significant problems recently in maintaining oil output from maturing fields. Neither is producing gas in the sultanate plain sailing.
‘In central Oman we have learned a lot about the performance of our wells,’ says Ali al-Harrasi, head of government gas operations. ‘We were slightly optimistic about their performance at first and we may have to do some more drilling but we have encountered no real major threats. These wells are in very tight reservoirs down to depths of up to 5,000 metres. The gas has condensate so it is high pressure and high temperature. There are very few of these kinds of wells in operation in the world today.’
Well fracturing is a major element of PDO’s strategy of drawing more gas from these tight reservoirs. The technique, which can result in a three fold increase in gas flows, requires the high-pressure injection of viscous liquid to crack open deep well structures up to 300 metres from the well bore. But like all advanced technology this comes at a price. Hydraulic fracturing can add $2 million to the operating cost of each well drilled.
‘We are already using hydraulic fracturing to increase productivity from Saih Rawl, Qarn Alam and Barik,’ says Sultan Said al-Shidhani, head of petroleum engineering, government gas assets. ‘We plan to use the technique to boost output from any well if it is required. We are also looking at multilateral drilling and multi-phase metering to help increase productivity.’
Apart from employing advanced technology to deliver more gas, PDO aims to bring more fields into production over the coming five years. Once work in Saih Nihayda is complete, the company plans to press ahead with the development of the Kawther field, discovered in May 2001. The field could be in production by as early as 2008. ‘It is a matter of putting in place our development plan for Kawther. We are entering the final value assurance phase, which we expect to finish early next year. Front-end engineering and design [FEED] work will follow before we can confirm the project,’ says Al-Shidhani.
All this investment is essential if PDO is to meet the expected increases in demand arising from the government’s proposed gas-based industrial schemes. According to the Oil & Gas Ministry, reserves stand at about 28 trillion cubic feet (tcf). The figure is just enough to meet both present domestic requirements and export commitments. The search for fresh reserves is unrelenting and the target is to book an additional 1 tcf of gas each year for the next 20 years. Exploration is expected to ease off only once at least 40-50 tcf of reserves have been built up.
‘We are in the process of recommending various supply scenarios to the government,’ says Elaine van Ravesteijn-Scott, head of gas business planning. ‘There is a base case scenario that is purely demand driven by all the projects being considered by the government. However, that potential demand cannot be sustained indefinitely by the indigenous reserves present, so it would require a blend of additional reserves, exploration and imports.’
The onus is on PDO to ensure that the government has enough gas at its disposal. As Al-Lamki says: ‘We have certain reserves against which the government is committed and PDO has an exploration effort to find more gas, which is going to continue. You can only commit to what you have and there will be no projects without the gas.’