Gas playing a growing role in oman's energy mix

Gas has played an increasingly important role in Oman's energy sector since the early 2000s and this looks set to continue. Plans for Mabrouk North East follow the successful development of the Khazzan gasfield by BP which came on stream in 2017. The second phase of the project, known as Ghazeer, is currently under way and is expected to increase gas production from the Khazzan field from the current level of around 1bn cu ft/d to 1.5bn cu ft/d.

BP expects to invest US$4bn in the Ghazeer project, which was 33% complete in late October 2018; production is expected to start in early 2021. Once complete, the projects will provide a boost to the economy and increase the in-country value of natural gas. Overall, the oil and gas sector will continue to dominate the Omani economy.

Gas output is projected to overtake crude in Oman by 2023. (Rystad Energy)
The value of Oman’s natural gas output rose more than 20 per cent to US$ 4.2 billion from US$ 3.5 billion in 2017.
Oman’s gas production is seen to increase by 130 million cubic meters per day by 2025.
International players are favoring gas developments in Oman due to the increasingly lucrative domestic gas market and rising global LNG demand.
There has been an impressive surge in the development of gas fields in Oman and in new gas finds.
DOWNSTREAM
More gas will certainly be required in the future, too, as the sultanate’s new port and industrial area of Duqm takes off. The OOC has outlined some $15bn in investment for this project, with recent moves including the ground-breaking for a $7bn integrated refinery complex in April 2018.

At the same time, Oman Tank Terminal Company is building a $400m crude oil storage terminal at Duqm, with a 10m-barrel capacity for its first phase. The port is seeing the construction of a OR200m ($519.4m) bulk liquid terminal, which will facilitate the export of the petroleum, petrochemicals and chemicals that are produced in the industrial and refining areas of the Duqm Special Economic Zone (SEZ).

The Duqm Refinery Project will double the downstream throughput and drive growth in an array of adjacent segments.

Sohar is implementing a $6.7bn steam cracker and petrochemicals project called the Liwa Plastics Industry Complex. By September 2018 it was reported 67% complete and on track to be delivered for operation sometime in 2020. When it begins operations, the complex is expected to boost plastics production in Oman by some 1.8m tonnes per year.

Liwa has already added greatly to ICV, with 350 small and medium-sized enterprises awarded some $20m worth of contracts during construction through to September 2018. In other works, ORPIC and Spain’s Compañía Logistica de Hidrocarburos inaugurated the $336m, two-way Muscat Sohar Product Pipeline and Al Jefnain fuel terminal in March 2018. This pipeline now delivers about half of the country’s entire fuel needs via the terminal, which has a 170,000-cu-metre capacity.

The Port of Sohar was recently proposed as the future site of Total’s LNG bunkering terminal, which will become part of the downstream ICV add-on to its participation in Block 6 non-associated gas development.

Construction of the $826m Salalah Liquefied Petroleum Gas project is under way in the Salalah Free Zone. Petrofac won the contract to build a $600m LPG extraction plant within the area, which will process 8.8m cu metres per day. The goal is to make Salalah a major global LPG and condensate export hub after the project is completed in 2020.

UPSTREAM
In addition to experiencing heightened award activity, Oman’s upstream industry is perfecting EOR techniques as a method of extracting all possible product from maturing reservoirs. The large quantity of heavy oil in the sultanate – some 40% of known reserves are comprised of this high viscosity variety – is also making EOR an increasingly vital technology, as light oil, which is typically easier and less costly to pump with conventional means, becomes increasingly scarce.

PDO’s investment in such techniques will increase EOR production as a share of its overall output to at least 23% by 2025, a significant increase on 10% in 2018. In addition to this, the company has invested in miscible gas injection, thermal recovery and chemical thickening agents as methods to optimize trapped residue.

Other outfits are also venturing into EOR in Oman. The UK’s Petrofac secured a $265m EOR deal in March 2018 for the development of the Marmul Polymer Phase 3 project, which has some 500 producing and 75 injector wells within its scope.

OFFSHORE
Oman’s offshore industry is rapidly growing and continues to deliver value for Oman’s future.
Recent discoveries of hydrocarbon in Oman have led to increased offshore oil production activities in 2019.
Revenues from Oman’s main offshore producing fields has generated revenues totaling about US$ 1 billion.
The government is increasing efforts to unlock the multi-billiondollar investment potential of the Arabian Sea and Indian Ocean lapping its shores.
OUTLOOK
Recent discoveries in the north of Block 6 and elsewhere may even give the country enough of a surplus for it to become a more significant LNG exporter, while increasing the domestic petrochemical sector’s share of the global petrochemical market.

The new refinery at Duqm is expected to provide crucial support for the oil segment. Kuwait’s involvement likely means that the facility will retain a bias towards the processing of that country’s heavy crude, while Duqm will also be well situated to harness Oman’s inland fields, which also mostly produce heavy oil.

IOCs and local outfits will continue to follow ICV and Omanisation policies, while also pressing for these to be as flexible as possible, given industry constraints. The pursuit of ICV in particular will mean a much greater tie-in between upstream and downstream operations, with Oman seeking to end a period when much of the benefit from its oil and gas went overseas.

Mergers and acquisitions activity in the hydrocarbons sector increase growth opportunities.