A consistent E&P strategy for PDO.

OMAN'S two-year long talks with Iran to jointly develop LNG projects and establish a company to market LNG exports have yet to bear fruit. However, while talks are still ongoing, Oman is developing its West Bukha field (off the Musandam Peninsula at the mouth of the Persian Gulf) in partnership with the UAE's Ras Al Khaimah Petroleum.

It is also rolling out an enhanced oil recovery programme, which includes a thermally assisted gas oil gravity drainage (GOGD) facility, thought to be the first of its kind in the world. In 2007, the state-run Oman Oil Company signed a memorandum of understanding (MoU) with the National Iranian Oil Company that allows for Iran to export up to 1 bcm of LNG, and for the two companies to develop gas fields, including West Bukha and Hengam. The agreement also proposed the establishment of a joint Omani-Iranian company to market LNG exports. Field development was originally estimated at $200 million, including the construction of a 100-km pipeline to the port of Sohar (north-west of the capital Muscat) and on to Sur (south-east of Muscat), slated to be online by 2011. "There have been several rounds of discussions with the Iranians about the development of joint fields at Hengam and West Bukha. However, we haven't reached any agreement," says Ali Bin Thabit Al Battashi, director general of planning and studies at Oman's Ministry of Oil and Gas. Asked about US sanctions on Iran, which cover the sale of specialised equipment for extracting LNG, and the potential impact on the joint venture and the distribution of LNG to the west -- the US in particular, Al Battashi says it was not a concern. "The world is big enough to not have to deal with the Americans," he adds. Although the joint project with the Iranians is still under review, Al Battashi says Oman has decided to develop the West Bukha block with RAK. "Production started the first week of February and is still under the commissioning process for the platform and pipelines. We expect the field can produce 10,000 bpd and estimate reserves of some 50 million barrels of very light crude oil and around 500 bcf of gas," he notes. The field is planned in two stages -- phase one will be over three years, with the fuel produced by a RAK gas processing plant offshore the UAE. "There will be six platform slots and a 32-km pipeline connecting the new platform with the existing platform at Buqafi," says Dr Zaid Bin Khamis Al-Siyabi, director general of oil and gas E&P at the ministry. "The government has decided to construct a processing plant onshore, near the Musandam area, with phase two starting in 2012 -- but we are still finalising the bidding." The development will fall in line with plans to boost production at Petroleum Development Oman (PDO), the E&P company that is 60 per cent owned by the government and 40 per cent by Shell, Total and the Partex Oil and Gas Group of Panama. "We have a strategic view and are implementing that in terms of bpd, the target is to plateau at 550,000 bpd for PDO and for all the projects to achieve this production -- and have some cushion as well. Production at that plateau is to continue for the next 10 years," he adds. However, to achieve this plateau, Oman will have to bring difficult fields onstream and heavily invest in new steam, gas and polymer technology. To develop the onshore Marmul field in the south-east of the country, Oman is piloting a polymer injection technology that is to be brought onstream this year, while at the Harweel field in the same region, a municipal gas injection system is being implemented to enhance oil flow. The massive onshore Mukhaizna oil field in central Oman is another difficult field to develop, according to Al-Siyabi, requiring steam injection to enhance recovery. Production at Mukhaizna is expected to reach 85,000 bpd by year-end, up from the current 46,000 bpd. "We will ramp up to that level and rise to 150,000 bpd by 2012," says Al-Siyabi. One of the biggest projects under way is the $1.4 billion Qarn Alam project in central Oman, which is expected to come onstream by 2010. "We will enhance heavy oil production through the use of carbonated water, and it will be the world's first thermally assisted GOGD facility of this size in a fractured carbonate reservoir," says Al-Siyabi. However, with oil prices lower than last year and Oman's budget based on $45/b, projects are dependent on oil prices staying around that mark. "If oil prices go down to $30/b we would have to revisit projects," he notes. That said, the recently reduced costs of raw materials -- which had trebled in price over the past five years in the Middle East -- could benefit the roll out of projects.

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