Oman receives new foreign investment commitments

12 March 2019, Week 10, Issue 715

A recent flurry of upstream activity in Oman continued in the last week of February.

US junior PetroTel Energy received funding from Washington to launch a development project at two blocks in the northern Musandam peninsula. The project is important to Muscat, as it offers an alternative source of feedstock for a recently commissioned power plant serving the remote northern exclave, separated from the mainland by the eastern UAE.

Meanwhile, compatriot Occidental Petroleum (Oxy) finalised a licensing agreement for the company’s eighth block in the sultanate – coinciding with an event held to highlight the two parties’ mutual importance.

Texas-based PetroTel progressively amassed a quartet of operated Omani licences over several years around the turn of the decade, first acquiring blocks 17 and 40 in the Musandam peninsula in 2009 and 2011 and then picking-up blocks 39 and 67 in the southern Dhofar governorate near the Yemeni border two years later.

In 2014, the firm completed a 2D, 2,000-square km seismic survey at the 2,378-square km Block 17, which lies primarily onshore, and in 2015, the second and third wells were drilled in the largely offshore, shallow-water 6,120-square km Block 40.

The acreage was described as having potential for conventional and unconventional reserves of both oil and gas, but subsequent plans appeared to be derailed by the prolonged oil price slump.

On February 27, the US government’s Overseas Private Investment Corp. (OPIC) announced a funding package of US$450 million for the development of the two Musandam blocks, split between a US$300 million loan and US$150 million of insurance.

The deal was billed as a symbol of the strong intergovernmental ties between Washington and Muscat, which is valued as a moderate mediating force between the region’s warring Saudi and Iranian-led factions.

PetroTel intends to install processing facilities for the contiguous blocks and a 3-km offshore pipeline to carry gas to the Musandam Gas Plant (MGP) at Tibat. This was built and is operated by a subsidiary of state-owned Oman Oil Co. (OOC) to feed the exclave’s 120-MW power plant.

The desire for additional local hydrocarbons feedstock is made pressing by an ongoing decline at the Bukha and West Bukha fields in nearby Block 8. Output there had dropped to 4,460 boepd by the time Norwegian operator DNO withdrew at the start of the year. OOC subsidiary Oman Oil Company for Exploration & Production (OOCEP) has taken over the licence. MGP has a processing capacity of around 20,000 bpd of crude and 0.465 bcm per year of gas.

 

Oxy

Oxy is the second largest oil producer in Oman after government-led Petroleum Development Oman (PDO).

In January, the company signed exploration and production-sharing agreements (EPSAs) for two blocks – 51 and 65 – completing, with existing blocks 9, 27, 30 and 62, a 362-km-wide string of contiguous acreage across the north.

On February 28, an EPSA was signed with the Ministry of Oil & Gas (MOG) for the 3,530-square km Block 72, in the south-east. This is located adjacent to Block 53, which is home to the company’s flagship Mukhaizna field, the sultanate’s largest single producing oilfield.

Oxy said it was committed to investing US$59 million over the first seven years of the deal and to drilling three wells apiece in the first and second exploration phases.

Unlike the new northern blocks, Block 72 was not awarded as the result of one of MOG’s regular open international bid rounds. Instead, it appears to have been directly negotiated, with a view to leveraging the US firm’s expertise in the area. Oxy carried out a record-breaking heavy oil steamflood project at Mukhaizna, which has raised production more than 10-fold since the firm acquired the licence in 2005 to around 120,000 bpd.

The new block has been carved out from PDO’s Block 6 concession, which spans 900,000 squared km. 

In a symbol of Oman’s importance to Oxy, the company’s board met in Muscat in February, only the second such conclave to have been staged outside the US. The firm’s fourth-quarter production in the sultanate averaged 246,100 boepd. 

In the past year, BP, Italy’s Eni, Royal Dutch Shell and France’s Total have all sign up for new ventures in the Middle East. Hoping to capitalise on a recent upsurge in interest in the country from global majors, Muscat launched a six-block bid round in mid-February.

This focused on acreage in the remote south-west near the Saudi border and just north of PetroTel’s Dhofar holdings.

Edited by

Ian Simm

Editor

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