Oman Oil Exploration & Production (OOCEP) has taken over operation of a unique offshore block in northern Oman and has been joined at two other concessions by two leading IOC players.
The company is the upstream arm of state-owned Oman Oil Co. (OOC) and its role in the sector is growing rapidly. The new deals are symptomatic of OOCEP’s evolving internal technical capabilities and its strategy of partnering with foreign majors to develop the sultanate’s challenging fields.
Its wholly owned subsidiary Musandam Oil & Gas Co. (MOGC) acquired operatorship of Block 8, off the coast of the northern Musandam Peninsula, on January 4, the day after it had been relinquished by Norwegian operator DNO and South Korea’s LG International.
In a statement to mark the exit, DNO noted that the block had produced 35 million barrels of oil and 8 bcm of gas – earning Muscat US$1 billion in revenues – since the acquisition of the concession in 2012.
The acreage contains the Bukha and West Bukha fields – in production since 2009 and 1994 respectively.
Output averaged around 4,460 boepd in 2018 and has been in decline from a peak of 15,000 boepd four years ago – hence the operator’s decision to withdraw in order to sharpen focus on core assets in Norway and Iraqi Kurdistan.
However, the output is important to Muscat and OOC in providing the feedstock for the 120-MW power plant commissioned by the company in JV with LG in late 2017 to serve the remote exclave.
Speaking at the handover ceremony, MOGC’s newly appointed managing director Mahmoud al-Hashmi explained OOCEP’s envisaged role at the block. A full study would be carried out this year to determine areas for “quick wins” in order to maintain current production levels. A five-year strategy would then be drawn up, in co-ordination with the Ministry of Oil & Gas (MOG).
Questioned about international involvement, he noted that OOCEP was already working with Italy’s Eni at offshore Block 52 under an EPSA signed in late 2017 and said that the major could be asked for assistance with the new acreage.
The Block 52 deal flowed from a wider MoU sealed earlier that year for OOC and Eni “to explore co-operation opportunities in the oil and gas sector”.
A period of state management of the Musandam block could also be a precursor to approaching potential long-term foreign operators.
MOGC has adopted a licensing strategy over the past two years of decreasing the risk for prospective investors by consolidating and publishing large volumes of existing data in advance of the bidding process.
OOCEP’s participation in the consortium led by the US’ Occidental Petroleum (Oxy) that assigned an EPSA for onshore Block 65 in December was illustrative of a strategy increasingly being deployed by Muscat. The state firm is being tasked with managing fields temporarily for the performance of studies – with the data then used in an approach to prospective external operators.
In a ceremony to mark the award, MOGC officials revealed that OOCEP had been studying the 1,230-square km block in the north for around two years and had committed to drilling a well to target unconventional resources. The licence area contains two plays: an unconventional oil play and the other play, conventional oil and gas.
Oxy is Oman’s largest independent oil producer – second only to state-led Petroleum Development Oman (PDO).
The strategy was in play over a longer period at Block 42 – a 25,600-square km licence in the east operated by OOCEP under an EPSA awarded in 2011.
In 2017, the company signed a heads of agreement (HoA) with Royal Dutch Shell to collaborate on exploration – including the performance of an aerial study – and on January 23 a royal decree ratified the farm-out of a 50% stake to the major.
A commercial find has yet to be made in the remote concession but the announcement of the HoA included an assertion of hydrocarbons potential in several geological plays – a view presumably still held.
Shell’s experience of Oman’s geology is unparalleled among IOCs by dint of its long-standing 34% shareholding in PDO.
Earlier in the month, OOCEP reprised the Block 52 partnership with Eni, with the two firms taking stakes of 10% and 90% respectively in onshore Block 47 in the north-central A’Dakhiliyah governorate – likewise at the exploration stage.
In December, OOCEP raised around US$1.3 billion for further investment by completing the divestment of a 10% stake in Block 61 to Malaysia’s state-owned Petronas. The asset is home to the sultanate’s flagship US$16 billion Khazzan tight gas development, operated by BP.