Since the first oil concession license was granted to Darcy Exploration Company in 1925, the Sultanate of Oman has come a long way to becoming: (a) one of the world’s most successful oil and gas producing countries; and (b) the largest oil and gas producing non-OPEC member in the Middle East.
Initial reports on oil reserves conducted almost 100 years ago proved to be inconclusive and the first oil exploration well turned out to be dry. However, since its very first discovery, oil and gas production in the Sultanate has steadily risen, year-on-year, reaching 340 million barrels in 2013. This figure represents a 2.3% increase in production compared to 2012 and is set to rise still further in 2014.
In 2013, the Ministry of Oil and Gas for Oman tendered out five new blocks, two of which have been awarded to international firms for exploration to commence this year. These blocks are located in southern Oman, where the majority of oil and gas production takes place. This trend is set to continue, with the Ministry of Oil and Gas recently announcing that Oman will “continuously offer open blocks to the market”. This announcement is made following the completion of negotiations for several other oil blocks, including two production sharing agreements which the Government of Oman signed in December 2013: one with Total to develop an offshore block off the northern coast; and a second agreement with Petrogas Kahil to develop an onshore block in the Al Wusta (central) region of Oman.
As a direct result of Oman’s relatively favourable exploration and production opportunities (including more preferential contractual terms compared to its regional counterparts), most of the major international players have a presence in Oman, including Shell, Partex, KoGas, Occidental Petroleum and BP. In 2013, the Government of Oman and BP signed a gas sales agreement and an amended production sharing agreement for the development of the Khazzan field which will involve approximately 300 wells. Once completed, it is expected that this field will produce approximately 28.3 million cubic metres of gas per day. This amount of gas would meet one third of Oman’s daily domestic gas requirements. The total investment in the tight gas project is estimated to be around US$16 billion.
Currently there are 22 international oil and gas exploration and production companies operating within the Sultanate. Each company works under a production sharing agreement and contributes to approximately 30% of the country’s total crude oil production. Given the current level of international interest in the Omani market, the Omani Government’s clear willingness to open up this sector to international investors and the demonstrable need for expertise in accessing oil and gas within the region, the opportunities seem boundless and a far cry from the arid days of 1925.
Oman remains focussed on inward investment, with a large proportion of the revenue generated from the oil and gas sector being reinvested into the Omani people and infrastructure. During a seminar held by Oman’s In-Country Value (ICV) Committee, it was estimated that Oman’s oil and gas sector would provide approximately US$64 billion in additional “ICV” during the period from 2013 to 2020. It is estimated that 80% of the inward investment would go to local suppliers and the remaining 20% being directed towards the employment of Omanis.
