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Oman Gas Development and Production
The depletion of the sultanate's crude oil reserves
accelerated the government's bid to increase the use of
gas in
electric power generation and industry. In the early
1970s, the
sultanate began to use gas in electric power generation.
Gas
pipelines were laid, and generators were converted from
diesel to
gas. This was done in the Muscat metropolitan area just
before
the second oil price shock despite resistance by importers
of
diesel. Plans were to increase gas use by extending the
government gas grid linking the south and the east to the
north.
Power generation facilities north of Muscat in 1992 were
using
gas as a feedstock, and plans were to increase gas-fired
units
elsewhere.
Although the government has promoted the industrial use
of
gas, oil firms remain the principal consumers, using a
total of
8.5 million cubic meters per day of associated gas. Gas is
required for reinjection, compression fuel, and power
generation
to support facilities at producing fields. This is likely
to
continue in the short term, given the slow pace of
switching
industrial use from petroleum. The government's focus in
the
1990s on exploiting natural gas reserves and increasing
output to
meet rising demand complements its priority in maintaining
current oil output levels. It seeks to do this without
depleting
crude reserves by using gas produced in association with
oil
output for reinjection at mature fields to increase
production
and, by substituting gas for oil, to release greater
volumes of
crude oil for export.
On February 8, 1992, the Ministry of Petroleum and
Minerals
signed a cooperation protocol with Royal Dutch Shell for a
comprehensive evaluation of Oman's gas reserves, estimated
in
June 1992 at 482 billion cubic meters, the bulk of which
is in
nonassociated form. According to the minister of petroleum
and
minerals, some studies indicate a reserve base as high as
935
million cubic meters. A preliminary feasibility study
conducted
by Royal Dutch Shell indicated the potential for
exploiting gas
reserves at a rate of 142,000 cubic meters per year as
exports
over a twenty-year-period and for meeting domestic demand
for the
next fifty years.
Most of the gas produced is in associated form and
comes from
PDO's Jibal field; smaller volumes come from the Natih and
Sayh
Nuhaydah fields in northern Oman and the Birba field in
the
south. Gas plants have been constructed in Jibal, Fuhud,
Sayh
Nuhaydah, Sayyala, and Rima, providing Oman with a
gas-processing
capacity of almost 18 million cubic meters per day.
Despite
increased gas production, gas throughput at these plants
ran at
about one-half of total capacity in 1989.
Evaluation of the commercial viability of the northern
offshore Bukha natural gas and condensate field,
discovered in
1986 by its concession operator, the International
Petroleum
Company of Canada, was completed in June 1992. The company
estimates the life expectancy of the Bukha field at
fifteen
years, a capacity of 28 million cubic meters per day of
gas and
5,000 to 10,000 bpd of condensate, and a requirement of an
approximately US$60 million capital investment to bring
the field
onstream. Production was scheduled to begin in 1993.
The government planned to drill wells in the central
fields
(Sayh Rawl, Sayh Nuhaydah, Barik, and Mabruk) at a cost of
RO47
million (US$18 million) between 1992 and 1995. Output from
these
structures will supply the US$9 billion LNG project, which
was
finalized on May 6, 1992, by a memorandum of
understanding. In
this project, the government will be responsible for all
upstream (see Glossary)
activities. A new consortium was
established,
comprising the Omani government at 51 percent, PDO's
foreign
shareholders (Royal Dutch Shell, Total-Compagnie Française
des
Pétroles, and Partex) at 42 percent, and three Japanese
firms
(Mitsubishi, Mitsui, and C. Itoh) undertaking downstream
operations under a service contract. Deliveries of LNG are
not
expected to begin before 1999. The Japanese market is
expected to
be the most probable destination for output.
If increasing volumes of gas are lifted, the government
may
consider new gas-based industries such as methanol,
fertilizers,
and methyl tertiary-butyl ester (MTBE). During 1992 talks
were
conducted with Iran concerning joint development of the
Bukha and
Henjam offshore fields, where limited drilling has
indicated a
gas and gas liquids potential. Omani officials have also
conducted talks with Qatar regarding the purchase of
natural gas
from Qatar's North Field. The proposal to build a gas line
from
Qatar to Dubayy may be expanded to include a spur line to
Oman.
Minister of Petroleum and Minerals Shanfari indicated that
Oman
is prepared to purchase a volume up to 113 million cubic
meters
per day of gas from Qatar if an acceptable price can be
negotiated. The regional gas line proposal was being
considered
among gulf countries for much of the 1980s. As of early
1993, a
definitive decision on a regional (Arabian Peninsula)
coordinated, long-term gas plan that would rationalize
supply and
demand for decades had not been completed.
Data as of January 1993
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