PDO sets new production record of 1.3 million boepd

Muscat – Petroleum Development Oman (PDO) confirmed today (3 April, 2017) that it set a new combined oil, gas and condensate production record of 1.293 million barrels of oil equivalent per day (boepd) in 2016.

The achievement was secured whilst reducing capital and operating expenditure and thanks to continuous improvement in drilling, well and reservoir management and project delivery.

To boost near-term cashflow and reduce reliance on Government funding, PDO cut planned 2017 expenditure by almost US$1.5 billion through project optimisation and re-phasing, closer collaboration with contractors and a further comprehensive review and challenge of costs across the organisation.

The Company pledged to continue to drive cost reduction opportunities to improve the
country’s budgetary position, including through its Lean business efficiency programme, which has to date generated more than US$400 million in terms of extra revenue, cost reduction or avoidance.

At the same time, it increased its investment in its In-Country Value (ICV) programme to boost Omani business and generate almost 7,800 employment opportunities for young jobseekers, both in the oil and gas industry and other sectors of the economy, contributing to a total of almost 30,000 since 2011.

The average PDO daily oil production for 2016 was 600,197 bpd, the highest since 2005 and more than 15,000 bpd above the original planned target. Annual condensate production was 81.325 bpd against a yearly target of 76,800 bpd, helped by a strong performance from wells at Kauther, Rabab and Khouloud. Average Government gas production during the year was 80.24 million m3/d against 81.07 million m3/d in 2015.

Commenting on the 2016 performance, PDO Managing Director Raoul Restucci said: “I am pleased to announce that in another year dominated by the low global oil price, PDO exceeded performance expectations, delivering a significant improvement across a broad range of functional and asset targets.

“Our philosophy and strategy have been simple and consistent: working to ‘stay the course’ while addressing value creation, cost control and continuous improvement in every facet of our business. This approach has helped to steer us through the difficulties caused by the low oil price environment and to build solid foundations for the future.

“The recessionary climate has meant established ways of working have required a paradigm shift in mindset to significantly improve capital efficiency and deliver competitive projects. However, the ability of our staff and contractors to adapt and work more collaboratively has enabled us to exceed targets across the board.”

PDO confirmed it was well placed to develop growth plans to further raise our plateau levels and create more value for Oman when the production restrictions are lifted.

“With our partners at Shell, we have identified 46 opportunities for incremental development that could yield in excess of 700 million barrels of recoverable reserves and raise our production plateau.”

In 2016, PDO’s Exploration Directorate sought new sources of low unit technical cost hydrocarbons to create value and meet customer needs. It exceeded its 2016 delivery targets, booking a total of 86.4 million barrels of oil, 0.45 trillion cubic feet (Tcf) of non-associated gas and 24.3 million barrels of condensate as commercial contingent resource (CCR) volumes. Major oil discoveries of the year included the Shammar play opening, which unlocked 40 million barrels of CCR volumes from the shallow, high-permeability reservoir in the Lekhwair field.

The exploration and production efforts were underpinned by an intensification of well activities, with 644 oil and gas production and exploration wells drilled, 33 above plan and a 12% increase on 2015. There were also 19,600 well interventions, a 49% increase on the 2015 total of 13,190 activities with a similar well entry and work-over fleet.

Despite the heavier workload, the Well Engineering Directorate realised considerable savings in well delivery against the approved budget, through a multitude of Lean business efficiency projects and innovative contracting strategies. The cost per metre drilled fell 8% from 2015, the lowest since 2010, with well delivery 3% under budget despite being 5% ahead of plan. Beyond cost reductions, this effort contributed to also achieving 10% extra oil than planned from new wells.

PDO achieved the majority of its corporate project delivery milestones on or ahead of plan, and all were delivered within the year. Three major projects – Yibal depletion compression phase 3, Mabrouk phase 2, and Ghaba North gas oil gravity drainage were delivered successfully.

The Company disclosed that the Rabab Harweel integrated project – the largest capital project in PDO with a reserve add of more than 500 million boe – is on schedule, while the Yibal Khuff project, which involves the simultaneous development of a number of sour oil and gas reservoirs, is ahead of schedule with construction beginning last year. Meanwhile, Miraah, the world’s largest ever solar thermal project at peak production, moved ahead of schedule with phases 1 and 2 both at the construction stage. The first steam from the project, which PDO is developing with partner GlassPoint Solar, is expected mid-year.

On the safety front, the Company recorded a 21% improvement in Lost Time Injury Frequency from 0.28 to 0.22 per million manhours, albeit with three work-related fatalities. There was also a 27% fall in Tier-1 Asset Integrity-Process Safety (AI-PS) incidents.

Mr Restucci said: “We are making progress on ensuring our operations are safer but we still need to strive harder to reach our Goal Zero aspiration of no harm to people, environment or assets.

“Work to improve our safety performance even further has begun with simpler, standardised, fit-for-purpose training and procedures to encompass a greater emphasis on compliance, increased learning from incidents, greater frontline supervision, behaviour-based training and improving risk and hazard identification in operations.”

During his presentation at the annual Ministry of Oil and Gas Media Briefing in Muscat, Mr Restucci highlighted a string of PDO achievements last year. These included the creation of 7,787 employment, training and re-deployment opportunities for Omanis with PDO contractors and non-oil sectors, such as aviation, hospitality, fashion and real estate. PDO also awarded contracts worth more than US$5.03 billion to nationally registered firms, the highest sum in its history.

Mr Restucci said: “Despite the recessionary pressures, it has been more important than ever to pursue our ICV programme to build a sustainable Omani industrial/private sector base able to compete on the international stage and retain more of the industry’s wealth in the Sultanate.

“The creation of employment and training opportunities for Omanis remains a strategic priority for PDO and we are determined to play our part in helping the thousands of nationals who come onto the job market each year to find meaningful and rewarding work.”

PDO has also been an active participant in the Tanfeedh programme to enhance economic diversification, contributing to initiatives on logistics, manufacturing, manpower and tourism and commends the Government’s efforts in this key programme.

On corporate social responsibility, the Company continued with its social investment and grants and donations to help communities across our Concession and beyond. It also signed 26 Memorandums of Understanding pledging support to a variety of good causes, including back 10 non-governmental organisations.

Meanwhile, Project Prism, PDO’s industry-first initiative covering the welfare of contractor personnel, completed its first full year. Confidential interviews were conducted with 28,000 workers about a wide range of topics, including safety, food, medical care and accommodation, and coaching sessions were held with contractors to ensure compliance with Omani law and PDO policies.