Win-win collaboration with energy heavyweights

Muscat: A succession of Exploration & Production Sharing Agreements (EPSAs), as well as partnership pacts, signed by the Oman government with some of the world’s biggest energy players – the challenging fiscal backdrop notwithstanding – is seen as A testament to the Sultanate’s robust political and economic fundamentals.

At least half a dozen landmark pacts were inked over the past 12 months with international energy firms that rank among the so-called ‘super-majors’ of the oil & gas industry. The agreements underscore renewed confidence in the strength of the Omani hydrocarbon sector and its potential to play a pivotal part in sustaining the nation’s long-term socioeconomic development.

Some of the signatories in question are already well-entrenched in Oman’s upstream and midstream sectors, but are looking to ramp up their presence significantly. Examples include Shell, Occidental Petroleum Corporation and Total.  BP, which is investing billions of dollars along with the Omani government in Block 61, has already brought the giant Khazzan gasfield on stream last September, and has commenced the task of unlocking the potential of the adjoining Ghazeer gasfield. Italy’s ENI has also made its maiden foray as the operator in Oman’s largest offshore license – Block 52 – along with Oman Oil Company and Qatar Petroleum.

Wholly government owned energy investment vehicle Oman Oil Company, which has an equity stake in almost all of these newly forged pacts, says its partnerships with these energy heavyweights dovetails with its own strategy to evolve into an integrated energy corporation in the Sultanate.

Robust partnerships

“Oman Oil Company is converging towards the concept of an integrated oil and gas company and that’s our vision,” explained Eng Isam al Zadjali, CEO. “We are at the moment consolidating all our assets under that vision. Part of this vision is to partner with international oil companies (IOCs) with experience, technical knowhow and the financial sources, and we are selectively choosing our partners.  This trend will continue whereby we will not continue with any upstream project without a technical and competitive partner that will add value to the venture.”

Most notable among the agreements signed recently is the one inked by the Ministry of Oil & Gas with several oil and gas companies, including Shell, Total and Oxy to develop the energy sector in the country. Key was an MoU signed with Shell Gas & Power Developments BV (Shell) and Total, covering upstream gas exploration and development, gas-to-liquids (GTL), liquified natural gas (LNG) and renewable energies.

Under the agreement, Shell is to operate an upstream project with Total and Oman Oil Company (OOC) as partners. It will also operate a GTL project with OOC as a partner.

Total and Shell as operators will develop several natural gas discoveries located in the Greater Barik area on onshore Block 6, with respective shares of 25 per cent and 75 per cent, as per the agreement between both companies and before possible State back-in, with the objective of an initial gas production of around 500 MMcfd and a potential to reach 1 bcf/d at a later stage.

Total will use its equity gas entitlement as feedstock to develop in Oman a regional hub for Liquefied Natural Gas (LNG) bunkering service to supply LNG as a fuel to marine vessels.

Going offshore

A further shot in the arm for the oil & gas sector came around a year ago when Italian energy supermajor Eni signed an EPSA along with Oman Oil Company for Block 52. Located offshore of the Sultanate’s southeastern and southern seaboard, the block is the largest of Oman’s oil and gas concessions covering a massive area of 90,790 sq km.

Rome-headquartered Eni is globally recognized as a heavyweight in the offshore exploration and production sector with operations in dozens of countries internationally. Its well-established prowess in exploring for liquid hydrocarbons and natural gas in shallow to semi-deep offshore basins – expertise that it has successfully leveraged in Africa, Europe and other regions of the world – will likely be a game-changer for the Sultanate’s efforts to harness potential resources lurking in its vast, untapped offshore space.

A month earlier, Oman Oil Company Exploration & Production LLC (OOCEP) – the upstream arm of Oman Oil Company, and Shell Exploration BV, signed a Heads of Agreement to collaborate on Block 42.

This cooperation in Block 42 is the first such project between OOCEP and Shell in Oman. The two companies are already partners in the Pearls joint venture in Kazakhstan. Block 42 comprises an area of about 25,600 sq km, which could hold hydrocarbon potential in several geological plays.

Occidental Petroleum Corporation (Oxy), the largest independent operator in Oman’s oil and gas sector, has also bolstered its presence in the Sultanate. Last November, the company signed an EPSA with the government for Block 30, which was awarded to a partnership of Oxy and OOCEP following an international bid round process launched in 2016. Pursuant to the EPSA, Oxy was designated the Operator of Block 30 with a 72.86 per cent stake while OOCEP holds the remaining 27.14 per cent stake in the Block.

The Block is located in the North-East mountainous region of Oman, approximately 200 km southwest of Muscat and covers an area of 1185 sq km. It contains four discoveries made by several operators under previous agreements namely the Nadir, Al Sahwa, Hafar fields and the Hamrat AlDuru field.

Copious supplies

But basking in the spotlight was BP which brought into operation Phase 1 of an ambitious tight-gas development programme – targeting shale gas in Block 61 – last September. The Khazzan gasfield – representing the first phase of an estimated $16 billion investment being made by BP and OOCEP in the Block – is currently producing one billion cubic feet (bcf) of natural gas per day. The drilling of development wells targeting the adjoining Ghazeer field has already commenced. First gas from Ghazeer is targeted by 2021, with output projected to climb to 1.5 bcf/day.

Also earlier this year, BP’s Singapore subsidiary inked a landmark deal with Oman LNG to import liquefied natural gas (LNG) from the Qalhat complex. Under a Sales and Purchase Agreement concluded with BP Singapore Pte Ltd, the latter will lift 1.1 million tonnes per annum (mtpa) of Omani LNG – equivalent to 18 LNG cargoes annually – over a period of seven years.

The SPA, a Free-on-Board (FOB) contract starting January 2018, will span over a period of seven years lifting 1.1 million tonnes per annum (mtpa), which is equivalent to approximately 18 LNG cargoes annually. It will be a significant boost to the global LNG market where Oman LNG currently contributes a significant amount.