Muscat, Dec 15 – Oman recently played host by a group of top-flight upstream investors of energy supermajor BP — a first-of-its kind visit that underscored the importance of its signature investment, the Khazzan tight gas development, in its global operations.
Bernard Looney, BP’s Chief Executive — Upstream, who led the group to Muscat, said the visit was a testament to the “extraordinary” partnership that BP has forged with the Omani government in unlocking Khazzan’s tight gas resources in Block 61 in central Oman. BP is the operator of the block with a 60 per cent equity interest. Oman Oil Company Exploration & Production (OOCEP), the upstream arm of Oman Oil Company, is a shareholder (30 per cent), and it is expected that the Malaysian state-owned energy firm Petronas will join soon taking 10 per cent of OOCEP.
“This visit exemplifies BP’s strategy in Oman,” said Looney. “It’s about early access, which occurred back in the 2007. It’s about very strong execution as reflected in the transfer of technology and learning from across BP, particularly in this example from North America, and it’s about growth in the future. Indeed, our business here in Oman, in collaboration with the Ministry of Oil & Gas and the Omani government, exemplifies what can happen when we work in partnership.”
The roughly 30-member team, comprising a mix of shareholders and analysts, spent two days in the Sultanate. Deliberations on the first day encompassed BP’s upstream operations around the globe. On the following day, the group flew into central Oman by charter flight for a ringside tour of the two-train gas processing plant in Khazzan — the centrepiece of BP Oman’s multibillion dollar tight gas development.
Oman, according to Looney, was a natural choice for the Upstream Investors Group weighing international destinations for their summit that occurs every two or so years. “It was a no-brainer to come to Muscat because what we have done together with Khazzan — country and company — is an extraordinary accomplishment,” he said.
Khazzan, representing Phase 1 of an estimated $16 billion investment that BP and its shareholders are making in Block 61, currently delivers 1 billion cubic feet (bcf) per day of gas into the Sultanate’s gas grid. Ghazeer, representing Phase 2 of this landmark project, will boost output to 1.5 bcf per day when it is brought into operation in 2021.
“Ghazeer is about 40 per cent complete to date, which is excellent because it is on schedule — if not slightly ahead — and on budget as well,” Looney, who is responsible for BP’s Upstream Segment, noted.
Despite its sizable commitment to Block 61, the energy giant is not ruling out possible investment in new exploration blocks or integrated gas developments. The latter business model, which grants investors full control over the complete value chain — from upstream to the midstream and downstream — has already elicited the interest of energy heavyweights such as Shell, Occidental and Total.
To a query from the Observer on potential BP interest in integrated gas schemes in the Sultanate, Looney responded: ‘The answer is ‘yes’! We have discussed such options with the Ministry of Oil & Gas over the past year or so. It’s an area we are interested in. We think it’s an area we can bring unique technology to bear, and we understand the country’s desires and needs in this regard, taking its local natural resource and converting it into something of value in country, rather than exporting it solely. We understand that need and obviously it will create jobs.”
The official stressed however that discussions on the issue haven’t yielded anything “concrete” to date. “Nevertheless, BP is very open to those conversations, and I hope there are things that we can bring that are unique in terms of our technology. I think time will tell where those conversations go,” he said.
Furthermore, BP is also keen to explore new opportunities for business growth, said Looney, citing the “positive environment” that has enabled international Oil & Gas firms to thrive in the Sultanate. “Our experience in Oman for our company, and I hope for Oman as well, has been very positive. The environment we find ourselves working in here has been a positive experience for us. So we would like to do more, if possible!”
But taking on new challenges at this juncture would prove potentially daunting for BP, saddled as it is with the mammoth Khazzan tight gas development. “As you are aware, we are very busy at the moment,” Looney explained. “We just brought Phase 1 of Khazzan online a little over a year ago; it is working well, but we have to continue to drill wells to keep the gas plant full, and at this time, we are building the third train of the next phase. The 4,000 people on site will grow to 6,000 in the coming year, as we get that train on line in 2021. So we have a lot on our hands at the moment.”
Moreover, any opportunities that BP contemplates will have to be competitive on a global basis,” stressed Looney. “A lot of companies are exercising real capital discipline, and it’s what our investors are demanding of us as well. Therefore, any capital we do commit has to be the most competitive.”
As part of its strategy for growth, BP will also be looking to harness the full potential of its Block 61 tight gas resource. The current priority for the company is to develop the Block’s tight gas resources to ensure there is enough gas for the present two trains. And as for the third train, which is currently under construction, BP is confident of its ability to develop adequate resources to meet its requirements, he noted.
Human capital development is another huge priority for the company, said Looney. This is reflected in the high proportion of Omanis (75 per cent) in executive positions in its Oman operations, he pointed out.
A further 18 Omanis are currently posted in BP projects internationally, garnering a wealth of expertise that will prime them for leadership positions upon their return to the Sultanate in the future. Joining their ranks this year will be six more Omani professionals.
Recruitment of Omanis will also continue apace as the Ghazeer phase advances, according to the Chief Executive — Upstream. Around 100 Omani technicians have been hired and trained by the company, while 70 graduates have been recruited as well. Roughly a third of the estimated 4,000-strong labour force on site at Khazzan comprises Omani nationals — a remarkable percentage for construction related positions.
“We think the capability of the Omani people is fantastic, and the policy direction and environment in we work under the leadership of Dr Mohammed al Rumhy, Minister of Oil & Gas, is great. It’s a constructive, competitive and collaborative environment!” he said.
Already, BP’s successful partnership with the Omani government and OOCEP in the delivery of Khazzan Phase 1 is a key talking point in the region and across the world, said Looney. “This in turn has been attracting more and more oil and gas companies to Oman. It’s a great example of how the development itself is bringing jobs, delivering gas to the country, and also has the benefit of exposing Oman as a country and a place to invest in to the broader world,” he added.