BP weighing options for integrated gas development

Muscat, April 20 - Energy major BP says it is studying options for delivering an integrated gas project in the Sultanate, seeking to emulate some of its peers which have announced substantial roles in a landmark integrated gas development first unveiled last year. The revelation came during a brief Q&A session with local media on the sidelines of a presentation by Spencer Dale, Chief Economist at BP, focusing on the energy giant’s newly released Global Energy Outlook 2019. BP Oman President Yousuf al Ojaili, when asked about the company’s plans for an integrated gas development, said: “We are looking at it. The (Omani) government is keen for all the IOCs (international oil companies) to come up with integrated offers. We are thinking about what kind of integrated offer we would like to present to the government.”

Integrated Gas Developments are a new paradigm being espoused by the Ministry of Oil and Gas as the most effective route to maximising value creation from Oman’s gas resources, while also supporting the government’s economic diversification, employment generation and GDP enhancement objectives.

In an integrated gas development, an IOC partners with local and international players in developing the entire value chain — upstream, midstream and downstream — when harnessing Oman’s gas resources.

Energy heavyweights Shell and Total have recently announced downstream ventures as part of an ambitious integrated gas development centring on the monetisation of gas resources in Greater Barik area (Blocks 10 and 11) in central Oman. Also participating in the integrated venture are Petroleum Development Oman (PDO) and Oman Oil Company (OOC).

Under a MoU signed with the Ministry last year, Shell and Total broadly committed to investing in specific components of an integrated gas development that envisions sizable upstream gas exploration and development, a first-of-its-kind Gas-to-Liquids (GTL) scheme to be set up in Duqm, and a LNG terminal within Sohar Port that will provide LNG as fuel for shipping.

As per the agreement, Total and Shell as operators will develop several natural gas discoveries located in the Greater Barik area, with respective shares of 25 per cent and 75 per cent. The objective is to achieve an initial gas production of around 500 million cubic feet per day (MMcfd) and a potential to reach 1 billion cubic feet per day (bcf/d) at a later stage.

Total, for its part, will use its equity gas entitlement as feedstock to develop a regional hub in Oman for an LNG bunkering service which will supply LNG as a fuel to marine vessels.

This entails the establishment of a new small-scale modular liquefaction plant, initially of a capacity of 1 million metric tonnes per year, to be built in Sohar Port.

Under an Interim Upstream Agreement signed with the Ministry last month, Shell and Oman Oil Company (OOC) further agreed to integrate their share of the upstream project with the goal of setting up a GTL project to be developed and operated by Shell in partnership with OOC. GTL capacity is envisioned at roughly 45,000 barrels per day.

Significantly, BP Oman is already an important contributor to Oman’s natural gas production with around 1 bcf/day of gas currently being supplied from its Khazzan development in Block 61. Output is projected to jump to 1.5 bcf/day by early 2021 when BP Oman is slated to bring its adjoining Ghazeer field into operation.

“By the time we bring Ghazeer on stream in the first quarter of 2021, the total gas production (from Block 61) will be about 35 per cent of the country’s total production. That’s a lot of gas — representing a significant investment by BP and its partners in the country,” said Al Ojaili.

Commenting on Block 77, for which a partnership of BP and Italian firm Eni signed a Heads of Agreement with the Ministry earlier this year, Al Ojaili stated: “It’s too early, to be honest! Block 77 is a pure exploration Block. Eni and ourselves have to first do 3D seismic, and drill exploration wells before we can really assess how much gas is available, (if there is any at all).”