Gearing up for Challenges

Oommen John P14-05-2018, 02:58 AM

The Sultanate will continue to develop new oil and gas projects even if crude oil prices slide below the current level, according to HE Salim bin Nasser al Aufi, Undersecretary at the Ministry of Oil and Gas.

“The outlook for the year 2018 remains positive. Our system is resilient enough to produce oil even if prices drop below the current level. The government will continue to develop and sanction new projects,” he said at the 2018 annual media briefing hosted by the Ministry of Oil and Gas at the Institute of Oil & Gas (instOG) recently. “All our programmes continue to remain sound and solid and we will maintain the production levels even if prices drop further.” Prices have ranged between $60 and 65 since the start of 2018. “I don’t foresee oil prices will drop further drastically,” he added.

Aufi said the Sultanate’s total gas reserves to 24.96 trillion cubic feet (TCF) by the end of 2017, primarily attributed to Khazzan and Ghazeer fields.  Around 4.97 TCF of new reserves were added in 2017, up from 3.81 TCF in 2016. The Sultanate’s oil and condensate reserves stood at 4.740 billion barrels at the end of 2017 down by 376 million barrels in 2016 despite the addition of 355 million barrels of oil and condensate from exploration activities and revaluation of some producing fields. The decline is attributed to the transfer of around 323 million barrels of reserves into recoverable quantities based on recovery in prices.

Oil and condensate production averaged 972,000 barrels per day in 2017, down from 1004K in 2016 demonstrating the Sultanate’s compliance with OPEC agreement to cut production. The price of the Oman Crude Oil Futures Contract averaged $51.29 in 2017, which was up by $11.15 per barrel over 2016.  While the highest price of $55.59 per barrel was recorded in December 2017, the lowest was $44.54 per barrel registered in January 2016. The daily gas production in addition to quantities imported from Dolphin averaged 112 million cubic metres per day, of which 88 million cubic meters was non-associated gas and 19 million cubic metres of associated gas and 5 million cubic metres of gas imported via the Dolphin, Aufi said.

The Sultanate’s oil and gas expenditure amounted to $11.4 billion in 2017, as against $11.3 billion in 2016.  The total oil sector expenditure was $7.9 billion in 2017, which was similar to $7.9 billion in 2016. The gas sector expenditure was$3.5 billion, against $3.4 billion in 2016. Four oil blocks have been opened for tendering in the last quarter of 2017 and the ministry is currently in the process of evaluating the tenders submitted by local and international companies. The oil and gas sector has been mandated to create 5000 jobs for Omanis in response to the Royal Directives of His Majesty to the public and private sectors to provide 25,000 jobs for Omani job-seekers. However, we are confident of going beyond that, he added.


Meanwhile, Petroleum Development Oman (PDO) has confirmed a “significant” gas find with estimated recoverable reserves of more than four trillion cubic feet (TcF) and 112 million barrels of condensate in the northern part of its concession area. The company also reported on a string of achievements, including its best-ever safety performance, record investment in local companies and the creation of 14,146 job opportunities for Omanis in 2017.

In total, five wells have recently been drilled in the field and all have encountered gas. One is already producing and another will be hooked up shortly. Work is also progressing on two further appraisal wells, with plans for the expansion of production infrastructure. Additionally, exploration is continuing in nearby prospects.

PDO managing director Raoul Restucci said, “This is an exciting find which will provide a boost for economic growth in Oman and help meet rising gas demand from residential, commercial and industrial customers. Once again, our Exploration Directorate has performed admirably in challenging conditions to identify, discover and appraise a major hydrocarbon find which will make a substantial contribution to Oman’s sustainable development. This year, we are celebrating the 40th anniversary of PDO gas production and this is a fitting way to mark that milestone.”

Exploratory drilling has taken place at depths of 5,000 metres. The Barik and Miqrat reservoirs tested at commercial flow rates of up to 1.2 million cubic metres per day after fracturing. The discovery follows PDO’s acquisition of high resolution 3D Wide Azimuth seismic data in the area in 2015. Further prospects are also being drilled.

Mabrouk North East builds on the discovery made in March 2013, when PDO announced another significant find at Mabrouk Deep, some 40km west of Saih Rawl.

Restucci added: “We have a very attractive portfolio which keeps us very active, with large seismic programmes and extensive exploration drilling.”

The company operates gas fields and processing plants exclusively on behalf of the Omani government. The average Government daily gas supply during 2017 was 76.64 million m 3 /d, lower than the initially targeted level of 83 million m 3 /d due to the start of BP’s Khazzan field.

Throughout, PDO effectively met the gas demand for all its customers despite increased requirement quantities for Oman LNG.

Notwithstanding a number of operational challenges in 2017, PDO also showed good compliance with government targets arising from the OPEC/non-OPEC agreement to limit oil production, while compensating at short notice for any shortfalls in total country supply. Average oil production was 582,196 barrels per day (bpd).

As an example of the step change in efficiency, the Company’s Well Engineering Directorate carried out more than 21,000 well interventions, compared to 13,000 well entries in 2013 with the same rig and work-over hoist fleet. It also drilled 626 oil and gas production and exploration wells reducing the average well cost by 4 per cent and the rig move cost by 12 per cent compared to 2016 through better collaboration and rig sequence optimisation.

Restucci said, “Contingent on OPEC constraints, we are maintaining momentum to be ready to deliver in excess of 650,000 bpd. The Company is more efficient than ever and we have raised performance across the key parts of our value chain.”

On the safety front, the Company recorded a record performance with Lost Time Injury Frequency falling 0.20 per million manhours, albeit tragically with one work-related fatality. It also recorded a new road safety milestone of 500 million kilometres driven by staff and contractors without a fatality, and with a 40 per cent fall in Serious Motor Vehicle Incidents.

Restucci commented: “Our Journey Management Control Centre, which monitors a fleet of more than 8,500 vehicles, has brought about a step change in safer driving since it was opened inn2016 with a 97 per cent fall in the average number of violations per vehicle.

“Safety remains our overarching priority and we have made good progress through greater frontline supervision, tailored training, stricter consequence management, and enhanced hazard and risk identification in our operations. However, there is still much work to do in securing our Goal Zero aspiration of no harm to people, environment or assets. We must do better to ensure all staff, contractors and sub-contractors alike, return to their loved ones at the end of every work day.”

PDO reported that the Rabab Harweel integrated project – the largest projects in its history with a reserve add of more than 500 million barrels of oil equivalent – is well ahead of plan and budget, and good progress is being made at its second mega project at Yibal Khuff, the most complex venture it has ever undertaken. A total of almost $800 mn in capital expenditure savings have been secured on both.

The company will continue to place a greater focus on renewables and energy and water management. The giant Miraah solar energy installation at Amal, which it is developing with partner GlassPoint Solar, is in daily operation and meeting its targets for steam output for use in thermal enhanced oil recovery. Construction is progressing on schedule with another eight blocks on track to be completed in early 2019, on top of the four which were commissioned in December 2017.

PDO is also expanding its awarding-winning Nimr Water Treatment Plant which currently treats 115,000 m 3 /d of produced oilfield water using reed beds and, with partner Bauer Nimr, is making progress on a biosaline agriculture trial. Plant growth from a number of crops has been promising with the potential for commercial application, and the possibility of biomass and oil seed production.

Restucci highlighted significant corporate social responsibility advances last year. These included the creation of 14,146 employment, training, re-deployment and transfer opportunities for Omanis with PDO contractors and non-oil sectors, such as hospitality, fashion and digital media. PDO also awarded contracts worth more than $5.19 bn to nationally registered firms, the highest sum in its history, and backed a series of new Omani factories and workshops supplying vital parts, equipment and engineering services to the oil and gas industry.

The company committed to 35 new social investment projects, totalling more than $5.5 mn, which will have tangible impacts on the quality of life of thousands of people living in our concession area and beyond. These include the provision of clean drinking water facilities, safe public spaces, and research and learning opportunities. Further support was provided through miscellaneous grants and donations.

Meanwhile, to boost near-term cashflow, PDO made more than $400 mn in further cumulative operational and capital expenditure savings through project re-phasing, closer collaboration with contractors and a further comprehensive review and challenge of costs across the organisation. The company will continue to drive cost reduction through its Lean business efficiency programme.

Looking forward, Restucci said: “Irrespective of production agreements to stabilise oil prices, 2018 will require us to continue to focus on becoming more efficient, agile and productive in all our key business activities.

“This will mean identifying savings and cost reductions while delivering growth, excellence and sustainable value creation for Oman and our shareholders. We will also continue our gradual transition to becoming a fully-fledged energy company, with a greater focus on renewables, and securing greater alignment between academia and industry on research and development. “These are rapidly changing times for our industry with climate change realities, automation, digitilisation and artificial intelligence transforming the way we do things. However, I am confident that these changes also offer us a great opportunity to work more safely, productively and responsibly.”

Oman Oil Company (OOC), a commercial company wholly owned by the government, is keen to explore the potential for partnerships with local and international investors especially in power and renewable energy in the Sultanate, Isam al Zadjali, Chief Executive Officer said.

Highlighting the achievements of 2017, he said OOC and Eni signed a MoU for cooperation in the oil and gas sector and another agreement was signed with Kuwait Petroleum International Limited (KPI) for the development of Duqm Refinery and Petrochemical complex.

“We are looking at attracting investments and are working in close coordination with the ministry of oil and gas. We can certainly be the catalyst to attract foreign investment into the country and we are very well positioned to do that.” The company is in talks with the State General Reserve Fund (SGRF) to look at the possibilities of collaboration to invest in power or renewables. Al Zadjali also informed that a major rebranding of Oman Gas Company (OGC), is being planned.

Oman Oil Refineries and Petroleum Industries Company (Orpic’s) strategic growth projects such as Suhar Refinery Improvement Project (SRIP), Muscat Suhar Product Pipeline (MSPP) and Liwa Plastics Industries Complex (LPIC) are progressing as per schedule, said Orpic CEO Ahmed Saleh Al Jahdhami.

Highlighting Orpic's key achievements for 2017 with regard to its strategic growth projects, environmental and financial  performance as well as the latest updates on people, In-Country Value (ICV) and Corporate Social Responsibility (CSR), he said, “We firmly believe that these three major projects will transform Orpic’s business model and product mix over the next years and will firmly reinforce Orpic as a recognised player in the international petrochemicals marketplace."

SRIP and MSPP have already entered the operational phase in 2017. The combination of the three projects represents a growth strategy that revolves around increased integration within the manufacturing complex, and the production of a broader slate of petrochemical products that will enable Orpic to extract more value from the oil and gas molecules of Oman. On its financial Performance, he said Orpic achieved highest EBITDA in 2017, thereby sustaining a positive revenue trend.

On the people perspective, Orpic firmly believes in empowering its people to maximise their potential and considers people as its biggest asset. As an employer-of-choice, Orpic recruits, trains and retains the best talents in Oman. Up until 2017, Orpic recruited more than 1000 employees and trainees across different functions and departments. On the other hand, Orpic had awarded 40 scholarships as part of its International Scholarship Programme to enable young Omani students to study in leading universities across the world.

As a responsible company, Orpic’s objective is to support business development, human capability development, and productivity stimulation in Oman’s economy through the retention of maximum in-country value. Orpic fully supports the national ICV program and plans to maximise its ICV contribution within the USD 9.5 billion capital projects. Hence, the total ICV value spent for 2017 including growth projects were $330mn. In addition, 340 local SMEs were awarded contracts during 2017 with a value of $21 mn.

Meanwhile, Energy giant BP has announced plans to participate in the tender for the Oman Power and Water Procurement Company (OPWP)’s 500 MW utility-scale solar photovoltaic project in Ibri.  Further, it has also planned to bid for Petroleum Development Oman’s (PDO)’s 100 MW solar PV project in South of Oman.

In his presentation, BP Oman President Yusuf al Ojaili said that achieving first gas from Khazzan Phase One is just the first step. Further development is needed in Khazzan and in the adjoining Ghazeer field to boost production to 1.5 billion cubic feet of gas per day by 2021.

Occidental Oman (OXY) achieved substantial cost savings across all areas of the business in response to market conditions and low oil price environment in 2017. “We have maintained activity levels and production compared to 2016 with a reduction of 5.6 per cent against planned expenditure,” said Steve Kelly, President and General Manager of Occidental Oman(Oxy-Oman).

“Occidental’s Oman operations reached a significant milestone in November 2017 with the production of its one billionth gross barrel of oil, including condensate, from all its blocks,” the company said. “Over two-thirds of this production has come in the last 10 years, illustrating the tremendous growth achieved over that period,” he said.

“We added about 100,000 BPD of liquid handling capacity and 50,000 BPD of water injection capacity in 2017 in Blocks 9 and 27. Additional gas compression and liquid handling facilities along with further de-bottlenecking of production stations will continue in 2018,” he said.

Shell Oman is on its way to reach its goal of having 22 schools fitted with solar photovoltaic generation systems across the Sultanate, said Chris Breeze, Shell Country Chairman in Oman.

Reflecting on how ‘Solar into Schools’ embodies the company’s values while fulfilling the needs of the future, the nation and its citizens, he said, ‘‘Shell’s ‘Solar into Schools,’ project was created with two aims. First, we wanted to support the development of Omani SMEs in the field of solar energy by creating a platform for sustainable growth to meet Oman’s energy and economic needs. Secondly, it was crucial to raise awareness and interests of young people about energy problems and to inspire entrepreneurship and innovation.”

The annual briefing concluded with Business Gateway making a presentation on the National Subsidy System, which currently has 233,000 plus subsidy seekers.


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