Oil has been an economic powerhouse, but declining production means change is afoot
f
oil is still king in Oman, then natural gas is the rightful heir to
the throne. With declining oil production due to depleted reservoirs
and mature fields, Oman is looking to harness its burgeoning gas reserves
and expand its energy-based industry. Oil money still accounts for over
two-thirds of total government revenue, though this is falling as output
drops. In 2003, production is expected to reach 763,000 barrels per
day (bpd), down from an average of 909,000bpd two years ago. Investment
in advanced production methods is expected to squeeze more out of the
country’s oil wells in the years ahead, and output projected to
rise to around 800,000bpd by 2005.
Oman Oil Company
– a state-owned company formed in 1992 to pursue energy investments
both at home and abroad – is a key player in many of the nation’s
new gas projects. Its portfolio includes shareholdings in the Oman India
Fertiliser project (50 per cent), Oman Gas Company (20 per cent), and
various initiatives in the Sohar industrial complex.
|
||
 |
David
Douglas, Chief Executive, says it is no secret that Oman
offers rich potential to foreign gas and industrial companies. The government,
through organisations like Oman Oil Company, which brings expertise
and finance to the table, is ready to assist. “If you are a gas
company, you don’t have to build the gas pipeline because the government
has done that for you, so basically you can come in and set up your
project. You cannot find that in many places in the world, coupled with
the stable political and economic situation of the country.”
Mr Douglas describes the progress of the country on the back
of its oil reserves over the last 30 years as “phenomenal”
and that initiatives, like the Sohar complex – a network of large
energy and industrial schemes – are well placed to carry forward
development. “I think if you go to Sohar, instead of seeing a big
flat pile of land, you will see one of the largest industrial areas
being developed.” He says Oman Oil Company is looking to play a
significant role in the future of the economy through its active participation
in many of these new projects, as well as diversifying investments overseas.
Oman LNG (liquefied natural gas) – the largest gas-based
project in the country – is an example of what can be achieved.
Since it commenced production over two years ago it has successfully
exported LNG cargoes to the Far East, South Asia and, increasingly,
to the European market. With annual revenues of around £610 million
it is building a third production train that will raise capacity by
50 per cent to 9.6 million cubic feet. The project is 50 per cent owned
by the government alongside Shell (30 per cent) and various other private
investors.
 |
| Oman LNG is building a third production train that will boost capacity by some 50 per cent |
|
Dr Agnus Cassens,
General Manager and Chief Executive, says the joint venture has the
highest credit ratings for a project company outside places like the
UK and US, and notes that the stability of Oman is essential in meeting
long-term contracts that run for up to 25 years. “Oman LNG has
made a very good name and reputation ever since it started production,”
he says. The company has also responded to short-term contracts in markets
such as the UK, and supplied its first cargoes to Tokyo Electric in
Japan, the world’s biggest LNG buyer. “If we can penetrate
Tokyo Electric it will be a huge success for us,” he adds.
Petroleum Development Oman (PDO) – another government joint
venture with the private sector – is the main oil producer in the
country, generating an estimated 40 per cent of GDP and providing roughly
£2.44 million a year to government finances. It is the largest
business enterprise in the country with a staff of some 4,500 people.
John Malcolm, managing director, says the organisation’s chief
priority is to optimise oil production through cutting edge technology
and to expand exploration activity. PDO has been investing heavily in
recent years to halt the decline in oil production. “There is no
room for complacency,” he says.
International oil giant Shell is a partner in both PDO –
in which it owns a 34 per cent stake – and Oman LNG, and plays
a key role in the local energy industry, bringing important know-how
and capital to projects. It also owns a 49 per cent interest in Shell
Oman Marketing.
John Crocker, General Manager of the Shell representative office in
Oman, says: “LNG has been a great success story for Oman. I think
it remains the fastest project in the world, from the initial discovery
of gas to the market, and it’s certainly one of the lowest cost.”
info@worldreport-ind.com