British oil giant BP is expected to invest a whopping $24 billion for the first phase full-field development of its block 61 tight gas fields in north-central Oman. "The initial upfront investment will be $24 billion,-? said Shaikh Ali bin Thabit Al Battashi, Adviser to the Ministry of Oil and Gas, on the sidelines of a signing ceremony between the Ministry of Oil and Gas and Sohar International Urea and Chemical Industries.
He said the first phase of the development program is spread over a 25 year-concession period and aimed at producing 6.7 trillion cubic feet (TCF) of natural gas, which is equivalent to one billion standard cubic feet of gas per day.
The first delivery of gas is expected by 2017, he said, adding, "Initially, the company will start with a lower production, which will eventually reach 1BCF by 2019.-? If everything goes well, BP 's gas exploration will help Oman -" which is short of gas for meeting demand from a host of industrial projects -" to achieve self-sufficiency in clean energy.
He also noted that the government and BP are discussing to bring forward the second phase development, which is envisaged to produce another one billion cubic feet of gas.
"The upfront investment of $24 billion will cover most of the investments required for phase II development program as well because the second phase will be for drilling of wells. Facilities like a central gas processing plant will come up in the first phase itself,-? added Shaikh Al Battashi.
Dr Zaid Khamis Al Siyabi, Director General, Exploration and Production for Oil and Gas, Ministry of Oil and Gas, said the plan is to drill 282 wells. "Ten (test) wells are currently being prepared for fracking. Now BP is drilling 12th well and one more is to be drilled soon. Few wells have been hooked up through early production facilities and BP is trying to assess the productivity of the wells. They use the information to update the model and the whole full-field model will be used to predict the overall production for the entire field.
Shaikh Al Battashi said a heads of agreement is expected to be signed in the fourth quarter of this year. "That will be the driving force for the development of gas-rich Khazzan and Makarem fields.-? The work on a full-scale commercial development of the gas fields will start in the third quarter of next year.
Nasser bin Khamis al Jashmi, Undersecretary at the Ministry of Oil and Gas, said the investment for developing the gas field will be borne by the British company. "Government will enter into a sale and purchase agreement for gas at a certain price. This will enable BP to recover its investment, along with a certain rate of return,-? he noted.
Gas will be sold exclusively to Oman government and at the end of the day, the government will be bearing the cost of development. Further, the proposed $24 billion investment is structured in such a way that the government of Oman will also invest a portion of it upfront. Al Jashmi also noted that a team has already been formed to negotiate between the government and BP . "The team is working as per the schedule. We are moving on certain timeframe and schedule and addressing issues one after the other.
BP signed a major exploration and production sharing agreement with the government of Oman in January 2007 for the appraisal and development of Block 61 and the Khazzan and Makarem gas fields. The agreement covers an area of some 2,800 square kilometres in central Oman, which contains a number of 'tight gas' reservoirs which were first discovered in the 1990s.
Shaikh Al Battashi also said that the projected oil and gas investment of $100 billion for the next ten years between 2012 and 2022 will be from Petroleum Development Oman and all foreign operators operating in Oman, including Occidental, BP , PTTEP, Harvest and Tethys Oil.
Shaikh Al Battashi said the country's oil production is expected approximately 900,000 barrels per day this year. The production has been hovering in the region of 800,000-900,000 barrels per day for quite sometime. He said the anticipated natural gas production will be 3 BCF.
Times of Oman
2 September
