2014-01-23 19:12:15 - New Energy research report from Business Monitor International is now available from Fast Market Research
We expect Oman's recent impressive gains in oil production to begin to moderate, with output peaking in 2016 before gradually trending lower as the recent impressive gains from enhanced recovery operations begin to dissipate. There are many upside risks to this view, with opportunities from the approval of additional upstream projects to new discoveries, with offshore a particular area of opportunity. However there is downside risk such as disappointing output from redevelopment projects approval failure. These risks extend to gas as well. While we assume a more sustained rebound in output, albeit with much of the gains reliant upon BP's costly and complex Block 61, setbacks here would result in downward revision to our forecast. That said, Oman's continued push
to secure additional foreign participation makes the market one of opportunity despite expectations for growth to moderate.
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We highlight the following trends and developments in Oman's oil and gas sector:
* Oman has managed to oversee an impressive revival of activity in its hydrocarbons sector. Specifically, the government has channelled efforts and funds into enhanced recovery methods. The results to date have been largely successful, with output recovering from a low of 714,000 barrels per day in 2007, to a forecast of around 942,000b/d for 2013. The redevelopment of existing fields in order to boost recovery rates, as well as the upside offered by healthy interest from international oil companies (IOCs) in the country's upstream, underscore a broadly positive outlook for the oil sector.
* French international oil company (IOC) Total has announced the successful acquisition of a deepwater block in Oman. Block 18 lies in the Sea of Oman and covers some 24,000 sq km in total with depths of between 30 and 3,000 meters (m). According to Total's head of exploration, Arnaud Breuillac, the Oman move was 'aligned aligned with Total's ambitious exploration strategy focused on frontier basins and new plays with strong potential.' Offshore Oman is seen as underexplored, but previous efforts to prove up the area's potential have produced mixed results.
* Improved exploration and production (E&P) technology could see Oman surprise to the upside. Circle Oil puts initial resources estimates across 9 different prospects on Block 52 at 2.2bn bbl of oil. Oman's offshore should soon be tested with the drilling on Block 50 by Masirah Oil. According to the Omani Ministry of Oil and Gas, if a commercial discovery is made on Block 50, then early production could begin before the end of 2014.
* Even with a strong pipeline of investment, we expect overall production to peak by mid-decade and gradually trend downward. While we note healthy upstream activity and high interest pose upside risk to this outlook, our core view is for recent gains in production to dissipate as new supplies fail to offset declines in output elsewhere. By 2022, Petroleum Development Oman (PDO) is due to spend some US$11bn alone on 16 major projects targeting development of in excess of one billion bbl of oil. From 2013-2017 some 100 wells were due to be drilled and some US$800mn spent in an aggressive hunt for new reservoirs.
* We are more optimistic with regard to our outlook for gas production than oil. We forecast natural gas production will grow at a slowly over the next several years as supply additions from new projects such as Block 61 and Musandam will be moderate. However a more dramatic increase is due to come with the start of the Khazzan project, tentatively scheduled to come online from 2017. The upside form Block 61 could extend should a decision be made to advance additional phases of development. Sour gas fields could result in even more gains to gas supplies as other reserves on the field are targeted. We expect the first phase online from the end of the decade.
* In late 2013, Oman's twin LNG marketing companies - Oman LNG and Qalhat LNG - completed a successful merger. The consolidation was designed to take advantage of efficiencies including single source of supply and shipping. Merging the two companies should result in lower operational costs and more flexible and responsive trading, allowing Oman to better take advantage of arbitrage conditions through spots sales while meeting long term export commitments.
* During the course of an official visit in August to Iran, Omani Sultan Qaboos bin Said announced a deal for the export of natural gas by Tehran. The agreement calls for a construction of a pipeline to begin in a 'short period of time' according to the official memorandum of understanding. Oman and Iran are also planning to discuss the joint development of offshore gas fields as well as expanding trade and cooperation more broadly on oil and gas. The latest agreement follows on from a deal signed in 2009 between Muscat and Tehran for construction of a 200km gas pipeline. Gas was to be sourced from the offshore Kish field located Iranian waters. Oman was to help finance development of the field, estimated at the time to cost between US$7bn to US$12bn and with gas in place estimated at 1.85trn cubic meters (tcm).
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