Downstream Oman Builds $1 Billion Refinery and Pipelines - Upstream Increases Push for Greater Gas Production

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). At a time when the gas and oil industry in the Sultanate of Oman is celebrating the twenty fifth anniversary of the opening of its first gas processing plant, the country is moving ahead with new projects across the energy resources spectrum.

Petroleum Development Oman (PDO) will have five new gas wells onstream by the end of 2004. Oil production in Oman is going down by 10% per annum and gas has grown significantly in PDO's portfolio. PDO supplies 38 million cubic meters of gas per day to domestic customers. About 30% of the hydrocarbon energy that PDO supplies comes from natural gas, which has a central role in the governmentýs economic diversification plans.

"The gas production rates of these wells are anyone's guess. They will become clearer after well tests have been conducted. And if we are fortunate enough to discover a new gas field through one of these five wells, then its reserves will depend on the results of subsequent appraisal of wells, which will take some more time to drill and test," said John Malcolm, of PDO, reports Gulf News.

An increase in proven natural gas reserves in Oman from 12.3 trillion cubic feet in 1992 to 30 trillion cubic feet this year has been achieved by intensive exploration. The new gas wells could increase the total by another two trillion cubic feet. A massive amount of gas in Oman is associated with oil and much of the non-associated gas is often still near oilfields. It is estimated that more than 10 trillion cubic feet of Oman's non-associated natural gas is beneath oilfields in deep geological structures.

PDO is constructing a third gas processing plant with a capacity of 20 million cubic meters per day at Saih Nihayda (PEC 94600017). A 265-kilometer pipeline is being laid alongside the 350-kilometer line from central Oman to the Sur area. The new plant is scheduled to go onstream at the end of 2004.

Another project due for completion in the third quarter of 2006 is the $1 billion oil refinery at Sohar in Oman (PEC 94600036/18). A government owned project, the refinery will have a crude unit with a capacity of 116,400 bpd and a residue fluid catalytic cracking unit (RFCCU) with 75,260 bpd capacity.

The refinery, which will operate at full capacity to maximize propylene production of around 327,000 tons per year which will serve as feedstock for a propylene project planned in Sohar, said oil and gas minister Dr Mohammed bin Hamad Al Rumhi adding that the refinery would give a boost to the Sohar industrial port (PEC 96400006/05/10) and that up to 90% of its output would be exported through a ten year takeoff agreement with BP (LSE: BP) (London, UK). JGC (TOKYO: 1963) Yokohama, Japan) (PEC 98890058) has started work on the construction.

The government has proposed the construction of a 220 kilometer pipeline from the existing refinery in the capital Muscat to Sohar in the northeast. The pipeline would carry up to 100,000 bpd of a mix of crude oil and long residue as a feedstock for the Sohar refinery. Twenty-three international banks are on call to finance the pipeline construction and Dodsal (Mumbai, India), SK Engineering Seoul, Korea and Chiyoda (Yokohama, Japan) are said to be possibles in the frame for the construction contract. Five firms are bidding for project management contract with Mott MacDonald (UK) coming in at $1.7 million and Canada's Veco Engineering with $3.6 million. Germany's ILF, Tebodin from the Netherlands, and Electrowatt Engineering are the other bidders.

The Omani government retains full ownership of all gas fields and associated assets in the PDO's concession area.