ENERGY COUNTRY REVIEW

keyfactsenergy.com Country Review Oman

Oman Oil Production At the mouth of the Persian Gulf and in the path of trade routes Thousand barrels per day to East Africa and the Orient, Oman built a commercial empire centuries ago. After the mid-19th century, power struggles weakened the sultanate, strengthening bonds to the British Empire.

1004 In 1970 British-educated Qaboos bin Said deposed his father 952 943 942 and, as sultan, began modernizing. Oman allows the United 918

885 States to use port and air base facilities. Oil, exported since 1967, has financed roads, schools, and hospitals. The majority of Omanis still farm or fish, and protection of fisheries and coastal zones is promoted.

Oil & Gas Overview

Oman is the largest oil and natural gas producer in the Middle East that is not a member of the Organization of the Petroleum Exporting Countries (OPEC).

Located on the Arabian Peninsula, Oman's proximity to the Arabian Sea, Gulf of Oman, and Persian Gulf grant it access to some of the most important energy corridors in the world, enhancing 2011 2012 2013 2014 2015 2016 Oman's position in the global supply chain. Oman plans to capitalize on this strategic location by constructinga world-class Source: BP Statistical Review oil refining and storage complex near Duqm, which lies outside the Strait of Hormuz (an important oil transit chokepoint).

Like many countries in the Middle East, Oman is highly dependent on its hydrocarbons sector. In 2014, the sector accounted for 84% of government revenues and 47% of Oman's gross domestic product, according to the Central Bank of Oman.

Due to the relatively high cost of production in the country, Oman's government offers incentives to international oil companies for exploration and development activities in the country's difficult- to-recover hydrocarbon plays.

Country Key Facts

Official name: Sultanate of Oman Capital: Muscat Population: 5 119 745 (2016) Area: 309,500 square kilometers (119,500 square miles) Form of government: Absolute Monarchy Language: Arabic, English, Baluchi, Urdu, Indian dialects Religions: Ibadhi Muslim, Sunni Muslim, Shiite Muslim, Hindu Currency: Omani rial Calling code: +968 Country Review Oman

Oman Oil Reserves Oil and gas investments are projected to exceed $100 billion over Billion barrels the next ten years, of which $40 billion will be in gas-related areas. Oman’s long-term sector strategy extends all the way to

5.6 the year 2044 and even beyond. 5.5 5.3 5.2

5.0 Key opportunities The sultanate’s oil and gas sector is one of the most mature industries in the region, with the national oil company Petroleum Development Oman (PDO) focusing on enhanced oil recovery (EOR) schemes to maintain output at depleting fields.The company will also build a series of depletion compression projects to enhance flow rates from its gas fields.

Future Plans With its oilfields maturing at a rapid pace, PDO is introducing a range of increasingly complex technologies to extract oil. These include thermally assisted gas/oil gravity drainage and steam injection and polymer flooding, alkaline/surfactant/polymer flooding and microbial EOR. Rising volume of water seeping into reservoirs expected to increase by 35% in the next ten years also presents further challenges. 2011 2012 2013 2014 2015 PDO’s ambitious savings and production targets over the next Source: BP Statistical Review few years and will focus on six key priority areas:

• Well and reservoir management • Operational excellence • Human Resources • Hydrocarbon maturation • Drilling and engineering project • Contracting and procurement

Getting into the market The market place is crowded, but work is available in all segments of the sector. Small, niche area operators tend to take up specialised product lines and work. The country relies heavily on imported products. Most large contractors have developed in- house sourcing or trading capabilities that complement their line of activities. This allows them a degree of control over supply, delivery, pricing and, in general, an edge over the competition.

Agents The market is import-oriented, highly competitive and promotes an 'agent' culture. The success of a product, to a great extent, depends on the agent. Several major end-users as well as the Omani Commercial Law encourage vendors to engage a registered local agent. An amendment to the Agency law has removed the requirement for exclusive agents. There is no standard format for agency agreements. However, once in place, representational arrangements can be difficult to get out of. Country Review Oman

AFGHANISTAN JORDAN

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SAUDI ARABIA UAE

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Key Players About a dozen or so business groups - through some 400 or so associates, divisions and subsidiaries-dominate the market and control the trade economy. Prominent among these are: Suhail Bahwan Group, Saud Bahwan Group, Omar Zawawi Establishment (OMZEST), Zubair Enterprises, Khimji Ramdas, W J Towell, Tawoos (Renaissance Group), Mohsin Haider Darwish (MHD), and Galfar.

Sector organization

Oman's Ministry of Oil and Gas coordinates the state's role in the country's hydrocarbon sectors. Final approval on policy and investment, however, rests with the sultan of Oman. Petroleum Development Oman (PDO) holds the vast majority of Oman's oil reserves and is responsible for 80% of its production, according to the Middle East Economic Survey. In addition to the government's 60% ownership stake in PDO, Shell (34%), Total (4%), and 's Partex (2%) all own stakes in PDO. The Oman Oil Company (OOC), which is responsible for energy investments both inside and outside of Oman, is fully government- owned. The Oman Oil Refineries and Petroleum Industries Company (ORPIC) controls the country's refining sector and owns both of Oman's operating refineries. Country Review Oman

PDO has an even greater presence in the natural gas sector than in the oil sector, accounting for nearly all of Oman's natural gas supply along with smaller contributions from Occidental Petroleum and 's PTTEP. The Oman Gas Company (OGC) directs the country's natural gas transmission and distribution systems. The OGC is a joint venture between the Omani Ministry of Oil and Gas (80%) and OOC (20%). Oman Liquefied Natural Gas (OLNG)—owned by a consortium including the government, Shell and Total-operates all liquefied natural gas (LNG) activities in Oman through its three liquefaction trains in Qalhat near Sur.

The government enlists foreign companies in new exploration and production projects, offering generous terms for developing fields that require the sophisticated technology and expertise of the private sector. Given the technical difficulties involved in oil production in Oman, the contract terms for international oil companies (IOCs) have become more favorable in Oman than elsewhere in the region, some allowing significant equity stakes in certain projects. Occidental Petroleum has the largest presence of any foreign firm and is the second largest oil-producer in Oman. Other major players with interests in Oman include Shell, Total, Partex, BP, CNPC, KoGas, and Repsol.

Reserves According to the Oil & Gas Journal, Oman had 5.3 billion barrels of estimated proved oil reserves as of January 2016, ranking Oman as the 7th largest proved oil reserve holder in the Middle East and the 22nd largest in the world.

Oman held 24.3 trillion cubic feet (Tcf) of proved natural gas reserves as of January 2016, according to the Oil & Gas Journal.

Source: UK Trade & Investment, Energy Information Administration

History

The Sultanate of Oman granted the first oil concession license to Darcy Exploration Company for exploration rights in the country in 1925. Twelve year later, in July 1937, the concession license granted to Darcy was transferred to Petroleum Concessions Company Ltd which was subsequently re-named “Oman and Dhofar Oil Company Ltd”, (part of Iraq Oil Companies Group), who exercised the exploration and production rights on behalf of the (“IPC”).

Later In 1951, Oman and Dhofar Oil Company (Ltd)”, assigned its concession rights in Dhofar Region to Dhofar City Services Company(DCSC). A year later, Oman and Dhofar Oil Company (Ltd) changed its name to Petroleum Development Oman (“PDO”). Country Review Oman

Until 1954, the exploration activities were limited to geological studies. This was due to several challenges including those related to logistics, which made access to the most promising oil prospects difficult due to the limitation in roads & transportation. The effort in search for oil continued and in 1955, DCSC drilled the first wildcat well in south Oman, named Douqah-1 and in 1956, PDO drilled its first exploration well in north Oman Fahud, named FHD-1. Both wells were dry. These failures combined with worsening logistical problems and a surplus oil supply in the world market led to withdrawal of some of the oil companies as operators. A few companies including Shell opted to remain in the Sultanate and continue their efforts for oil search.

The first oil discovery in the Sultanate was achieved in 1956, through Dhofar City Services Company's Marmul-1 well. However, this was not considered as a commercial discovery because the oil found was of a heavy type compared to oil discoveries in the neighboring Arab Countries at that time.

In 1962, PDO’s exploration activities culminated in a commercial discovery of oil in the Yibal field, followed by giant discoveries in Natih and Fahud fields in 1963 and 1964 respectively. These discoveries were the starting point to the birth of an Oil producing country.

PDO intensified exploration activities by conducting more geophysical surveys and increased exploration drilling leading to the discovery of more oil fields. As a result of these efforts, In 1968 and 1969 the Al-Khuwair and AlHuwaisah fields were discovered respectively. Further discoveries were declared in 1972 represented by North Ghabah, Qarn Al-Alam, Nuhaida and Habour fields, followed by Amal field and Saih Rawl field in 1973.

Encouraged by the results, the Government, in 1973, signed two new concession agreements to explore for oil and gas. By 2009, the number of producing oil fields reached 135 fields with 21 concession holders.

In 2013, the total number of companies working in oil and gas exploration and production reached sixteen, working on thirty concession areas, optimizing the use of the local resources, initiating employment opportunities by hiring and training Omanis and contributing to the local community development in particular and to the Oman economy in general. Country Review Oman

REGULATORY AUTHORITIES/ORGANIZATIONS

Ministry of Oil and Gas (MOG) Al Khuwair Ministry Streets PO Box 551 PC 100 Muscat Sultanate of Oman

T +968 2464 0555 F +968 2469 1046 E [email protected] W www.mog.gov.om

Main responsibilities: Oversees all oil and gas exploration and production activities in Oman.

Ministry of Environment and Climate Affairs (MECA) Al Khuwair Ministry Streets PO Box 323 PC 100 Muscat Sultanate of Oman

T +968 2440 4830 F +968 2469 2462 E [email protected] W www.moeca.gov.om (Arabic only)

Main responsibilities: Sets general policies, plans and programmes required for environment protection, and ensuring the safety and preservation of various environmental systems in Oman.

Oman Society For Petroleum Services (OPAL) P.O.Box 493, Oman

T +968 24 605700 F +968 24 604255 E [email protected] W opaloman.org

Overview: OPAL - Oman society for Petroleum Services is the first Society in Oman’s Petroleum Industry to be officially approved and registered in the Sultanate of Oman, on 27 October, 2001 under the regulations governing the formation of societies with the Ministry of Social Development. OPAL started as a concept in 1998, Country Review Oman

where by like-minded companies embarked on a vision to promote the industry standards and create level playing field.

OPAL is the industry forum society for Oman’s Petroleum Industry. It is a non-profit organization. Its more than 400 members are made up of Oil & Gas companies, including Oil & Gas Producers & Operators, Contractors and Suppliers – large and small. Country Review Oman

Proved oil reserves at 2016 year end (billion bbls)

Iran (158.4) Iraq (153.0) Kuwait (101.5) Oman (5.4) Qatar (25.2) Saudi Arabia (266.5) Syria (2.5) UAE (97.8) Yemen (3.0)

Proved gas reserves at 2016 year end (trillion cubic metres) Bahrain (0.2) Iran (33.5) Iraq (3.7) Kuwait (1.8) Oman (0.7) Qatar (24.3) Saudi Arabia (8.4) Syria (0.3) UAE (6.1) Yemen (0.3)

2016 Oil production (thousand bbls per day) Iran (4600) Iraq (4465) Kuwait (3151) Oman (1004) Qatar (1899) Syria (25) UAE (4073) Yemen (16)

2016 gas production (billion cubic metres) Bahrain (15.5) Iran (202.4) Iraq (1.1) Kuwait (17.1) Oman (35.4) Qatar (181.2) Saudi Arabia (109.4) Syria (3.6) UAE (61.9) Yemen (0.7)

Source: BP Statistical Review