Oman Downstream report

Omifco currently owns and operates a modern world scale two-train of ammonia and urea manufacturing plant located in the Sur Industrial Estate, 300 km

Despite a gas feedstock shortage, Oman’s supportive governmental policies and incentives have fostered an export-culture and aided the private sector in adopting an outward-oriented strategic vision

Oman has witnessed a dramatic swing in the balance of supply of its gas feedstock, as it turned from exporting gas to the UAE in 1994, to importing Qatari gas via the UAE through the Dolphin Energy pipeline in 2008 to meet increasing domestic demand.

“We have been supplying Ras Al Khaimah with offshore Omani gas from 1994, and then we signed three years contract in January 2004 to supply it with gas from our onshore gas field,” says Yousuf Mohamed AL Ojaili, CEO of Oman Gas Company. “This was necessary to cover gas requirements in the UAE till Dolphin gas started operation,” he adds.

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But the growing demand for gas in Oman from the industrial and the domestic sectors, led the Sultanate to import gas from Qatar. “We started importing gas from Qatar using the existing export pipeline of the Dolphin project,” he adds. “The Dolphin gas complements Oman’s domestic gas consumption, and is also consumed in Sohar’s large industrial complex,” he explains.

In addition, Oman had committed too much of its limited gas production to long-term liquefied natural gas (LNG) export contracts. As a result, the government was trying to boost production by taking smaller and less productive gas fields away from Petroleum Development Oman (PDO) -- 60% owned by the government and 34% owned by Royal Dutch Shell -- and awarding them to international companies such as British Gas and BP.

In 2007, Oman signed a concession agreement with BP to develop tight gas fields, which contains complex and deep formations that are difficult to exploit. “BP believes that Oman has a considerable amount of untapped gas,” says Dr Jonathan Evans, general manager, BP Oman.

“We hope that our Khazzan tight gas project will be the first significant new source of gas into Oman and will help to ensure that Oman doesn’t need to worry about gas shortages for many years to come,” he adds.

BP has previously said that output in 2011 could reach 200 million to 300 million cubic feet per day (cfd). The two fields BP is developing are the Khazzan and Makarem fields.

But, despite the gas shortage, Oman is determined to honor its commitments toward existing projects. “We will honour our obligations to supply gas to existing projects,” says Nasser al Jashmi, Oman’s undersecretary of the oil and gas ministry.

Oman has also slowed projects that require gas feedstock, until it is sure that it will have the fuel to supply them. “We have engaged in the last few years not to encourage any gas consuming projects until we are sure our gas reserves can absorb the incremental demand,” al Jashmi adds.

The gas shortage has affected the expansion plans of many companies operating in Oman. Oman India Fertiliser Company ‘’Omifco’’ is one of the companies affected by the gas shortage as it suspended its expansion projects due to gas feedstock shortage.

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