Oman must offer better deals on its
limited gas resources to fend off competition from Saudi Arabia which
is opening up its vast resources to foreign investors, industry
officials and analysts said. "Oman will need to offer more
security packages in profit sharing, offer longer commitment or face
strong competition from the Saudis once they have fully opened up
their gas fields to foreign firms," TotalFinaElf General Manager
in Oman Jerome Bourceret told Reuters.
"Gas exploration is more economical in Saudi Arabia and the
reserves are much bigger than in Oman," Bourceret said. Saudi
Arabia has short-listed world firms for investment in its upstream gas
sector, the first such opening since Riyadh nationalized oil
exploration and production in the 1970s. Oman's proven gas reserves
stand at 22 trillion cubic feet, with potential reserves more than
double that figure. TotalFinaElf, which has a 5.54 per cent stake in
the Oman LNG plant, is currently exploring for oil and gas in an
offshore site in northern Oman.
Other firms with similar deals with Oman include Phillips Petroleum
Corp and Occidental Petroleum Corp. Analysts said that Oman must
revise and update the terms of the production-sharing agreements to
remain competitive. "Officials need to revise the terms of the
EPSAs (Exploration Production Sharing Agreements), they have not
changed much since the 1980s, especially on the breakdown of the
percentage of the profits between investors and the government,"
one analyst told Reuters.
"Since the government does not contribute to the exploration
capital, it needs to reduce its share of profits so investors can keep
a little bit more from their efforts," he said. An oil industry
official, who declined to be identified, said Oman must also offer
longer exploration contracts to make the deals more attractive.
"Currently, Oman grants a two or three year exploration contract
which binds the investor to find gas or relinquish the field. The
timeframe may not be enough to assess a field and an investor may find
himself relinquishing it to his rival after he has made a considerable
investment," he said.
Mike Cubrillo, General Manager of Gulf stream Resources Oman, a unit
of Gulfstream Resources Canada Ltd, said for now only his company has
a gas production sharing deal in Oman. "We are the only firm
which has signed such an agreement but we won't enjoy that status for
long since the demand for gas is increasing every year," he told
Reuters. In 1997, Oman awarded Gulfstream oil exploration and
production rights in Hafar block 30. The deal commits the company to
spend at least $20 million over six years on exploration.
Officials had said Oman planned to invite more foreign firms this year
to Cubrillo said Gulfstream expected to start producing 100 million
standard cubic feet per day of gas in 2002. Under the terms of the
agreement, the Canadian firm will sell the entire gas production to
the government. "Industry developments and population growth will
call for aggressive exploration to provide cheap fuel for gas-based
industries," he added.
According to official statistics, Oman gas demand in 2000 was 28
million cubic meter per day (cmd) and is expected to increase to 70
million cmd in 2005. The statistics also showed that more than 80 per
cent of the demand would be consumed by the Oman LNG plant and planned
projects, including refineries and power plants.
An oil and gas ministry official said that most of the power plants
are currently fueled by diesel, which cost 30 baisas per unit.
"Gas costs only 10 baisas per unit and more environmental
friendly than diesel," he told Reuters.
Source: Gulf News