PDO outlines production growth plans

Muscat: Oman’s total oil reserves for 2018 consisted of approximately 4,791 million barrels at the end of 2018, rising by around 51 million barrels since the end of 2017, as shown by evaluating the fields and additions from new discovery operations after deducting the quantity produced in 2018, said Eng. Salim bin Nasser Al Aufi, Undersecretary of the Ministry of Oil and Gas.
In his speech during the annual press conference of the Ministry of Oil and Gas held at Oman Convention and Exhibition Centre today, Eng. Al Aufi added that in terms of oil reserves, some 0.96 trillion cubic feet of gas have been added, bringing Oman’s total gas reserves to approximately 24.65 trillion cubic feet at the end of 2018 after deducting the quantity produced in 2018. This marked a decrease of some 0.31 trillion cubic feet from the end of 2017.
He pointed out that as for production, the average daily production of oil reached approximately 978,000 barrels of oil per day in 2018, confirming Oman’s commitment, alongside Opec members, to lower production and to narrow the gap between supply and demand.
"Meanwhile, the average daily production of natural gas plus the gas imported from Dolphin reached approximately 125 million cubic metres per day against 112 million cubic metres daily in 2017, of which 98 million cubic metres of non-associated gas and 22 million cubic metres of associated gas in addition to 5 million cubic metres of gas imported from Dolphin," Eng. Al Aufi said.
He affirmed that the Government continues to deploy efforts to encourage the local and international private sector toward joint investment in the oil and gas sectors in all petroleum projects across their different iterations, ranging from exploration through production and development, on to the creation of gas-dependent projects and auxiliary services projects for the petroleum industry.
He pointed out that the overall expenditure on oil and gas exploration, production and development amounted to approximately US$11.75 billion against US$11.4 billion in 2017, distributed over some 69 per cent as capital expenses, e.g. drilling, facilities, etc., and some 31 per cent as operational costs.
Eng. Al Aufi further said that expenditure on the oil sector consisted of approximately US$8.4 billion whereas total expenditure on the gas sector reached approximately $3.3 billion.
He added that strategic projects and economic diversification plans in Oman are key. Their aim is to make a significant contribution to sustainable development through which the Ministry of Oil and Gas (MOG) seeks to attract promising investment opportunities, expand investments and work with partners to capitalise on technical expertise in order to help boost local production and create jobs, which have so far reached some 6000 positions. Among the chief strategic projects are Salalah Liquefied Petroleum Gas Project, Ghazeer Field Project, Yibal Khuff Project, Rabab Harweel Integrated Project (RHIP), Tayseer Project, Liwa Plastics Factory Project and Duqm Refinery Project.
Eng. Al Aufi pointed out that at the end of 2018, the total number of employees at operating companies (including concession area companies, Oman Oil Refineries and Petroleum Industries Company (Orpic), Oman Liquefied Natural Gas LLC, and Oman Gas Company) consisted of some 18,095 employees, 14,927 of whom were Omani employees and 3,168 international employees, thus representing around 82 per cent of Omanisation in the sector. In 2018, the companies hired some 800 Omani nationals in technical, engineering and administrative positions.
In terms of marketing open concession blocks, Eng. Al Aufi added that six oil concession blocks were proposed in the first quarter of the present year. The MOG is currently endeavoring to notify local and international companies of the 2019 bidding and marketing round for oil concession blocks in hopes that its efforts will culminate in success following the positive results of the last two rounds where seven out of eight concession blocks were awarded.
In the context of the MOG’s in-country value (ICV) efforts and in collaboration with the operating companies of the oil and gas sector, the Oil and Gas Undersecretary said the ICV programme has played a significant and active role in encouraging local companies to be involved in the manufacturing and different services pertaining to the oil and gas sector, and boosting the expenditure of companies on purchases and contracts with locally registered suppliers. The ICV statement showed steady improvement that amounted, in late 2018, to 40 per cent of the value of expenditure since first being applied, at a 2 per cent annual increase. In their endeavour to Omanise products and services, operating companies managed to Omanise 26 out of 53 local investment opportunities identified in the Roadmap Strategy Study, e.g. the manufacturing of large-diameter carbon steel pipes, tube sleeving, drill bits, and polymers used in enhanced oil recovery (EOR) and in assembling and repairing electrical submersible pumps.
Overall investment in these opportunities amounted to approximately US$160 million, and around 840 jobs were created. More than 30 investment opportunities were Omanised by the operators outside the Roadmap Strategy Study too, e.g. manufacturing drilling, manufacturing salt, grinding and lifting equipment during well repair and assembling and repairing progressive cavity pumps as well as repairing some of the equipment of lifting machinery.
Speaking at the annual Ministry of Oil and Gas Media Briefing event at the Oman Convention and Exhibition Centre, Raoul Restucci, Managing Director of Petroleum Development Oman (PDO) said that PDO announced plans to ramp up oil production to a new level of 670,000 barrels per day (bpd) in the next five years.
He added that after setting a 550,000 bpd 10-year plateau commitment over the last decade, the company has consistently grown production and is confident of delivery of further production growth.
This comes after it confirmed that 2018 yielded its highest oil output since 2005 of 610,170 bpd despite the impact of Cyclone Mekunu last May, which disrupted production in the south of its concession area.
He added: “Our approach has been simple: to stay the course in the face of oil price uncertainty and increasing technical and operational scale challenges. Increasing value delivery for the nation’s development and preparing the business to face changing energy expectations".
Restucci pointed out, “This means more sustainable oil and gas, driving energy efficiency in all aspects of our operations, and broadening our business model to add value to Oman beyond operations in our concession".
“As we head into the next decade, we are stepping up the deployment of new technology and pursuing ever more efficient ways of working to achieve enhanced productivity in our exploration and production business," he said.
Restucci added, “During 2018, we successfully delivered a combined daily oil, gas and condensate output of 1.205 million bpd.”
PDO set new milestones on the safety front, achieving a record 0.15 Lost Time Injury (LTI) Frequency – a 25 per cent fall on 2017. Total Recordable Case Frequency was also down at 0.71 with more than 214 million manhours of activity.
On the road safety front, staff and contractors drove more than 750 million kilometres without a work-related motor vehicle fatal incident, and on asset integrity, there was a 77 per cent fall in the number of Tier 1 process safety incidents and a 50 per cent drop in Tier 2 incidents – both the lowest since 2010.
Restucci said: “These improvements highlight the ongoing concerted effort across the Company to enhance safety and operational excellence at the frontline. This is achieved through better supervision, awareness, training, and the continuous implementation of new technologies and programmes, such as our game-changing new Ihtimam behaviour-based system.
“Regrettably, the impressive results were overshadowed by the deaths of two contractor employees at Nimr in April and Yibal in July, tragic reminders of the constant need for improved vigilance and greater rule compliance at all levels.
Restucci added, “In a year in which we celebrated four decades of uninterrupted gas supply, I’m pleased to report that we also successfully migrated to becoming the country’s swing producer, requiring us to operate in a highly dynamic mode, frequently compensating for third party production variations.
He said, “However, it’s important to stress that while oil and gas will continue to be fundamental to our energy mix, we are developing innovative renewable solutions to create new growth opportunities for the Company as well as for the nation. This has us increasing emphasis on renewables, such as solar, whilst leveraging new technology and improving our overall energy efficiency.”
Restucci said “good progress” was being made on both PDO’s “mega” projects at Rabab Harweel and Yibal Khuff with the former, the largest capital project in PDO history, expected to come on stream in mid-2019, representing a reserve add of more than 500 million barrels of oil equivalent. The latter, an integrated sour oil and gas development, is scheduled for start-up in 2021, developing in excess of 327 million barrels of oil equivalent.
The Exploration Directorate set new records, providing higher quality seismic data acquisition through the deployment of sophisticated Ultra-High Productivity technology whilst delivering impressive unit finding cost of USD 0.3/barrel of oil equivalent.
He said: “The new seismic has enabled us to identify new plays in Central Oman, reaffirming the significant prospectivity in our Concession area”.
Restucci reported that the Company’s Field Development Centre and Front End Engineering and Design (FEED) Office were both delivering lower cost growth solutions and robust development plans.
He said: “Both of these departments rely heavily on Omani talent and are playing a critical role in ensuring we remain competitive and fit for the future. We are also looking at how we can commercialise their expertise beyond our boundaries in areas such as enhanced oil recovery, project management and training.”
PDO continued to drive a rigorous cost control and Lean business efficiency programme across the full spectrum of its business, completing a total of 142 efficiency improvement projects which secured US$152 million in cost savings. A further US$300 million of projected savings were identified through cost improvement reviews with our contractors and other value optimisation initiatives in response to the lower oil price environment.
Despite the increased complexity in the 2018 drilling scope, the Company’s Well Engineering Directorate delivered 600 new wells and achieved the best ever recorded cost per metre drilled in PDO’s history (4 per cent lower than 2017). At the same time, it also managed to be more efficient in terms of drilling time per metre with a 5 per cent improvement compared to the previous year.
By the end of 2018, the directorate had carried out 22,400 completion and well intervention activities – the highest number ever recorded with the same number of resources as previous years. PDO ramped up its ICV programme, awarding contracts worth US$3.7 billion to nationally registered firms, retaining a value in country of 44 per cent, and supporting the opening of new Oman-based workshops and factories to service the domestic oil and gas sector.
Its National Objectives team generated 17,027 employment opportunities for Omani jobseekers, consistent with the target for the year, in both the oil and non-oil sectors. For 2019, the Company is targeting the creation of 21,000 job opportunities.
Restucci said: “Against a backdrop of fluctuating trends in the global market and increasing technical, operational and financial challenges, I announce that, in 2018, PDO exceeded performance expectations across a wide range of asset and functional targets and is well positioned to continue to play our part in support of value creation for all our stakeholders.”
Stephen Kelly, President, General Manager of Occidental Oman, said the company's exploration programme had been successful during 2018 by reporting 9 discoveries with a success rate of 60 per cent for the year as a whole. The company acquired more than 1150 square kilometres of the new three-dimensional seismic data in Block 53.
He added that the company added about 120,000 barrels a day from liquid processing power, as well as 40,000 barrels a day as water injection power and 30 million cubic feet a day from gas compressor power.
Mus'ab bin Abdullah Al Mahrouqi, CEO of Oman Oil and Orpic Group reviewed the Group's projects being implemented during the current period. He said that the investment cost of Liwa Plastics Factory Project stood at US$6.7 billion while the cost of Sohar Refinery Project stood at US$2.7 billion, Muscat Sohar Pipeline Project and Al Jifnain Terminal at US$336 million.
Eng. Ahmed bin Saleh Al Jahdami, CEO of Oman Oil and Orpic Group Downstream said that the Group's investments stood at 54 at a cost hitting US$16 billion.
He pointed out that the Group's dividends – before calculating interest and tax – estimated by US$2.1 billion.
Dr Salim bin Saif Al Huthaili, CEO of Duqm Refinery Project said that the total investments of Oman Oil and Orpic Group estimated by US$28 billion in the past years including USD 7.6 billion to be funded by Oman Oil, US$3.9 billion by partners and US$16.7 billion by debt and loan.
Eng. Yousef bin Mohammed Al Ojaili, President of BP Oman said that the completion rate at Ghazeer field stood at 45 per cent up to now while the completion rate in the third train at the central processing facility stood at 28 per cent.
He added that after one year of commencing production at Khazzan field, 9.200 million cubic metres of gas, and 10.5 million barrels of condensates were produced, in addition to drilling 50 wells. — ONA