Muscat: BP and Oman Oil on Sunday signed a heads of agreement with the government of Oman committing to amend the Oman Block 61 exploration and production sharing agreement (EPSA), extending the licence area of the block and enabling a further development of the major Khazzan tight gas field.
BP is the operator of Block 61 with a 60 per cent interest and Oman Oil holds the other 40 per cent, according to a press release.
Under the amended EPSA, the extension will add a further over 1000 square kilometres to the south and west of the original 2,700 square kilometres of Block 61.
The extension will allow a second phase of development, accessing additional resources in the area that have been identified by drilling activity within the original block. Development of this additional resource is subject to final approval of the government of Oman and of BP; both expected in 2017.
The Khazzan reservoirs in Block 61 represent one of the Middle East’s largest unconventional tight gas accumulations, with the potential to be a major new source of gas supply for Oman over many decades.
Production from Khazzan will make a significant contribution to ensuring continuing stable and long-term domestic supplies of gas for Oman.
Combined plateau production from Phases 1 and 2 is expected to total approximately 1.5 billion cubic feet of gas a day (bcf/d), equivalent to around 40 per cent of Oman’s current total domestic gas production.
The agreement was signed on Sunday in Muscat by Dr Mohammed Al Rumhy, minister of oil and gas of the Sultanate, Bob Dudley, BP Group chief executive, and John Malcolm, executive managing director of Oman Oil E&P.
“I am delighted to see BP taking additional acreage that will result in realizing more gas reserves and more production of gas that our country needs to support our energy planning and requirements,” said Dr Mohammed Al Rumhy.
“Khazzan is a major resource with the potential to produce gas for Oman for decades. This expansion of its development will build on the success we are already seeing in our work on the first phase, working closely with our Omani partners and applying BP’s leading technology and extensive tight gas experience. It clearly demonstrates our commitment to continue to invest in a superior project that will deliver long-term value to both BP and Oman,” added Bob Dudley.
The Phase 1 project, sanctioned in December 2013, remains on schedule to deliver first gas in late 2017. Subject to completion of the agreements and final sanction, the new Khazzan Phase 2 project will come on stream from 2020.
The two phases are expected to produce 1.5 bcf/d through development of 10.5 trillion cubic feet of recoverable gas resources. This will involve construction of a three-train central processing facility with associated gathering and export systems and drilling around 325 wells over a 15 year period. Improved reservoir performance, drilling efficiencies and other improvements have reduced the well count by around 100 wells from the original Phase 1 plan.
Block 61 contains significant volumes of unconventional gas, distributed across several reservoirs. Owing to the tight nature of the rocks in the Khazzan reservoirs, the wells need to be hydraulically stimulated to flow gas at target rates.
BP signed an agreement with the Government of Oman in January 2007 for the appraisal and development of Block 61. BP carried out one of its largest-ever onshore seismic surveys covering the 2,700km2 Block 61 area and began appraisal well drilling activities in 2008.
In March 2011 BP Oman achieved a milestone with the first gas delivery to the government from its extended well test project in Block 61. This successful pilot project helped to demonstrate the potential of a much larger scale development.
Phase 1 is on track to deliver first gas by end 2017 producing 1 bcf/d through development of seven trillion cubic feet of recoverable gas resources. By end of 2015, 27 wells had been drilled and completed. Its two-train Central Processing Facility is more than 60 per cent complete and around 11,000 people are currently working in the field. The estimated cost for developing Phase 1 and the Phase 2 extension is around $16 billion.