Oman signs agreements with Shell, Total to develop gas projects

Oman, the biggest Middle East oil producer outside Opec, signed two separate agreements with France’s Total and Anglo Dutch oil major Shell to develop gas projects and fields in the sultanate.

The Shell agreement covers proposed projects covering upstream gas exploration and development, gas-to-liquids, liquefied natural gas and renewable energy, it said in statement on Sunday. Separately, Shell and Total, which hold 75 per cent and 25 per cent stakes in the Greater Barik area onshore Block 6 respectively, will collaborate before state back-in to produce an initial 500 million standard cubic feet of gas per day, with a target to reach a potential 1 billion cf/d “at a later stage.” The two companies didn’t provide a timeline for gas production or the cost for the project.

“We are hopeful we can use Shell’s integrated gas and new energies investment to accelerate Oman’s diversification and industrialisation agenda,” said Maarten Wetselaar, Shell Integrated Gas & New Energies director. “The proposals could also enhance in-country value, resulting in value and job creation in Oman’s economy.”

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Oman is seeking to develop its oil and gas industry to help counter the drop in oil prices which has dwindled its income from hydrocarbons. BP and Oman Oil Company Exploration & Production approved this year the second phase of the onshore Khazzan gas project, which will start output in 2021. The new investment will boost overall output at the site by 50 per cent to 1.5 billion cf/d.

The separate memorandum of understandings signed between the government of Oman, Shell and Total "will help secure Oman's longer-term gas supply through development of recent discoveries in the Greater Barik area of central Oman, close to BP's Khazzan tight gas development brought on-stream last year,” said Liam Yates, research analyst, Middle East and North Africa upstream, at consultancy Wood Mackenzie.

As part of the agreement, Shell will operate a gas-to-liquids project with state owned Oman Oil Company, the statement said, without providing details about the size of the plant or timeline for its completion. Shell already has a 34 per cent stake in Petroleum Development Oman and a 30 per cent stake in Oman LNG. Total has a 5.54 per cent stake in Oman LNG and 2.04 per cent holding in Qalhat LNG.

The preliminary agreement "sets out an initial mutual understanding between Shell and Oman and serves as a platform for further negotiations on the proposed developments,” Shell said.

Meanwhile, Total will use its equity gas entitlement in Block 6 as feedstock to develop a regional hub in Oman for an LNG bunkering service in the port city of Sohar that will supply the fuel to marine vessels. A new small-scale LNG liquefaction plant will have a 1 million tonne per year train that can be expanded in the future.

“We will bring our expertise in LNG and will introduce access to a new gas market for the Sultanate,” said Arnaud Breuillac, president exploration & production at Total.  “Developing an LNG bunkering service will generate in-country value and job opportunities, and will support industry diversification through fostering the shipping activity in Oman.”