BP weighs $10bn Oman self-sufficiency deal

Plan could produce five times as much as emirate now imports.

BP expects to decide within two years whether to proceed with a US$10 billion (Dh36.72bn) gas project that could give fuel self-sufficiency to Oman.

The company is conducting a pilot project foreshadowing what may be a major commercial development of deposits thought to contain more than 100 trillion cubic feet (cu ft) of natural gas in the ground, of which between 10 trillion cu ft and 50 trillion cu ft, may be recoverable.

If BP decides the "tight gas" development is economically viable, it would aim to produce 1 billion cu ft of gas a day from the project, or about five times the amount of gas that Oman imports from Qatar.

"This is a world-scale gas accumulation," Jonathan Evans, the general manager of BP's operations in Oman, told the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) yesterday.

"Under our contract, we have until February 2013 to make a final investment decision. But we are targeting [making the decision] before the end of 2012," he said on the sidelines of the meeting.

BP was in talks with Oman's government about the volume of output from the project that would best serve the sultanate's needs, Mr Evans added.

Oman, like most GCC states, is short of gas for power generation and industrial projects. It is locked into long-term contracts to export liquefied natural gas (LNG) through facilities built about a decade ago, which now run at partial capacity.

BP has spent about $450 million on seismic exploration of Oman's Block 61 and drilling seven wells.

The company is committed to spending $650m on exploration and commercial feasibility assessments but may exceed that, Mr Evans said.

The first six wells BP drilled in Block 61 were conventional, but the latest includes a long horizontal section designed to provide greater contact with the gas.

First production from the test well is expected by the end of this month. The aim is to establish whether the more expensive horizontal wells are more productive than the best of the vertical wells, which have pumped up to 20 million cubic feet a day. That would be the minimum necessary for commercial development, Mr Evans said.