Over the past 10 years, Oman’s maturing oilfields have increasingly relied on enhanced oil recovery (EOR) technologies, which have seen current production return close to levels not witnessed in 15 years. With EOR expected to comprise a quarter of state-owned Petroleum Development Oman’s (PDO) total oil production by 2020, the sultanate has seen natural gas usage in oilfield production expand substantially, and new technologies utilising solar power have been touted as the solution to the sultanate’s EOR challenge.
Although development to this point has been driven almost exclusively by American firm GlassPoint Solar, the government’s long-term renewables strategy will likely create space for a host of private players in advanced solar EOR processes.
Increased Use Of EOR
In 2013 PDO, the sultanate’s largest oil producer, announced plans to drill more than 100 wells in the next five years, at an estimated cost of $800m. By 2022, the company plans to commission 16 megaprojects with a combined value of over $11bn, with a target to produce more than 1bn barrels of oil.
Many of these projects will be developed within existing fields, and involve utilisation of EOR techniques, which has shown rapid expansion in recent years. PDO commissioned its first EOR project in 2004, and announced in 2013 that EOR will grow to comprise 25% of its total liquid oil production in 2020, up from current levels of around 3%. Some of the company’s biggest projects are expected to deploy EOR technology, including the Rabab Harweel, Yibal Khuff/Sudair, and Budour fields, which are expected to add an additional 200,000 barrels per day of capacity.
In 2011 EOR and sour oil projects accounted for a total of 11% of the sultanate’s crude production portfolio, with primary and secondary recovery projects accounting for 48% and 41%, respectively, according to consultancy EY, which also estimated that 23% of the sultanate’s oil production was supplied by EOR in 2012, although EOR-produced supply was dominated by production at Oxy Oman’s Mukhaizna field.
Two of the most popular EOR techniques, thermal/steam injection, and miscible gas EOR, involve heavy usage of natural gas, which is either used to heat water, forming steam that is then injected into wells to improve flow and production, or injected directly into reserves. The Ministry of Oil and Gas (MoG) reported that gas injection into oilfields stood at 319.6m cu feet per day in 2013, a 5% increase over 2012, and this is expected to further grow as the share of production from EOR rises. As such, the government is increasingly looking to renewables-driven energy projects, including development of solar-fired EOR processes, which could allow the sultanate to reduce domestic natural gas consumption, enabling it to meet export obligations and provide sufficient domestic supply.
“The varied and difficult sub-surface conditions in Oman underline the need for innovation and efficiency. This has put Oman ahead of many countries in embracing new innovative technologies in the oil and gas sector,” Chris Breeze, country chairman at Shell Development Oman, told OBG.
Process & History
Rather than burning natural gas to produce steam, solar EOR uses concentrated solar power (CSP) technology to produce steam, with mirrors reflecting concentrated sunlight onto receivers that collect solar energy and convert it to heat, which is then used to produce steam. Solar EOR is able to produce the same quality and temperatures of steam as natural gas EOR, and could significantly reduce EOR gas requirements. The process can additionally be used in oilfields where there is limited availability of natural gas, negating the capital investment requirements of gas infrastructure, and rescuing the sultanate’s so-called stranded assets, or oilfields located in the remote hinterland. PDO began investigating solar EOR in 2005, in the wake of growing recognition that EOR’s long-term strategic importance would likely create a gas-supply conflict in the sultanate.
“Most people don’t realise that the oil and gas sector is a huge user of energy, just because of the scale of it. It takes energy to make energy. It’s hard to get your head around just how much energy we’re talking about. In Oman, nearly a quarter of the country’s natural gas supplies are consumed to produce oil. All this gas is used for EOR, but if the gas was used for higher-value applications, like power generation, imagine the kind of impact it would have on utilities,” Rod MacGregor, CEO of GlassPoint Solar, told OBG.
In 2009 PDO initiated a tender process that saw GlassPoint win a contract for construction of a 7-MW pilot project in the Amal field in southern Oman. Although this was the first solar EOR pilot project to be rolled out in the Middle East, it was not the company’s first foray into solar EOR; in 2011 GlassPoint installed a solar EOR project at an oilfield operated by Berry Petroleum in Kern County, California, which was used to preheat water for gas-fired steam generators.
Construction on the project finalised in December 2012, achieving impressive early success. One of the biggest cost drivers in a traditional CSP project is building a system that can withstand wind, which usually entails heavy use of steel and concrete. GlassPoint’s CSP system, however, is enclosed in an agricultural greenhouse, allowing the company to use cheaper, thinner mirrors, and around half the amount of steel and aluminium typically required in an outdoor solar field. The company reported in June 2014 that the pilot project had not only met, but exceeded targets for its first year of operation, achieving 99.8% uptime, with zero injuries reported during construction and operation.
“We reported zero lost-time incidents, construction was delivered on time and on budget, and the pilot performed above contract specifications. It has now been operating successfully for 18 months, producing an average of 50 tonnes of steam per day,” MacGregor told OBG in September 2014.
Economic Benefits
The potential benefits to the Omani economy are significant. In September 2013 GlassPoint commissioned EY to conduct an economic impact assessment of the roll-out of solar thermal EOR technology in Oman over the next decade (years 2014-23). The report, released in January 2014, examines three separate scenarios for solar EOR development in the sultanate. The “steady growth” scenario assumes solar EOR will account for 22% of total thermal EOR by 2023, the “leadership” scenario has solar EOR accounting for 50% of total thermal EOR activities, and the “full-scale deployment” scenario looks at the possibility of using solar power for 80% of thermal EOR activities in Oman.
The report determined that the “leadership scenario” is the most likely to occur, reporting that using solar EOR for 50% of total thermal EOR activities in Oman offers enormous economic benefits. As many as 196,000 new jobs could be created within the oil industry and related sectors, including 41,600 jobs for Omani nationals, as well as adding up to $7.52bn to the sultanate’s GDP over the next 10 years.
The leadership scenario would also result in substantial natural gas savings, with EY reporting that the sultanate could save an estimated 331.8bn British thermal units per day by the end of 2023, resulting in either 30,000 new jobs, $11bn of additional oil revenues, or $722m of new gas exports.
Commercial Potential
Following its early successes, GlassPoint is now hoping to further capitalise on early developments by rolling out a commercially viable, large-scale solar EOR project.
The idea is not without precedent; Oman’s Rural Areas Electricity Company commissioned US-based firm Astonfield to build a 303-KW pilot power plant in the Dhofar Governorate in November 2013, while the Public Authority for Electricity and Water announced earlier that year that it had identified four potential sites for large-scale solar power projects, which could offer between 100 MW and 200 MW of new supply. Although it would be a first for the sultanate’s oil sector, recent developments indicate that a large-scale solar EOR project could be imminent.
In September 2014 GlassPoint announced it had received $53m in investment from Oman’s largest sovereign wealth fund, the State General Reserve Fund, along with the venture arm of Royal Dutch Shell, and GlassPoint’s original syndicate of venture firms: RockPort Capital, Nth Power and Chrysalix Energy Venture Capital. Total equity funding in the company now stands at $80m, which could see a new announcement for large-scale solar EOR projects in the near future.
According to MacGregor, a non-pilot solar EOR project would offer a host of wide-ranging benefits to the Omani economy, making the project a good fit for the sultanate’s in-country value programme, which emphasises sourcing materials and HR locally in order to retain oil spending in the country. “The idea is that if and when PDO places an order for a full-scale, non-pilot system, we’ll establish local manufacturing in Oman to support it. This also makes economic sense; 10% of our total costs stem from transportation, we import glass from the Netherlands, supporting infrastructure from California, and the rest from China. So even if it costs a little more to manufacture locally, it doesn’t cost ‘10% of our total budget’ more,” MacGregor told OBG.
