Domestic gas requirements are set to expand rapidly over the next few years as Oman’s industrial base expands and as the utilities sector grows to keep pace with rising demand for water and electricity. However, officials have said projected increases in gas production will be managed to ensure supplies can be guaranteed over the long term.
The Oman Power and Water Procurement Company (OPWP) estimates gas consumption in the electricity and water desalination sector will rise from the current annual volume of 6.7bn cu metres to 10bn cu metres by 2020, an almost 50% increase. While the national demand for gas will rise sharply over the coming six years, the rate of increase is by no means evenly distributed, with requirements set to spike in some regions.
This is particularly the case in areas of the country where the government has promoted industrialisation as a means to broaden the economic base and provide new opportunities. Demand for gas in the Salalah region, the centre of extensive industrial development, is forecast by the OPWP to rise from the current 0.72bn cu metres annually to 1.2bn by 2020 as new industrial facilities, as well as the power plants and utilities needed to support them and the swelling population, come on-line.
Pumping up the volume
To help meet this demand from the utilities sector, along with that of industry and private consumers, Oman is pushing to raise production, with output to be increased steadily over the next few years. Production from domestic fields, which topped 100m cu metres a day in 2013, should reach 120m cu metres a day by 2018, according to the Ministry of Oil and Gas.
The biggest boost to output, one that could push production past the daily figure of 120m cu metres, will be the new Khazzan-Makarem tight gas development. A project of energy major BP and the Oman Oil Company Exploration and Production, the Khazzan project is based in an area known as Block 61 in central Oman. By sinking some 300 wells to depths of up to 4500 metres and utilising hydraulic fracturing technology and other techniques, BP plans to produce 28.3m cu metres of gas a day.
According to Dave Campbell, BP Oman’s general manager and vice-president of operations, Khazzan will be a significant factor for the economy of Oman. “BP and its partner are making a $16bn investment in developing the Khazzan tight gas resource,” he told OBG. “This project is not only important for BP, but is essential for the Sultanate of Oman. The economic benefit of gas extends past the energy sector because the growth in the supply of energy for Oman is also an enabler for economic development in all other sectors.”
While Oman will have far greater access to gas supplies in the coming years, the government intends to manage upstream flow to downstream industries, balancing long-term supplies with measured industrial expansion. According to Salim bin Nasser Al Aufi, the undersecretary of the Ministry of Oil and Gas, the first priority for the increased flow of gas will be utilities, ensuring the supply of electricity and water (through desalination), with commitments to existing industries being met after that.
“Yes, we will have more gas, but if we produce all of it today, then very soon in the future we will have a big hole,” Al Aufi told local media in late March. “When Khazzan-Makarem kicks in, there will be other producers and we will need to turn them down a little bit, so that we save that gas for the future.”
One of the industry players already set to benefit from rising gas production is Sohar-based Jindal Shadeed Iron and Steel with its recently expanded production facility set to take annual output of steel products to around 2m tonnes, most of which will be destined for the growing domestic market.
Naushad Ansari, Jindal Shadeed’s director and head of plant, recently told OBG, “Heavy industry forecasts expansion and operations based on the availability of gas, therefore it is crucial that the country’s strategy going forward revolves around ensuring reliable gas feedstock to industrial estates.”
While Oman is set to increase domestic gas production, and is holding talks with Iran over the possibility of imports via a direct pipeline, industry will have to compete with other calls on gas supplies. Those industries that can offer the best value-added components, including employment, revenue, export potential and meeting domestic needs, will likely have the inside running when pitching future proposals to the government and state agencies.