Oil and gas activities account for around one-third of Oman’s GDP, making hydrocarbons the largest contributor to the country’s economy and integral to job creation and export receipts. Exploration and production activities present lucrative opportunities for international investors, as do required upgrades to sections of the sultanate’s hydrocarbons infrastructure. While remaining focused on extracting maximum benefit from its remaining hydrocarbons resources, the country is emerging as a key regional player in the renewable and alternative energy spaces, with the government seeking private investment in solar, wind and hydrogen projects as the sultanate’s drive towards reaching net-zero emissions by 2050 gathers momentum.
Oversight
Hydrocarbons activities are overseen and regulated by the Ministry of Energy and Minerals (MEM). Oman’s 2011 Oil and Gas Law stipulates that all hydrocarbons reserves fall under the sole ownership of the government. Maximising the production of natural resources, developing energy – and mineral-related value chains, and endeavouring to increase renewable energy production and facilitate their integration into transmission networks are core MEM objectives. The MEM also collaborates with other government ministries and authorities to ensure cross-sector strategic alignment as the country works towards its economic development goals and climate commitments.
In October 2022 a national hydrogen strategy was introduced alongside the establishment of a new entity – Hydrogen Oman (Hydrom) – which was entrusted with its execution. Hydrom was created to steer the growth of the hydrogen industry, recognising the potential of hydrogen fuels in contributing to the global energy transition. Hydrom is in the process of developing a comprehensive master plan to oversee the infrastructure and regulatory evolution of this emerging hydrogen sector (see analysis).
In January 2025 the MEM announced plans to establish the Oman Net Zero Centre to aid the country’s decarbonisation plans. The centre will work with stakeholders to execute projects and initiatives and implement awareness campaigns, with industrial and public participation in the net-zero drive crucial to its success. Notably, Oman’s sustainable energy-related regulatory frameworks were ranked as the most advanced in both the GCC and MENA regions and sixth globally by the World Bank in 2023.
Structure
As is the case across the oil-rich nations in the GCC, the hydrocarbons industry is structured around government-owned entities. Petroleum Development Oman (PDO) was founded in 1937, and the company was instrumental in establishing Oman as a significant player in global oil production and export markets. In 2021 PDO, still the country’s largest in-country oil and gas producer, was responsible for 64% of Oman’s oil reserves.
As of 2022 the company’s extensive physical infrastructure included 202 producing oil fields, 43 gas fields, 33,000 km of pipelines and flowlines, and 9400 active wells. The government retains a 60% stake in PDO, while UK-based Shell Group has 34%, French multinational Total Energies holds 4% and Thailand’s PTT Exploration and Production with 2% complete the ownership profile. Although increased hydrocarbons production and exploration is targeted over the medium term, PDO is implementing innovative methods to reduce the sector’s carbon emissions, such as the use of solar power to generate steam for enhanced oil recovery.
The government’s stake in PDO is held by Energy Development Oman (EDO), whose other assets include 60% of the Block 6 oil concession, which is Oman’s largest crude oil resource, 100% of the Block 6 non-associated gas concession and full ownership of Hydrom. EDO was established by royal decree in 2020 to steer Oman’s journey towards energy efficiency and shape the country’s presence in modern and alternative energy markets in alignment with overarching national development plans.
OQ is a global energy industry investment and development company wholly owned by the Oman Investment Authority, the government’s sovereign wealth fund. OQ is responsible for managing direct energy investment in oil and gas exploration, production, refining, petrochemicals production, hydrocarbons trading, alternative energy, power generation and related infrastructure. Forging bilateral investment partnerships in the energy sector is crucial to OQ’s growth strategy, with its investment spread across 17 countries. Known as Oman Oil and Orpic Group prior to a 2019 rebrand and restructuring, OQ possesses an extensive portfolio comprising eight wholly owned subsidiaries, six publicly listed companies and 10 joint ventures (JVs), which between them operate at all stages of hydrocarbons and alternative energy value chains.
The government is seeking to privatise portions of prime assets to raise finance for economic diversification and to reduce public debt. A significant development in OQ’s strategic reorganisation and monetisation of assets came in October 2024 when the company floated 25% of its exploration and production business, OQEP, in an initial public offering (IPO) on the local bourse, the Muscat Stock Exchange. The IPO raised $2bn, making it the largest IPO in Oman’s history and the latest example of OQ’s efforts to raise capital and enhance liquidity via public offerings. In 2023 OQ raised over $1bn from IPOs, selling stakes in its pipelines business, OQ Gas Networks, and its Abraj Energy Services company. OQ retains a 51% shareholding in both companies.
A core component of the government’s in-country value strategy involves the training and upskilling of Omani nationals to enable them to occupy a higher proportion of high-skilled jobs. In line ewith this objective, the sultanate’s primary energy and industrial entities are, therefore, working to create job opportunities for Omanis across established and emerging energy-related value chains and to more deeply integrate homegrown small- and medium-sized enterprises into the national energy sector.
Strategy
Environmental protection and sustainability are at the heart of Oman’s economic development and diversification blueprint, Oman Vision 2040. Oman has set the target of achieving net-zero carbon emissions by 2050 and aims to see renewable energy account for 30% of its energy consumption by 2030. Significant public and private investment is required to facilitate progress towards those goals, with solar and hydrogen projects high on the agenda while climatic characteristics, unique to Oman in the regional context mean that investment in wind energy is also a strategic priority.
Hydrocarbons production is to be increased over the coming 10-15 years from 2025, with the goals of boosting export revenue, providing feedstock for enhanced downstream production and raising money to fund the broader economic diversification drive and the energy transition, before being strategically phased out in alignment with the netzero 2050 target. Circular economy initiatives are also gaining momentum, with the development of waste-to-energy plants across Oman (see Utilities chapter). The transport and manufacturing sectors are given high priority in the decarbonisation efforts due to their high energy consumption and emissions.
In addition, a central focus for achieving the Oman Vision 2040 goals include improving business and investment regulations. This is crucial given the reliance on private finance to support Oman’s plans, as well as the strong regional competition, with most other GCC countries pursuing similar objectives. Another important aspect is the in-country development, production, and trade of advanced technologies essential for renewable energy generation and the growth of the circular economy.
The MEM is in the process of drafting a dedicated energy transition strategy in collaboration with Oman’s key public and private sector stakeholders. The strategy will provide a more detailed roadmap for the achievement of key energy transition milestones, which include the aforementioned target of renewables accounting for 30% of energy production by 2030, rising to 70% by 2040 and reaching 100% by 2050. Balancing the provision of sufficient energy for the economic diversification drive while reducing carbon emissions, stimulating job creation and cultivating a skilled, future-ready workforce are also core goals of the strategy.
Transition To Renewables
Oman’s high solar density, and strong and steady night-time winds see the country emerging as a key regional centre for renewable energy and green hydrogen production (see analysis), with increasing inflows of international investment entering the segment in recent years. Indeed, according to the MEM, the January 2025 inauguration of the Manah 1 and Manah 2 solar plants, which brought online a total capacity of 1 GW of electricity, saw Oman reach its target of renewables – accounting for 11% of total installed electricity capacity by 2025.
Among the expanding list of investment agreements in operation, OQ Alternative Energies has formed a partnership with France-based energy giant Total Energies to develop renewable energy facilities in Oman with the capacity to generate 300 MW of electricity. OQ is the JV’s senior partner with a 51% holding. Three facilities will be constructed as part of the deal: one solar and two wind plants. North Solar will have 100 MW of capacity and will be situated in Saih Nihaydah in northern Oman, while the wind projects, Riyah 1 and Riyah 2, will be located in Amin and West Nimr Fields, respectively, in southern Oman. Both wind energy projects will also have a capacity of 100 MW at launch. “Investment in infrastructure and renewable energy are creating opportunities for industries in Oman to modernise and innovate,” Siddharth Malik, CEO of Jindal Renewables, told OBG. “With continued focus on enhancing supply chain efficiency and nurturing talent, the potential for creating a regional hub for green technology is increasingly within reach.”
Investment
By end-September 2024 hydrocarbons accounted for roughly 79% of total foreign direct investment (FDI) stock, with a value of OR21bn ($54.8bn). FDI inflows totalled over OR3.4bn ($8.8bn). Omani law states that all hydrocarbons resources are the sole property of the government until the ownership title is passed to a concession holder. Once the MEM issues a licence, operators are free to market and sell oil with no country restrictions in place. All natural gas derived from production activities is purchased by the government.
The majority of agreements relating to upstream activity involve exploration and production-sharing agreements (EPSAs), although small-scale investment in the line of technical services exist. Typically, the standard terms of an EPSA see the private contractor assume all risk for the costs of exploration, production and development in return for a contracted profit share. A common feature of oil production agreements is that the concession holder contracts to construct the necessary pipelines and related infrastructure to transport oil to market. Land required for the construction of said infrastructure is granted by the government through a usufruct agreement, providing the investor ownership rights under contracted terms.
Performance & Size
In 2023 total petroleum activities contributed OR12.2bn ($31.7bn) to GDP – roughly the same as in 2022. Natural gas accounted for OR1.8bn ($4.6bn) of the 2023 figure, up from around OR1.7bn ($4.5bn) in 2022. From 2013 to 2023 total petroleum GDP rose by roughly 13%, while GDP from natural gas rose by 18% during that period.
Oman has the capacity to produce around 1.1m barrels per day (bpd) of crude oil, with new concessions likely to see that figure rise in the coming years. Daily production of crude oil and condensate in 2023 was approximately 1.1m barrels, while gas production reached 142.5mcm per day. In 2023 the country exported an average of 850,000 bpd of crude oil and condensate, with China receiving 92% of shipments. Oman also exported an average of 31,000 metric tonnes of liquefied natural gas (LNG) per day, highlighting its continued role as a key energy supplier in the region.
According to the National Centre for Statistics and Information (NCSI), with the exception of January 2024, when average production was just over 1m bpd, Oman’s crude and condensate production was just below the 1m bpd mark across the first 11 months of that year. Meanwhile, the price per barrel ranged between $73.5 and $89.3, with the lowest price in that range coming in November and the highest in July. The average price per barrel of crude oil during the first 11 months of 2024 was around $81.8. Production for the first 11 months of 2024 fell by 5.1%, from 350.5m barrels during the corresponding period of 2023 to 332.7m. Crude oil production dropped 6.5% year-on-year (y-o-y) across the aforementioned timeframe, from 272.4m to 254.6m barrels, while condensate production remained at its 2023 level of 78m barrels.
Despite lower total production, oil exports remained strong – albeit with significant fluctuations in volumes to key markets – dipping only fractionally by 0.4%, from 283.4m in the first 11 months of 2023, hitting 282.4m barrels in the corresponding period in 2024. Exports to China rose by 1.5% for a total of 264.4m barrels, accounting for nearly 94% of all oil exports during the period between January-November 2024. Growth was also seen in export volumes to South Korea and India, rising by 52% and 10.6%, respectively, while exports to Japan declined by 50% over the same timeframe.
The NCSI compiles natural gas production data and natural gas import data as a combined total to view the country’s total supply, and across the first 11 months of 2024 the monthly figure ranged between 4.2bn cu metres and over 5bn cu metres for a monthly average of more than 4.7bn cu metres. The highest monthly total was recorded in July, with non-associated natural gas, which refers to gas not derived as a by-product of crude oil extraction and production, accounting for just over 80% of the total. Total production and imports between January and November 2024 reached some 51.8bn cu metres, representing an increase of 4.8% over the same period of 2023. Consumption by power generation plants rose by 77% y-o-y, while consumption by industrial projects, industrial zones and oil fields decreased y-o-y by 8.2%, 4.5% and 10.9%, respectively, during the first 11 months of 2024.
Anticipated oil revenue guides the government’s annual budget forecasts, and a projected oil price of $60 per barrel in 2025 is consistent with the previous year. That price reflects the government’s prudence in its annual budget, with the global average oil price around $82 per barrel in January 2025, when the budget was published. Total revenue is forecast at OR11.18bn ($29.1bn), with oil and gas revenue expected to account for 68% of that at around OR7.6bn ($19.8bn), a shade higher than the 2024 forecast of OR7.49bn ($19.5bn), but significantly below realised 2024 hydrocarbons revenue, which totalled OR9.15bn ($23.8bn). Oil revenue is forecast to be 1.4% lower than in 2024 due to Oman’s alignment with the OPEC+ group’s strategic production cuts, which are aimed at stabilising global oil prices by limiting supply amid concerns over demand fluctuations and rising output from countries outside the cartel of oil-producing and oil-dependent economies. Overall, Oman expects a budget deficit 3% lower than in 2024, due in large part to projected increased gas prices and production.
Upstream
According to the MEM’s most recent annual report, Oman contained 405 producing fields in 2023: 350 oil and 55 gas. Total crude and condensate reserves were just below 5bn barrels, while natural gas reserves measured 23trn cu feet. Oman also housed 63 oil exploration wells and 15 gas exploration wells in 2023. Oman Export Blend is a medium sour crude oil with a typical API gravity of 33.2 degrees, a measure of a crude oil’s density relative to water, where higher values indicate lighter, less dense oil that typically yields more refined products. Crudes commanding the highest prices generally carry API gravities of between 40 and 45 degrees. Due to the aforementioned OPEC+ production quota cuts, Oman has been adding condensate to its trademark blend (condensates production has not been restricted), with Chinese refiners stating that some crude oil received from Oman has registered an API gravity of up to 35 degrees.
According to India-based market research firm Mordor Intelligence, Oman’s upstream oil and gas market is expected to expand at a compound annual rate exceeding 5% between 2025 and 2030, with increased activity in the offshore and exploration segments, upcoming and active projects, and supportive government regulation cited as growth drivers. The vast majority of Oman’s upstream activity is focused onshore, while offshore potential remains relatively undeveloped, presenting opportunities for investors with access to large amounts of capital. Block 6 is the country’s largest, most productive field, with blocks 3, 4 and 9 also key production resources, as are the Khazzan gas field and Mukhaizna, Wadi Aswad and Abu Butabul fields. Key international players in the sultanate’s upstream market include Royal Dutch Shell, BP, Total Energies and Eni. Meanwhile, October 2024 brought the announcement that work to obtain complete seismic coverage of Block 6 was 93% complete, with the project expected to reveal additional potential for exploration and development investment.
Concessions
In September 2024 the MEM announced that a new 21,140-sq-km oil and gas concession – Area No 18 – was to be launched. The block, situated in the southern part of the Sea of Oman, is considered to be one of the country’s largest hydrocarbons resources, providing significant potential for exploration and production. OQ will provide an initial 10% of exploration costs, rising to 30% if the block is proven commercially viable. The announcement of the concession, which was made before a host of international stakeholders at a three-day conference in Muscsat titled The Role of Geological Sciences in Shaping the Future of Energy.
This initiative is part of the sultanate’s broader strategy to attract foreign investment to its hydrocarbons sector. In recent years, the government has expressed plans to ease restrictions on foreign operators in upstream activities to incentivise increased foreign investment. Additionally, in January 2024, Oman announced two more concessions, Areas No. 38 and No. 74. Local firm CC Energy Development has been contracted to conduct geological, geophysical and seismic surveys for both zones. Collectively, these areas encompass approximately 20,500 sq km, with Area No. 38 covering around 17,425 sq km.
Furthermore, the MEM approved a field development plan for the Block 56 onshore concession, which has been declared commercial, from Swedish operator Tethys Oil. The existing agreement has been extended until 2044 and the block contains significant potential for further exploration and discovery. Development will commence in 2025 with Tethys, the senior partner in the EPSA, with a 65% stake, while local firm Biyaq Oilfield Services holds a 25% interest and another Omani operator, Intaj, has a 5% share, as does Saudi-based Medco Arabia.
Midstream
Oman’s pipelines and storage infrastructure are spread throughout the country, strategically connecting key production zones with commercial and industrial ports. Major storage terminals are housed in Salalah on the south coast, Ras Markaz on the central-east coast and Muscat on the north coast. Meanwhile, gas pipelines generally converge on the primary line that connects with the LNG terminal in Sur, south-east of Muscat. Notably, the MEM announced plans to develop a new 3.8m-tonne-capacity LNG train at the Qalhat Industrial Complex in Sur. Initial procedures and studies are under way. The new facility will raise LNG production capacity to 15.2m tonnes per year.
Portions of Oman’s oil and gas infrastructure are ageing, creating opportunities for strategic investment in the rehabilitation and expansion of pipelines, storage and processing facilities. One notable recent development is the commissioning of the Ras Markaz oil storage facility in Duqm, operated by OQ subsidiary Oman Tank Terminal Company (OTTCO). With a capacity of 5.2m barrels, the facility includes blending capabilities and is designed to serve as a critical feedstock hub for the Duqm refinery, which officially commenced its operations in April 2023. At the time of its launch, Ras Markaz was accessible exclusively by sea through a single mooring point. To enhance its connectivity, a framework agreement was signed between the MEM and OTTCO to construct a 440-km pipeline linking the storage facility with the sultanate’s main crude oil pipeline network. Additionally, an 80-km pipeline connecting Ras Markaz to the Duqm refinery was completed in January 2023, improving logistical integration. Looking ahead, further improvements are expected, with a new storage facility planned in Dhofar Governorate. The OR47m ($122.2m) terminal, announced in August 2024, will house 110,000-cu-metre storage tanks, with oil pipelines to connect with key hydrocarbons infrastructure in Salalah.
Downstream
OQ either owns or part-owns all three of Oman’s oil refineries, which are situated in Mina Al Fahal in Muscat, Sohar and Duqm. Duqm refinery, an equal JV between OQ8 (OQ’s downstream arm) and Kuwait Petroleum International (KPI), officially titled Duqm Refinery and Petrochemicals Industry Company (DRPIC), reached its 230,000-bpd production capacity in February 2024, producing diesel, aviation fuel, naphtha, liquified petroleum gas, sulphur and petroleum coke, significantly boosting the sultanate’s standing in regional and global downstream petroleum export markets. Indeed, Oman’s refinery throughput as of 2021 hovered around 234,000 bpd, so the Duqm facility has effectively doubled capacity. October 2024 brought news of DRPIC’s intention to expand capacity at the Duqm refinery by 10-15% to reach 260,000 bpd over the next year, using a range of optimisation techniques.
Boosting downstream industries is central to the Omani government’s economic development plans, with significant finance being channelled into developing petrochemicals industries and value chains (see Industry chapter), with increased gas production intended to supply feedstock. In December 2022 OQ and KPI announced that they had signed an agreement with Saudi Basic Industries Corporation to construct a major petrochemicals facility in Duqm, with the study for the complex said to be near completion in October 2024.
Outlook
The government’s openness to expanding the role of private investors in the upstream segment should help to attract diverse flows of finance into exploration and development activities for as long as the sultanate maintains hydrocarbons production. Meanwhile, work from the relevant authorities to leverage Oman’s strategically advantageous location on the Strait of Hormuz is fortifying the sultanate’s status as a regional and global node for energy transportation activities. Furthermore, efforts from public and private entities to harness Oman’s sizeable potential for solar and wind energy and the country’s improving sustainability-related regulations should ensure investment opportunities and inflows remain robust throughout the energy transition, enabling new industries and value chains to emerge and flourish competitively across sectors.
