In 2013, hydrocarbon revenues in Oman were 31 billion USD. They accounted for 66 percent of Oman’s exports and 39 percent of its gross domestic product (GDP), according to the Central Bank of Oman. Oman has been more open about its oil and gas reserves than some of its neighbors. This perhaps results partly from the fact that the country is not a member of the Organization of Petroleum Exporting Countries (OPEC) and therefore not concerned about OPEC quotas. An additional factor is the presence of foreign companies that book reserves in Oman, rather than operating solely as service companies. Moreover, contrary to neighboring countries, Oman’s oil reserves are often deep and tight, leading to more expensive onshore extraction costs (as much as four times that of Saudi Arabia), and, in recent years, extensive use of enhanced oil recovery (EOR). According to the U.S. Energy Information Administration, Oman’s proven oil reserves are about 5.5 billion barrels. This is smaller than all other Persian Gulf countries except for Bahrain, though larger than Oman’s neighbor Yemen.
Oman possesses offshore fields as well as onshore fields, and the development of offshore fields has, along with onshore EOR, helped to maintain reserve levels for the Sultanate. However, production levels of crude oil and condensate fell during this decade after peaking in 2001 at 960,000 barrels per day (bbl/d). Natural production declines from aging fields combined with the difficulties of increasing reserves given Oman’s geology resulted in a steady decline to 710,000 bbl/d by 2007. From 2008 onwards, however, new investment and implementation of EOR bore fruit, with average production reaching 919,000 bbl/d in 2012.
One of the most important contributions to the return to production growth is the Oxy led steam flood project at the 2.1-billion barrel Mukhaizna heavy oil field. The company has increased production on the field from 5,000 bbl/d when it started the project in 2005 to 120,000 bbl/d in 2012. Other projects contributing to the renewed growth, though smaller in scale, include the Rak Petroleum (a private Omani company) and LG (of South Korea) offshore Block 8 that is building up production to 10,000 bbl/d.
Most of Oman’s petroleum production acreage (about 85 percent) is controlled by Petroleum Development Oman (PDO), which is owned by the government of Oman (60 percent share), and the private companies Royal Dutch Shell (34 percent), Total (4 percent), and Partex (2 percent). PDO has a forty year concession/operating agreement, which began in 2004. In 2008, PDO invested 170 million USD in exploration and appraisals. Other important projects expected to come online soon include the Karim cluster of oil fields being developed by Medco Energi of Indonesia, which is trying to increase output from around 12,000 bbl/d to 30,000 bbl/d. Another is the Rima Cluster of Oman’s Petrogas, which is attempting to boost production from 2,000 bbl/d to 7,000 bbl/d.
Oman’s gas production increased from 99 billion cubic feet in 1990 to 936 billion cubic feet in 2011 (Source: EIA). Nearly all of the Sultanate’s gas is produced by Petroleum Development Oman (PDO). Oman’s domestic natural gas pipeline system is controlled by the Oman Gas Company (OGC), although OGC has contracted the management of the network to a consortium of private companies. Oman’s natural gas network spans about 1,100 miles, bringing supplies from production centers to the country’s LNG terminals, power plants, and other domestic end users.
Oman has put large efforts into developing its natural gas reserves, despite its reserves being relatively small for the region. Proven natural gas reserves are estimated by the EIA at 30 trillion cubic feet. This is the least in the Persian Gulf, other than Bahrain, though still a sizable amount by global standards. For example, it is greater than the gas reserves of the United Kingdom. However, like the United Kingdom, Oman has very high demand for its domestic gas (in 2011, consumption amounted to 619 billion cubic feet). Although this does indicate a high level of economic development in the Sultanate, it also means that Oman, like the United Kingdom, will import more and more gas, despite being a sizable producer.
As with oil, PDO is investing to expand natural gas production, but a number of non-PDO exploration and production projects are also being carried out. Most important is the Mukhaizna field, which is estimated to contain as much as 934 bcm, though this would concern gas in place, not proven reserves. In April 2009, Petronas signed a deal to explore Block 63, Harvest a deal to explore Block 64, and BG a deal to explore Block 60, all for gas.