Energy & Mining

Power To The People


The various segments of Oman’s energy sector are overseen by state organizations. These groups are directed by the Ministry of Oil and Gas, which has been invested with responsibility for […]

The various segments of Oman’s energy sector are overseen by state organizations. These groups are directed by the Ministry of Oil and Gas, which has been invested with responsibility for these resources and their extraction. Petroleum Development Oman (PDO) manages national oil reserves (an estimated 5.5 billion barrels in 2013), while the Oman Oil Company (OOC) looks after investments in the sector. Downstream activities are handled by the Oman Oil Refineries and Petroleum Industries Company (ORPIC).


Crude oil represented the bulk of Omani exports in 2013, reaching a value of OMR12.3 billion of an overall energy export figure of OMR14.3 billion. Petroleum-related activities represented 49% of GDP by the end of March 2014, an indication of the segment’s critical role in the economy, and the trading of crude oil alone accounted for approximately OMR3.81 billion over the first four months of the year. Refined oil sales were at OMR37 billion at the same period in 2013. Production reached an overall average of 940,000 bbl/d, up from approximately 918,500 bbl/d in 2012. PDO achieved a daily total production average of 655,600 bbl/d, 569,700 of which was crude and 85,900 condensate. The remainder of the national daily average is split among numerous other companies, foremost of which is Oxy Oman (Occidental Oman), which produced 90,400, over 90% of which was crude. Other important participants in the segment include DNO, BP Oman, PTTEP Oman, CC Energy, Daleel, and Petrogas. Major oil fields run up through the center of the country from south to north, along with clusters around Safah near the border with the UAE, and rapidly developing offshore fields. In 2013, 33 new wells were dug in total. PDO created 15 exploratory wells, while Occidental drilled 11, Daleel sank two, Masirah Oil two wells, and CC Energy Development three wells.


Consistent growth in production, confirmation of PDO’s astute management of the country’s resources, is in sharp contrast with the trends of the late 2000s, when challenges posed by Omani geology caused a considerable drop in output. Authorities responded by embracing EOR techniques, and transforming the Sultanate into one of the world’s leading innovators in the field. PDO is engaged in 16 EOR field development projects, with chemical, thermal, and miscible gas injection methods having proved successful so far. The principal projects in 2013 were at Qarn Alam, Harweel, Marmul, and Amal West. These processes allow operators to extract difficult-to-access or heavy oil. It is estimated that by 2023 approximately one-third of PDO’s yield will involve EOR systems.


Oman’s energy infrastructure is well developed, based around its expanding port network and a series of oil and gas pipelines and refineries. ORPIC manages the three oil refineries at Sohar and one at Mina al Fahal outside Muscat. Crude is brought to the latter through an integrated pipeline network, which runs northeast from the center of the country. Mina al Fahal is then linked by a pipeline, which transports feedstock to supply the Sohar-based facilities that transform the product into LPG, diesel, gasoline, jet fuel, as well as industrial chemicals such as benzene and thermoplastic polymers. Arguably the most exciting development in the country’s downstream capacity is the Duqm refinery, expected to be complete in 2017. In parallel and intrinsically linked with the construction of the Port of Duqm, the Duqm refinery forms part of the nation’s largest megaproject. The refinery itself will have a daily 230,000-barrel capacity, and will also be situated adjacent to the 6,000-hectare Special Economic Zone (SEZ) and its petrochemical storage areas. The ports at Salalah, Sohar, and Muscat currently bring crude and condensates to the Arabian Sea and the Gulf of Oman, access that guarantees a special place for Omani energy exports.


LNG facilities are located near the port at Sur on the northeast coast of the Sultanate, linked to the country’s various gas fields, and offer a way out for the country’s other major energy export. Oman produced an approximate total 37.15 billion cubic meters (bcm) of natural gas in 2013, continuing the steadily rising trend of recent years. The Oman Gas Company (OGC) was set up in 2000 to manage the Omani natural gas distribution grid, with the Sultanate and the Oman Oil Company forming a closed joint stock company to own, construct, and operate the country’s gas facilities, including the Oman LNG plant, which was completed in 2002. Following this, Oman Liquefied Natural Gas constructed the country’s Qalhat LNG train near Sur, with the responsibilities of the company shared among Shell, Total, and the government. Gas is supplied by the government from the Saih Rawl, Barik, and Saih Nihayda fields, and the capacities of the facility are now supported by those of the adjoining Oman LNG complex, creating a consolidated LNG production model for exports. Oman LNG operates a total of three LNG trains with an overall nateplate capacity of 10.4 million tons per annum (mtpa).

BP holds the rights to the Khazzan-Makarem field, which potential holds up to 20 trillion cubic feet (tcf) and is expected to begin production in late 2017. The contract is worth $1.2 billion, and is planned to produce 28 million cubic meters (mcm) per day. A further 28 mcm of gas will be sourced from Iran following the signing of a Memorandum of Understanding (MoU) that will ultimately diversify Oman’s gas supply chain, supporting industry in Sohar and freeing up domestic production for other uses.


Diversification to other forms of energy is also anticipated, with Abu Dhabi’s Masdar renewable energy company having agreed to construct a wind farm in cooperation with the Rural Areas Electricity Company. At a cost of $125 million, around 16,000 houses and apartments will be powered with clean and sustainable energy from a network of 25 turbines. This could potentially meet 50% of the southern Dhofar region’s energy needs during the winter months. Given the Sultanate’s ideal location surrounded by ocean and sea, wind power has definite potential.


Iran will shortly begin to supply Oman with over 20 million cubic meters (mcm) of natural gas per day, or roughly 10 billion cubic meters (bcm) of gas per year, marking the end of a series of negotiations that have strengthened economic ties between the two countries. A memorandum of understanding (MoU) was signed between the countries in August 2014 for the sale of Iranian gas to Oman beginning in 2015, in a 25-year deal that is valued at around $60 billion. The announcement comes in spite of the fact that the proposed 260-kilometer pipeline between the two countries has yet to be constructed, and is projected to take almost three years to build. According to the FT, Oman will pay for the pipeline, which will extend from the Iranian province of Hormuzgan to Sohar in Oman; the pipeline across the Gulf is expected to cost about $1 billion. Oman plans to recoup the entire cost of the pipeline and the related infrastructure; the Sultanate reports that the costs will be mainly repaid through revenues generated from the sale of a portion of the gas. Bloomberg quotes Oman’s Oil Minister HE Mohammed Al-Rumhy as saying that the gas from Iran will begin to arrive as early as 2017. Oman has suggested that half the gas transferred to the country will be used for domestic consumption, but that some may be sold abroad through a joint venture project to be subsequently set up, and go to other markets such as Japan, South Korea, and India, as well as neighboring countries. Iran is known to possess the world’s largest gas reserves, according to the most recent statistics compiled by BP, but it has been prevented from exporting much of it because of Western sanctions over its highly contentious nuclear program. Very few countries are permitted to trade in oil or gas with Iran due to the international sanctions placed upon the country and some unresolved legal questions might remain. The effect of the sanctions on Iran has led to a sharp reduction in hydrocarbon exports since 2013, with oil exports dropping from 2 million barrels to around 1.1 million barrels per day.

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