Offshore Rush

"Safety will continue to be a priority, whether it is people-related or process safety."

Can you elaborate on the role of the Ministry?

With regard to promoting the oil and gas sector, we primarily promote all of the available open blocks for foreign or local investment. We normally know who the interested players are, giving them the opportunity to review available data and make their own assessments and judge the value of the block. Then, they put a bid together regarding the proposal to develop it. Than we evaluate the different options and enter into an exploration agreement with the winning company. Thus, our role is to bring more players into the market and make sure all open blocks are commercialized and active. Once a company is on the ground and working, we spend a great deal of time with it to make sure that its management understand the rules and regulations of Oman, as well as ensure they interact with other players in terms of synergy. By way of an example I would cite BP and PDO. PDO supplies BP with electricity and also transports BP gas and condensate, both on a tariff basis. There is also integration with Oman Gas Company, which supplies gas to consumers. BP has a relationship with them, and we entered the relationship as a final custodian of the gas. We also bring them under one umbrella with regards to the In-Country Value (ICV) to create synergies among the various contractors on major supplies of contracts and workforce training and utilization, and such synergies also serve to reduce costs. We also regulate the operators.

What were the highlights of 2013?

In 2013, I think the major highlight was on the Health, Safety, and Environment (HSE) front. It was probably one of the best years for many companies, especially PDO, the largest operator, which achieved the best year ever in terms of incident frequency. The other operators also reported excellent HSE results. Production-wise, I think 940,000 barrels per day (bbl/d) was an excellent achievement: we are going in the right direction Also, from a concession perspective, 2013 saw the signing of a concession with BP following extensive negotiations. We also signed an offshore concession with Total and PetroTel. The year of 2013 also saw positive results from the exploration program conducted by Masirah Oil Limited Offshore. Therefore, offshore is gaining greater momentum, which I consider welcome news.

“Safety will continue to be a priority, whether it is people-related or process safety.”

Can you elaborate on the importance of $1.2 billion contract for BP’s Khazzan project?

BP-Khazzan is a major undertaking that translates to production of 28 million cubic meters of gas per day, which is one-third of today’s production. By the time it comes on stream in late 2017-early 2018, it will be probably provide one-quarter of what we need in terms of gas. It will also allow us to create a buffer between supply and demand where, for a chain, we will have slightly more capacity to supply gas than there is demand in the market. This buffer provides the required breathing space in which to conduct maintenance, and so on. At the moment, each mishap translates into a shortage for one consumer or another. By creating that buffer, hopefully mishaps at gas plants or fields will not necessarily translate into shortages due to our ability to close that gap from alternative supply. In addition, we are confirming our ability to supply from deep, tight gas fields. Being able to secure that supply will give us the confidence to venture into unconventional gas plays on a bigger scale.

Oman recently signed a landmark agreement for natural gas from Iran. What does this milestone mean for gas-intensive industries in Oman?

What we have signed so far is a Memorandum of Understanding (MoU). There are many things that still need to take place before the project starts registering any milestones. Once complete, it will translate into about 28 million cubic meters of gas. To me, it will bring diversification of supply, which is important because, thus far, we have been relying heavily on our own indigenous gas supply. Of course, there is a small volume being imported; however, it is negligible and destined for Sohar’s industry. I think that if the Iranian gas does materialize, it will open up avenues of diversification for gas supply from beyond local production. It will definitely support enhanced oil recovery (EOR) production because EOR projects will demand more gas.

How is the Ministry of Oil and Gas facilitating technology transfer to Oman?

The ICV index will probably be the one to solve this puzzle. At the moment, we are fine tuning and further developing the ICV index. What the index will allow us to do is establish the ICV any company is generating, be it manufacturing, employment, development, training, or the transfer of knowledge and technology to Omanis and Oman. The index will try to capture a number of these elements, and of course we review local and international companies based on how much of that index they are scoring, either at the start of their set up or as they progress with contracts over the years. With that index, we will do everything we can to make sure that we maximize what the country retains by ensuring that companies score higher on the ICV index. If we can manage it that way, there will be an increased amount of technology transfer to the country, along with many industries setting up in the country, and subsequently a higher Omanization rate. The ICV index will allow us to ensure that when a contract has expired, there is sufficient knowledge, expertise, and industry generated in the country.

How would you assess the level of Omanization in this sector?

In the oil and gas sector, the number is probably the healthiest. Of course, we have two groups in the oil and gas sector: service provision and operators. Amongst the operators, Omanization is close to 80% on average. The rate at Oman Gas Company for example exceeds 90%, while at PDO it is at about 78%, and at Occidental around 83%. BP is growing because it just started, so it varies among operators. We are struggling somewhat with service providers as the nature of their work is more labor intensive. We need to spend more time on that front developing local capabilities. We take secondary school graduates and diploma holders, and train them to be able to enter the industry with greater understanding and capabilities. The nature of construction is that it tends to rely on more skilled and semi-skilled workers and that, at the moment, is more foreign labor intensive than Omanized. At the moment, under the ICV initiative, we are trying to understand which skill sets most available, and critical in nature, and are focused on creating development programs for Omanis in these skills for deployment in the workforce.

What are your priorities for 2015?

Safety will continue to be a priority, whether it is people-related or process safety. Another priority is to ensure that exiting gas projects are progressing as planned, because we absolutely need to meet the gas demand in 2017-2018; therefore, we have a greater focus on gas projects. I am confident that we can at least take one step further toward the one millionth barrel.