Occidental Petroleum Corp, the fourth-largest US
oil company by market value, is going to replace Royal Dutch/Shell
Group in developing an oil field with an estimated cost of over $2
Occidental and its partner Abu Dhabi's Liwa Energy
Ltd have committed to raise production from the Mukhaizna deposits
from existing 10,000 barrels to 150,000 barrels a day "within
next few years" the parties to the agreement said after signing
ceremony held in Dubai last week.
"We need to introduce more players to generate
healthy competition in the industry," Sheikh Ali al-Battashi,
director general of planning at Oman's oil ministry, said in a message
from Oman. "Arrival of Occidental will hopefully be a source of
enticement for other energy companies to come into Oman."
According to reports, Shell lost the right to
develop the 2.4 billion-barrel Mukhaizna field, Oman's sixth-largest,
because of a disagreement with the Oman government over how best to
tap the oil.
Currently, the Gulf sultanate needs billions of
dollars investment to reverse a four-year decline in oil output.
Petroleum Development Oman, in which Shell holds a 34% stake, controls
94% of Oman's oil production.
The company, which had planned to spend $1.8bn
boosting output from the field to 100,000 barrels a day, will still be
offered the chance to retain a reduced stake in the Mukhaizna field,
with Occidental acting as the field's main operator, al-Battashi said.
Oman in December extended Shell's franchise to 2044.
It is said that comparatively difficult Field
Mukhaizna holds crude oil that's too thick to pump without use of
steam or carbon dioxide, a process Occidental already uses elsewhere.
Occidental is already the second-largest oil producer in Oman behind
Petroleum Development Oman, majority owned by the Omani government.
Liwa Energy, wholly-owned by Abu Dhabi's
state-owned Mubadala Development Company, in January won the right to
explore for oil in Libya.
Energy experts were of the opinion that oil
production in the sultanate is expected to drop a further 5.3% this
year to a daily average of 720,000 barrels after a 7.3% decline in
Shell, which has been operating in Oman since mid
1930's, at present competing with companies including Exxon Mobil, BP
and ChevronTexaco for rights to develop fields in the Arabian Gulf,
the source of a quarter of the world's daily oil supply.
Informed sources said that Oman's government is
preparing to offer in July foreign companies the right to develop more
of its oilfields once PDO relinquishes 10% of its existing assets held
in Bloc 6, which covers an area that's roughly the size of
Shell's Oman venture must return the acreage to the
government by July 1 under the terms of the contract it signed in
December. The Omani oil ministry then plans to auction the concession
area, which includes territory that is yet to be explored for oil and
some fields already in production.
Malcolm Brinded, Shell's executive director for
exploration and production, said in a December statement after
extending the Oman franchise that Oman's oil reservoirs are
"among the most geologically complex in the world".
Omani wells produce 400 barrels of oil a day on
average, about a tenth the average volume per hole pumped in other
Gulf oil states like the United Arab Emirates and Saudi Arabia,
according to the Energy Information Administration.
Occidental still faces a challenge boosting output
from Mukhaizna even with billions of dollars of investment, and
technology known as enhanced oil recovery, officials said.
Shell said it books 246,000 barrels a day of oil
and natural gas liquids as equity production in Oman, its
fourth-largest stake out of at least 24 countries where the company
pumps crude. The sultanate is Shell's sixth-largest gas holding,
producing 471mn cubic feet day of gas the company can sell.
KUWAITI FIRM SIGNS COKE PLANT CONTRACT
State-owned Kuwait Petroleum Corp (KPC) has signed
a major contract with a Kuwaiti-US firm to set up the emirate's first
calcined petroleum coke plant as part of a privatization plan.
The deal with Petroleum Coke Industries Co (PCI),
in which three Kuwaiti private firms own 75% and US Oxbow and Minerals
the rest, calls for setting up the plant at a cost of $150 million.
Construction of the plant will start in September and it will go on
line in December 2006 to produce 350,000 tonnes of calcined petroleum
coke a year.
The entire production of the petroleum coke plant
is intended for export to Gulf States, Africa, Europe and Japan in
addition to Australia and China. Petroleum coke, produced in refinery
coking units, is the essential raw material to produce calcined
petroleum coke used in aluminum production.
PCI made the highest bid of $40 million at an
auction held by KPC for the commercial license of the plant. According
to the contract, KPC pledges to supply raw material to the plant for
20 years. The deal is part of a privatization strategy aimed at
bolstering the role of private firms in the emirate's oil sector.
Meanwhile, another state-run firm, Kuwait National
Petroleum Co was also expected to start inviting bids for its fourth
oil refinery with a capacity of 600,000 barrels per day (bpd) early
next year. "We are still in the front-end engineering stage which
is scheduled to be completed in February. After that we will invite
bids for the project," KNPC chairman Sami al-Rasheed said.
The new refinery will boost the emirate's refining
capacity to about 1.5 million bpd. The cost of the project has not yet
been precisely determined, but it will be "well in excess of $4
billion". The giant project will be handed to at least three
contractors as it is too difficult to run single handedly by one