UK oil giant BP has lined up a $15 billion investment into of Oman in recognition of the potential of its gas sector and as part of a significant push into gas in the Middle East. This was disclosed by Dr Jonathan Evans, BP’s General Manager for Oman, in a recent interview with the Energy Exchange in which he discussed BP’s position in the tight gas-rich country.
The Middle East region is in dire need of gas to keep up with its industry needs and rising population. And as the demand for grand air-conditioned homes and sleek glass towers rises, so does the demand for electricity needed to power these projects and more. According to The Oxford Institute for Energy Studies, an estimated gas shortage of 73 billion cubic meters is experienced in the Middle East and North Africa (MENA) region.
Dr Evans said: “BP believes that there may be as much as 100 trillion cubic feet (tcf) of tight gas in place (as distinct from proven recoverable reserves) within our Block 61 concession in Oman.”
The Khazzan Project represents the first phase of development of the large unconventional gas resource present in Block 61. “We are currently working on a Field Development Plan which will deliver an annual average of 1 billion cubic feet of sales gas per day,” said Dr Evans. BP will submit the Field Development Plan to Oman’s Ministry of Oil and Gas in 2012. If both parties are able to reach a commercial agreement and declare commerciality, BP will enter into a 30-year production period from these fields, extending the relationship into the 2040s.
Currently, to conserve supplies for domestic use, Oman has cut exports of Liquefied Natural Gas (LNG) and is only fulfilling long-term contracts that were established years ago. Some countries in the region have, in fact, begun to import LNG or are considering doing so, eventually leading to higher cost of gas in their domestic markets as they buy it abroad at global prices.
Dr Evans said: “I expect that we will see price rises towards the true cost of production or the alternative cost of import. Once prices rise then developing more costly gas resources — such as tight gas and sour gas — will make sense and increase gas supply flow. We may also see new infrastructure built to connect gas deficient countries with those countries, which have a gas surplus. For example, connecting Iraq with Kuwait would seem to make sense — just as the Dolphin pipeline system connects Qatar to the UAE and Oman.”
A technical challenge faced by BP is the deep gas reservoirs. These reservoirs are 4.5 to 5 kilometres below the surface and are very tight, restricting gas from flowing out of them and into the wells. Some form of reservoir stimulation is mandatory to ensure the flow of gas from these into the wells. “We have demonstrated that hydraulic fracturing can deliver enhanced flow rates from the reservoirs,” said Dr Evans. “Our top technical challenges are to drill the wells more quickly and efficiently to optimise the hydraulic fracturing for delivering the most flow in a cost-effective way.”
Dr Evans continued: “Because these reservoirs are generally deeper and hotter than those for which tight gas technology was developed in North America and the North Sea, we are developing the technology further to apply to these reservoirs in Oman.” There is significant potential to find deep reservoirs across Oman and the Middle East. PDO has recently begun exploring for deep unconventional gas elsewhere in Oman and BP has a project in Jordan where the company is exploring for tight gas in similar reservoirs. Other companies are testing for similar ideas in Saudi Arabia, which could certainly affect future energy supplies for the better.
Dr Evans will participate in the Gas Arabia Summit to be held in the Sultanate of Oman in December. He will join a renowned group of speakers on December 12 2011, for an interactive discussion on the future of gas and where the gas industry will stand in 2020. Furthermore, he will provide a comprehensive analysis of BP’s position in Oman and the Middle East on December 13, 2011. The Gas Arabia Summit will be held from December 11 – 14, 2011, in Muscat, and will be a highly dynamic and interactive programme with keynote presentations, an exclusive site visit, a gala dinner and two focus days dedicated to the future prosperity of the gas industry in the Middle East.