The Indonesian MedcoEnergi has won a deal contract with the Petroleum Development Oman (PDO), to develop a cluster of 18 small fields in the Nimr-Karim area of south Oman that currently produce 18,000 barrels of oil per day. PDO said that the contract was awarded on the basis of a highly competitive tender in which suitable companies from Oman and across the globe participated.
The service contract is aimed at raising the production levels of the small fields in a cost-effective way by providing the service provider a high degree of freedom in its operations. The contract will thus allow PDO to dedicate its resources to the development of its larger fields, which currently account for 95% of its oil production. (In 2005 the Karim Small-Fields Service Contract area contributed around 3% of PDO’s total production).
At a recent media briefing on the 5th of December, PDO Managing Director John Malcolm cited the Karim Small-Fields Service Contract as “another good example of how we have radically transformed our working relationship with contractors”. He then went on to explain how the contract would give the service provider “a high degree of autonomy, coupled with clearly defined financial incentives, so as to improve the delivery of oil from fields that are too small and too remote to merit PDO’s undivided attention.”
As part of the Karim Small-Fields Service Contract, MedcoEnergi will submit a work programme for the field cluster covering all aspects of the cluster’s development—from exploratory appraisal and sub-surface studies to well
engineering and facilities construction through to operations and maintenance.
MedcoEnergi will also submit an annual budget for the financing of that programme. PDO, which retains full accountability for what happens in its concession area, will review and approve the work programme and budget. No sharing of the equity in the field is involved in the agreement. This means that MedcoEnergi will receive only financial rewards based on the production levels obtained from the fields covered by the service agreement and on the costs involved in achieving those production levels. Oman Oil Company will also participate in the service contract as a partner with MedcoEnergi.
Commenting today on the award of the contract, Mr Malcolm said: “PDO and its shareholders welcome the news that MedcoEnergi and Oman Oil Company will be working with us to further develop a number of our small fields.”