Oman to spend $3.5 billion to boost oil production

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, July 21 -- Oman plans to invest $3.5 billion in the coming 5 years in an effort to boost the country’s oil production by 18%, according to the finance ministry.

"We are targeting an average of 1 million b/d by 2015, and we will be spending some $3.5 billion in the next 5 years to achieve it," a ministry spokesperson said.

"More oil will mean more money to spend on development projects,” said the official, who added that the increased funding would finance the drilling of more wells.

The statement coincided with reports from Oman’s Ministry of National Economy saying that the country’s overall production of oil and condensates rose 8.8% in this year’s first 5 months compared with the same period in 2009, reaching 129.8 million bbl.

Oil production rose by 7.9% to 113.7 million bbl and condensates by 15.3% to 16.1 million bbl.

The country’s average production of oil also increased to 859,400 b/d, with exports rising by 15.1% during this year’s first 5 months to 112.6 million bbl over the 97.8 million bbl exported during the same period of 2009.

Exports to China, which is the main destination for Omani oil, rose by 32.1% year-on-year during this period, while exports to Japan and Thailand rose by 55.5% and 20.7%, respectively.

Analyst IHS Global Insight said Oman has managed to reverse its oil production capacity decline over the past 2 years with a concerted effort to stem the decline largely through investing in advanced enhanced oil recovery techniques.

“The higher production and price levels will help the government avoid a budget deficit this year, according to our latest forecasts, and moreover push the sultanate's headline external balance firmly into the black,” the analyst said.

Meanwhile, Oman has reportedly cleared a proposal related to Mitsui Oil’s plans to acquire 20% interest in onshore Blocks 3 and 4 from Tethys Oil AB.

In May, Tethys Oil and its 100% owned subsidiary Tethys Oil Blocks 3 & 4 Ltd. entered into an agreement to sell 20% of its interest in Blocks 3 and 4 onshore Oman to Mitsui & Co. subsidiary Mitsui E&P Middle East BV, subject to approval by the government of Oman.

On completion of the transaction, Tethys will hold a 30% interest in Blocks 3 and 4 with Mitsui holding 20% and operator Consolidated Contractors Energy Development (Oman) Ltd. holding 50%.

Contact Eric Watkins at [email protected].