BP mulls $15 billion investment in Omani 'tight gas' fields

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, June 20 -- BP PLC is considering an investment of $15 billion over a 10-year period for the full-field development of its Block 61 tight gas fields in Oman, according to a senior executive of the firm.

“This will be a very large project…and will require approximately $15 billion in capital investment from BP to make that happen,” said Jonathan Edwards, vice-president of BP Oman.

“About $10 billion of that will go into the drilling of wells and the rest will go for surface facilities,” Evans said.

“We are proposing for the full field development of a gas processing plant with a capacity to process 1.2 bcfd, which will need 330 wells, and about 600 km of gathering system to connect all those wells,” Evans said.

“We have not yet reached an agreement with the government,” Evan said, adding that, “We have to submit a field development plan to the government, which we plan to do early next year.”

Evans noted that on the basis of field development plan, BP will negotiate commercial terms with the government. “The government has to agree for the scale of development that we are talking about,” he said.

If everything goes well, the first production of gas on commercial basis from the field is expected in late 2016 or early 2017. “We need 60 wells to start commercial production and thereafter, we will drill 20 wells every year for 10 years,” Evans said.

Evans’ remarks followed an announcement by BP of the successful completion of an extended well testing project, with the anticipated commercial gas production from its Khazzan and Makarem fields expected at about 1.2 bcfd.

“We are encouraged by the results of the extended well tests,” said Evans, who explained that the tests, “will help us as we now work towards declaration of commercialization by 2012-end.”

"We have already drilled eight wells and a ninth one is being drilled at the moment,” said Evans, who added that the stimulation and testing of the first three wells have been completed.

Evans said that teams in London and Muscat are working with the government of Oman to agree on the development concept for the Khazzan project, which will form the first phase of development on Block 61.

“This includes designs for wells and surface facilities,” said Evans, who added that BP had begun producing 60 MMcfd of gas from the test wells. He said seven wells have been successfully tested, with BP Oman planning to add two more wells by yearend.

Under the terms of the exploration and production-sharing agreement signed in January 2007, BP is required to submit a full field development plan to the government. “We plan to do this early next year, and on the basis of that, we will then negotiate commercial terms,” Evans said.

The agreement covers a 2,800 sq km area in central Oman, including the Khazzan and Makarem gas fields, which were discovered in 1993 but had remained undeveloped due to what BP called “the complexity of their tight gas reservoirs.”

At the time, BP said it signed “a major production-sharing agreement that will give the company access to two Middle East fields and associated accumulations that could yield resources of some 20-30 tcf of natural gas.”

In November 2009, BP completed drilling five of eight appraisal wells as part of its development program for the reserves on Block 61.

“BP will drill eight appraisal wells in total by 2011,” according to Jonathan Evans, BP Oman general manager. “So far we've done five wells, which have provided a lot of useful information on the nature and the scale of the reservoirs (OGJ Newsletter, June 7, 2010).”

BP has a 100% stake in Block 61, but Oman’s government may take 20% equity in the project at the time of commerciality.

Contact Eric Watkins at hippalus@yahoo.com.

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