Technologyovercoming geology

The story of oil in the Sultanate of Oman is,in some ways, rather different from that ofthe other Gulf countries. Commercialdiscoveries were not made until the early1960s, and generally the country’s oil fieldswere found to be smaller, more complex andmore difficult to exploit than those of its Gulfneighbors.

However, since the accession of HisMajesty Sultan Qaboos bin Said in 1970,Oman has seen many social and economicimprovements that are clearly reflected inthe country today.

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History

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History

Middle East Reservoir Review

Exploration for oil in Oman started in1925, when a two-year exploration

license for the Dhofar region wasgranted by Sultan Taimur bin Faisal tothe D’Arcy Exploration Company, whosefounder, William Knox D’Arcy, had beensuccessfully searching for oil in otherregions of the Middle East since 1908. Inthe winter of 1926, a geological fieldparty, which included George Lees andWashington Gray, traveled from Bait alFalaj along the coast to Al Khaburah,across Wadi Hawasina and across theOman Mountains to Mirbat in Dhofar.The results of this remarkable journeywere disappointing and the companyallowed its license to lapse.

There was little further activity until1937, when a concession was awarded tothe Iraq Petroleum Company (IPC).There was an option under theagreement to take up 75-year concessionfor Oman and Dhofar. Exploration andproduction was to be controlled byPetroleum Development (Oman andDhofar) Limited, comprising 95% for theequal shareholders Shell, CompagnieFrançaise des Pétroles and the NearEast Development Company. Theremaining 5% was held by Partex, a firmcontrolled by Gulbenkian.

IPC carried out many surveys, both incoastal regions and in the interior, untilfieldwork was halted at the outbreak ofWorld War II. Nevertheless, in 1944 IPCconverted its 75-year option into a fullconcession. However, the Dhofarconcession was fraught with difficultiesand was relinquished in 1951, when thecompany changed its name to PetroleumDevelopment (Oman) Limited (PDO).

The Dhofar concession was acquiredin 1952 by Dhofar-Cities Service, a jointventure between Cities Service and theRichfield Corporation of California thatfound oil in 1957, but not in economicquantities.

PDO finally spudded its first well atFahud in 1956 using a rig that had beenflown in from Qatar by Royal Airforcetransport aircraft. This was stopped dry,but no-one knew at the time that it hadmissed a huge oil field by just a fewhundred meters. In the period 1956 to1960, exploration wells were also drilledat Ghaba, Haima and Afar withoutfinding oil in commercial quantities. In1961, lack of success prompted thedeparture of all the shareholders exceptShell. The company was left with an85% stake along with Partex and the

conviction that there was oil in Oman.Total returned to PDO in the 1960s,purchasing a 10% interest in 1967.

Meanwhile, between 1957 and 1966,around 30 wells had been drilled in theDhofar region and several othercompanies either joined or pulled out ofthe venture, which had also beencontinuously hampered by civil unrest.

Good news at lastIn the PDO concession operated byShell and Partex there was no drilling,after the withdrawal of the other

partners, until 1962, when surveysconfirmed the geological structure firstidentified by gravimetric surveys atYibal. After another false start withtechnical problems at well Yibal-1, wellYibal-2 was sunk and soon encounteredunexpected natural gas which caused aserious blowout, luckily without humancasualties. On resumption of drilling,light crude was found in the Shuaibaformation.

Further encouraging results at Natihin April 1963 caused PDO to re-examinethe prospect at Fahud. Well Fahud-2,just 1.5 km from the unfortunate Fahud-1, confirmed that the whole Natihformation was oil-bearing. Thesesuccesses provided the green light forthe construction of an export terminalat Minah al-Fahal on the northern coast,and 276-km pipeline, costing some $70million was built from Fahud to Minahal-Fahal. Exports began in 1967, with aninitial shipment of 543,800 barrels at$1.42 per barrel.

This added impetus to the explorationeffort, Compagnie Française desPétroles rejoined PDO, and in 1969 thepartnership regained the Dhofarconcession. During the 1970s, PDObrought more fields into production(Figures 10.1 and 10.2). Discoveries inCentral Oman in 1972–73 included QamAlam, Ghaba North, Saih Nihayda,Habur and Saih Rawl. A sharp jump inoil prices in 1973 prompted a furtherflurry of exploration, especially in theeastern part of the south Oman saltbasin, where discoveries included theAmal and Amin fields.

Figure 10.1: Installation of a Lufkin pump at awell in Amal in May 1976

Figure 10.2:Constructing thenatural gas pipelinethat stretches 200 milesfrom Yibal gas field to apower plant at Ghubraon the coast in 1977

Arabian Sea

Oman

Gas field

Gas pipeline

Oil pipeline

International border

Oil field

Amin

Bahja

Daleel

Fahud

Natih W

Tawf Dahm

Mabrouk

Malih

Ramlat Rawl

Saih Nihayda

Qarat Al Milh

Barik

Ghaba N

Qarn Alam

HasirahAsfoor

Anzauz

Hassun

Sayyala

Sadad

Mezoon

Maqhoul S

ThumaydHaban

Khulud

Al BashairHareer

Shibkah

Suqtan

Qalah

Habiba

Baqlah

Rasafah

Fushaigah

Barakat

Farah South

Habur

Nafoorah

Zareef

Fayyadh

GhufosSafwan

KatheerHaima

Wafra

Zauliyah

HawqaMazeed

Al Ghubar

Alam

Mafraq

Saih Rawl

Maqtaa

Suwaihat

Fahud WNatih

M.Huraymah

Rajaa

Saih Nihayda SE

Sahmah

Ramlat

Al Barakah

Bahaa

Safah

Lekhwair

Dhulaima

Yibal

Al Huwaisah

Musallim

Makarem

Hazar

Burhaan

YasmeenAnuq

NaseemGhamr

Arnab

Mukhaizna

Nimr

Thayfut Rima

Mukhaizna S

Jalmud NWifaq

JawdahShahin

JalmudRasha

TannumReihan

Nuwar

Aseel

MahaRunibSalwa

Runib S

NuhamSaham

Simsim

HajalWaradAl Rhoda

JadeerIrad

BasmaJisr

Amal S/SEMarmul

Dhahaban S

Sarmad

Harweel Deep

Ghafeer

Jazal

Amal

Thuleilat

Rahab

Murshid E

Birba

Birba N

OmraanMarmul NW

Zumurrud

Wadi Haka

Kaukab

Rahab SWDhiab

BayyinahSabrQarmous

ThamoudAl Dhabi

Al BurjIhsan/Mawhoob

MsayhaFalak

Amin SIrad NE

Karim W

DurraNasir

GhanuqArjef

Maurid

Zahra

Waha

Al Noor

Ghazara

QaharirQata

Tuqaa

Saqr

Uqab

Jabel Madar

Al Shomou

Maurid W

Lekhwair E

The oil and gas fields of Oman

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History

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History

Middle East Reservoir Review

In 1974, the government took a 25%stake in PDO, subsequently increasing itto 60% and with correspondingreductions in the holdings of Shell to34%, Total to 4% and Partex to 2%.

The Central Oman oil fields came on-stream during 1975–76, bringing thecountry’s total production to 280,330B/D and total proven reserves to some1.278 billion barrels.

In 1977, the Government of Oman andprivate shareholders signed a new, long-term agreement giving greaterincentives for the development of theSouth Oman oil fields. By 1980,discoveries had been made at Rahab,Birba, Qaharir, Mahjour, Rima, Jalmud,Runib, Qata, Dhahaban South, Nimr,Jazal, Zauliyah North East, Sayyala,Suwaihat, Karim West, Nimr West,Wafra, Fayyadh, Amin, Dhulaima,Kaukab, Bahja, Jawdah, Hasirah,Anzauz, Burhaan, Ihsan and Jameel. By1982, most of these fields were on-stream, bringing production to around325,000 B/D and putting reserves at2.98 billion barrels. After a string offurther discoveries, the most recentfinds include the southern Al-Noor andAl-Shomou fields.

Following PDO’s successes in the1960s and early 1970s, a number offoreign companies began to develop aninterest in Oman. However, a successionof dry wells and noncommercial findspersuaded most companies that thebulk of Oman’s oil and gas had beendiscovered.

Exploration programs have beencurtailed in recent years. Despitelimited prospects, there are still manyforeign companies and consortia in thecountry. In 1998, there were 12 groups(excluding PDO) chasing Oman'shydrocarbons – of these only four wereproducing oil or gas.

Oman has essentially preserved itsoriginal concession and participationregime – converting early agreementsand more recent exploration contractsinto production-sharing deals. PDOaccounts for the bulk of Oman’s crudeoil exploration and production activity.Its success reflects the fact that thePDO concession encompasses thecountry’s main oil provinces. Othercompanies with fields in production areOccidental (Sunainah), Japex (WadiAswad) and Novus (Bukha).

The reservesOman’s crude oil reserves (Figure 10.3)are estimated at 5.28 billion barrels,with almost 95% being located in thePDO concession area. At the currentrate of output of around 900,000B/D,Oman has a reserve production ofaround 18 years.

The number of fields that contributeto PDO’s production has risen from 11in 1967–1980 to almost 100 currently.Together, the Yibal, Natih, Fahud, al-Huwaisah and Lekhwair fields in thenorth account for almost half of thecountry’s total oil production. Yibal isthe largest oil field in Oman, producingaround 180,000 B/D. Northern oil, of thetype found in Yibal field, is light (32–39°API range) and is mostly found togetherwith natural gas. Southern oil fields,such as Nimr and Amal, produce heaviercrude (20° API).

PDO is pursuing an active explorationprogram for both oil and gas and is morethan maintaining the level of itsreserves. In 1996, it added 327 millionbarrels of new oil and condensatereserves, a figure that exceeded thevolume produced by 23 million barrels.The main addition to reserves came from:• Burhaan West Deep (Barik) reservoir

that contains 8 million barrels of newreserves

• Saiti Rawl Deep (Barik) reservoirwhere studies identified an additional26 million barrels of condensate

• Thayfut Gharif reservoir.

These figures fit the pattern forrecent reserves additions where theincreases are related to re-evaluation ofthe potential in producing fields andother known, but unexploited,structures.

The recently discovered Al-Noor andAl-Shomou fields have estimatedcombined reserves of 340 millionbarrels. PDO hopes to increase thesereserves to 1.8 billion barrels and 2.7billion barrels by 2003 and 2011respectively.

The installation of water-injectionschemes also remains a high priority forPDO. The company embarked on amajor enhanced oil recovery (EOR)research program in 1985, conductingpilot schemes to test different methodsof gas, water and steam injection beforeapplying them in situ. The companyestimates that the application of EORtechniques could help it extract anadditional 1500 million barrels of oilfrom reservoirs containing heavy,viscous crude oil.

Doubling of gas reservesAccording to PDO, Oman’s gas reservesmore than doubled over the five years to1998. The company put the total in 1998at 28.32 Tcf – 25.37 Tcf of nonassociatedgas and 2.95 Tcf of associated gas.

Until the mid-1980s, gas in Oman wasonly discovered as a by-product of oilexploration. In 1984, however, PDOsigned a 10-year agreement with the

government under which it would startexploring specifically for nonassociatedgas. The country’s gas reservoirs arealmost all contained within the PDOconcession and usually occur in deepzones under oil-bearing structures.Some of PDO’s exploratory drillingprogram is still directed at thesedifficult targets (see Figure 10.4).

The sharp growth in known gasreserves has encouraged thegovernment to make the development ofnatural gas production a high priority inits overall economic strategy. Inaddition, it has given rise to a number ofprojects for exporting natural gas, bothby gas line and in liquefied form.

Oman became an exporter of liquefiednatural gas in April 2000, with its firstshipment to Korea. The 6.6 million-tonnes-per-year liquefaction plant islocated at Qalhat, near Sur.

ExportsOman exports about 90% of its crudeoil, and the volume exported hastracked recent rises in production.

In the early 1990s, the governmentdecided to exploit the country’s naturalgas resources for the production andexport of liquefied natural gas (LNG)and in 1992, asked PDO to undertake athree-year appraisal program to test theproduction potential of knownstructures. That called for the drilling of12 deep wells in the Saiti Rawl, SaitiNihayda and Barik fields – the three

structures in the center of Oman thatwould supply the natural gas feedstockfor the LNG project.

In 1996, PDO and the Korea GasCorporation (KGC) signed a firm contractfor the supply of 4.1 MMt/yr of LNG overa 25-year period starting in 2000. This1996 deal was the largest single-buyer,LNG contract ever agreed at that time.

The upstream work for this projectcalled for 31 new wells at the Barik andSaiti Rawl fields between 1997 and 1999.

Field development technology The geology of Oman is complicated andpresents PDO with a range of problems.For example, there are known reservoirsof light crude that lie at great depth incomplex reservoirs. As a result of thesechallenges, PDO has been at the forefrontof applying horizontal well technology tothe problem of bypassed oil in geologicallycomplex environments. More than 90% ofthe wells drilled in Oman are horizontal.

PDO has installed an online, real-time,computerized production system thatcontrols the operations of all its fields.This has increased effective productionby 5% and helped to save the companyaround $7 million per year in operatingcosts and capital expenditure.

Electronic instrumentation andsoftware have been installed on over 1200wells and at associated productionfacilities. Well data are transmitted in realtime to the central computer that ensuresoptimal control of the well processes.

PDO has conducted fully integrated,petroleum-engineering modeling studiesin various fields to enhance itsunderstanding of the fundamentalrecovery processes that governproduction potential. This has resultedin optimized development drillingstrategies; leading, in the case of theBahja area, to a shift away fromhorizontal drilling towards cost-effective,slim, vertical wells that have provedsuccessful in locating bypassed oil.

Demands for the futureOman’s oil reserves are increasing by asmall margin each year and its gasreserves increased dramatically duringthe 1990s.

Oman’s natural gas meets the needsof the country’s power stations,seawater desalination plants and otherindustries. The growing supply of cheapgas has encouraged new industrialventures to use gas as a fuel orfeedstock. These industries includepetrochemicals and aluminum smelting.As a result, domestic, natural-gasconsumption in Oman is expected torise substantially and production mustbe stepped up to meet these needs.

The demand for liquefied natural gasis expected to double from around78,400 t in 1997 to almost 148,000 t by2010. It is expected that, in 2010, LPGdemand will outstrip production.

Though a modest oil producer by Gulfstandards, Oman remains highlydependent on the hydrocarbon sectorfor its economic wellbeing. The recentfive-year development plan underscoredthe government’s commitment todiversification of the country’s economicactivities.

Exploration interest remains highwith nine new exploration licensesissued since 1995.

1995199019851980 2000

5.0

6.0

4.0

3.0

2.0

1.0

0.0

Rese

rves

(bill

ion

bbl)

1000900800700600500400300200100

0

Prod

uctio

n (1

000

bb p

er d

ay)

1985 1990 1995 1998

Figure 10.3:Production andreserves for Oman(excludingcondensate)

Figure 10.4: A PDO drilling rig on the edge of a vast desertsand sheet at Rub al-Khali

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History

Middle East Reservoir Review

the giant Bab oil and gas field. Theproject added two 350 MMscf/D trains totreat and process associated gas fromBab’s lower Cretaceous Thamama Breservoir and nonassociated gas fromthe Thamama C reservoir. A625 MMscf/D train was put in place fornonassociated gas from the Thamama Fand compression facilities that couldinject up to 830 MMscf/D into this layer.

The second phase of the OGD projectincreased condensate capacity by50,000 B/D and added 1 Bcf/D of salesgas by 2000. Sustained economic growthand urbanization will ensure a high andgrowing demand for gas to use in powergeneration and water desalination.

While the established industrialsectors typified by operations at DasIsland continue into the nextmillennium (Figures 16.7 and 16.8)there are new directions for businessand industry in the UAE.

2000

1500

1000

0

Prod

uctio

n (1

000

bbl p

er d

ay)

1985 1990 1995 2000

1980 1985 1990 1995 20000

120

100

80

60

40

20Rese

rves

(bill

ion

bbl)

Figure 16.7: DasIsland separatorsand hydrogen sulfideplant seen from thebase of the flowtanks

Figure 16.8: DasIsland tankerterminal. Frenchtanker Saint Remibeing moored at theterminal. A head lineis being taken onboard a work boat

The Gulf

T

Jarnain

Satah

Arzanah

Yaser

Bin NasherSaath AlRaaz Boot Umm Al

AnbarUmm AlLulu

MubarrasA, B, C

Umm AlDalkh

ZubbayaBu Jufair

Dalma

Hair Dalma

Mushash

Dhafra

Gazira

Bida AlQuemzan

Huwaila

Shah

SahilBab

Bu Hasa

Ruwais 2

Ghasha/Bu Tini

Zarrarah

Qusahwira Mender

Asab

Rumaitha

Arjan

Shanayel

JarnYaphour

Mirfa

HailBu Labyad

Nasr

Salman

Abu Al BuKhoosh

Umm Shaif

Zakum

Fateh

Fateh/Fateh W

Fateh SW

Rashid

MandousBu Dana

Belbazem/Umm Al Dholou/Umm Al Salsal

Baih

Mubarrak

Sajaa

Mo'ayyid

L-11-B

NorthField

Margham

Khubai

Juwaiza

Umm Al Qaiwan

SalehBukhaW Bukha

Hamriyah

Sharjah

Abu Dhabi

a

b

ed

f

f

f

b

cc

c

United Arab Emirates

a Dubaib Sharjahc Ras Al Khaimahd Ajmane Umm Al Qaiwainf Fujairah

United Arab Emirates

Gas field

Gas pipeline

Oil pipeline

International border

Oil field

The oil and gas fields of the United Arab Emirates

Figure 16.9: Fromfirst oil in the 1960sto fully developedfields in the 1990s,production in theUnited Arab Emirateshas grown rapidly.The economicchanges which haveaccompanied this oilboom have made theUAE a major playerin the Middle East oiland gas sector

In recent years, the UAE hasundertaken several projects to diversifyits economy and to reduce itsdependence on oil and gas revenues.According to one Emirates newspaper,the non-oil sector accounted for 69% ofthe gross domestic product in 1997. The federal government has investedheavily in sectors such as tourism,telecommunications, re-exportcommerce and aviation. As part of itsstrategy to further expand its tourismindustry, UAE plans to build new hotels,restaurants and shopping centers, andto expand airports and duty-free zones.

Beyond the oilThe United Arab Emirates is a relativelynew oil and gas producer with productionstarting in the 1960s (Figure 16.9) andthe country being formally constitutedfrom the seven Emirates in 1970s.

The country has used its oil and gasrevenues to establish itself as one of the leading business centers in theMiddle East.

Unable to rely on vast oil reserves forcontinued growth, Dubai has become acentral Middle East hub for trade andfinance, accounting for about 70% of theEmirates’ non-oil trade. In 1996, Dubaiunveiled its strategic development planfor the twenty-first century, whichfocused on the private sector andemphasized capital-intensive industries.It called for a new infrastructure andthe loosening of trade and bankingrules. For its part, Abu Dhabi planned todevelop an offshore financial andcommodity trade center on SaadiyatIsland. This will include storagefacilities, a port, a freight center, and afinancial and insurance center tofacilitate trading.