Can you elaborate on the role of the Ministry?
With regard to promoting the oil and gas sector, we primarily promote all of the available open blocks for foreign or local investment. We normally know who the interested players are, giving them the opportunity to review available data and make their own assessments and judge the value of the block. Then, they put a bid together regarding the proposal to develop it. We then evaluate the different options and enter into an exploration agreement with the winning company. Thus, our role is to bring more players into the market and make sure all open blocks are commercialized and active. Once a company is on the ground and working, we spend a great deal of time with it to make sure that its management understands the rules and regulations of Oman, as well as ensure they interact with other players in terms of synergy. I would cite BP and PDO as good examples of this. PDO supplies BP with electricity and also transports BP gas and condensate, both on a tariff basis. There is also integration with Oman Gas Company, which supplies gas to consumers. BP has a relationship with them, and we entered the relationship as a final custodian of the gas.
What were the highlights of 2013?
In 2013, I think the major highlight was on the Health, Safety, and Environment (HSE) front. It was probably one of the best years for many companies, especially PDO, the largest operator, which achieved the best year ever in terms of incident frequency. The other operators also reported excellent HSE results. Production-wise, I think 940,000 bbl/d was an excellent achievement. Also, from a concession perspective, 2013 saw the signing of a concession with BP following extensive negotiations. We also signed an offshore concession with Total and PetroTel. Overall, 2013 also saw positive results from the exploration program conducted by Masirah Oil Limited Offshore. Therefore, offshore is gaining greater momentum, which I consider welcome news.
Can you elaborate on the importance of $1.2 billion contract for BP's Khazzan project?
BP-Khazzan is a major undertaking that translates to production of 28 million cubic meters (mcm) of gas per day, which is one-third of today's production. By the time it comes on stream in late 2017 or early 2018, it will probably provide one-quarter of what we need in terms of gas. It will also allow us to create a buffer between supply and demand where, for a chain, we will have slightly more capacity to supply gas than there is demand in the market. This buffer provides the required breathing space in which to conduct maintenance, and so on. At the moment, each mishap translates into a shortage for one consumer or another. By creating that buffer, hopefully mishaps at gas plants or fields will not necessarily translate into shortages due to our ability to close that gap from alternative supply. In addition, we are confirming our ability to supply from deep, tight gas fields. Being able to secure that supply will give us the confidence to venture into unconventional gas plays on a bigger scale.
Oman recently signed a landmark agreement for natural gas from Iran. What does this milestone mean for gas-intensive industries in Oman?
What we have signed so far is a Memorandum of Understanding (MoU). There are many things that still need to take place before the project starts registering any milestones. Once complete, it will translate into about 28 mcm of gas. To me, it will bring diversification of supply, which is important because, thus far, we have been relying heavily on our own indigenous gas supply. Of course, there is a small volume being imported; however, it is negligible and destined for Sohar's industry. I think that if the Iranian gas does materialize, it will open up avenues of diversification for gas supply from beyond local production. It will definitely support enhanced oil recovery (EOR) production because EOR projects will demand more gas.