UNITED STATES (OBSERVATORY NEWS) — Oman has long been looking for a way to protect its financial future, at the Brent break-even price of just over $ 87 a barrel this year, and given that 85% of its revenues come from the hydrocarbon sector, although the country has only 5 billion barrels of estimated proven reserves oil.
Against the backdrop of the growing geopolitical polarization of the Middle East between the pro-Saudi and pro-Iranian factions, Oman seeks to strengthen its image of regional asylum in order to achieve this financial goal.
Oman has a huge natural advantage in implementing this strategy, due to its geographical location. It has long coastlines along the Gulf of Oman and along the Arabian Sea, far from the extremely politically sensitive Strait of Hormuz.
They provide unhindered access to the markets of South Asia, West Asia and Africa, to neighbors in the Middle East. He also tried not to join the pro-Saudi Arab countries in the Middle East (or the United States), including the UAE and Kuwait, or the pro-Iranian countries in the region (or Russia), including Iraq, Syria, Lebanon. For many years, there has been talk that the Iran-Oman gas pipeline will finally be launched. But after the restoration of US sanctions in 2018, Oman left this issue to chance.
The Sultanate sought to develop three elements of financial stability. The first involves focusing on the development of value-added products in the petrochemical sector, rather than on crude oil flows or gas exports, with the focus on the Duqm Refinery project and future Duqm Petrochemicals projects. Second: expanding relations with China in terms of export of hydrocarbons and petrochemical products and infrastructure projects related to the “One Belt – One Road” program. In the hydrocarbon sector alone, Oman’s daily oil and condensate production was 958,270 barrels, with China demanding 85% of all production. Third: ensuring that revenues are not wasted.
A great example of the first two points is Oman’s attention to the $ 3.6 billion Liwa Plastics Project manufacturing facility next to the Oman refineries and the Petroleum Industries Sohar refinery in Dukma Special Economic Zone. All of this is specifically designed to enable Oman to capitalize on synergies with the refinery and plastics market in China, the fastest growing market for these products in the world. Oman recently announced that it has increased planned investments in Duke’s leading oil refineries and future Duqm Petrochemicals projects from an initial $ 6 billion to a total of $ 18 billion. This will increase production from 15 million tons to 24 million tons by 2030.
Oman also signed a land lease agreement to create a huge industrial park in Dukma. This will allow a number of Chinese companies to invest approximately $ 10 billion in the Sultanate. Despite the fact that initially everything was focused on expanding the production capacity of the Duqm refinery and related operations, the deal covers a much wider range of projects in three areas – heavy industry, light industry and areas of mixed use. All of them will be ready in the next 5-10 years. There will be 12 projects in light industry, according to Yahya bin Saeed Al-Jabri, chairman of the Dukma Special Economic Zone Office, including the production of 1 GW solar power units,
The mixed-use sector will focus on tourism projects, including the construction of a $ 150 million hotel on an area of 10 hectares, as well as hospitals worth $ 100 million and schools worth $ 15 million. 12 projects related to the production of concrete, building materials will be presented in the heavy industry sector , production of glazed glass, methanol and other chemicals. In addition, the production of aluminum, tires, construction materials for protection against water and corrosion will be launched, and the process of extracting magnesium from seawater will be organized.
At the same time, there will be no empty expenses that are often in the process of implementing similar projects in other countries of the region. Some time ago, the Sultanate Council on Financial Affairs and Energy Resources announced that it had formed a specialized working group to study government spending and how to reduce it. The Government of Oman has announced that it will apply zero-based budgeting in the ninth five-year plan for approving appropriations for development projects only after completing all feasibility studies and analyzing the real value of each. The Council also emphasized that it seeks to avoid any additional funding requests from developers after the start of a project.
Predicting the future, Oman realizes that, although China will remain a key partner in its future in all areas of the economy, other partnership options need to be developed. Over the past few weeks, the world’s first deep-sea oil well was developed in Oman by the Italian company Eni, which is not a Chinese partner. Earlier this month, a drilling ship chartered by Eni Oman began drilling operations at Block 52, an extensive deep-sea concession that extends from the southern and southeastern coast of the Sultanate, according to company managing director Salvatore Jammetti. This month, the Omani Ministry of Oil and Gas signed a new exploration and production sharing agreement with a joint venture,
In anticipation of future investments, Oman announced a few days ago that Masirah Oil Limited (MOL) had successfully completed the drilling of an appraisal well in block 50, with the first oil coming in already. According to government statements, the Yumna-1 well, located 30 km off the eastern coast of the Sultanate, was drilled on December 26. To date, it has been tested with a productivity of 11 843 barrels per day through one well.
Meanwhile, the second exploration well, drilled in concession, successfully reached the target well depth of more than 3 thousand meters in the Cambrian reservoir. Limited quantities of high-quality light oil of 3,500 barrels per day began to flow. All current oil is currently temporarily stored on board the Aframax tankers. Drilling a new well and the possible success of this venture so far portends good progress in the coming weeks. In the future, major foreign players in the oil and gas industry will sign EPSA both at the Yumna oil fields and in other parts of the country.
This article is written and prepared by our foreign editors writing for OBSERVATORY NEWS from different countries around the world – material edited and published by OBSERVATORY staff in our newsroom.
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