In many ways, Oman is atypical of Persian Gulf oil producers. Omans petroleum deposits were discovered in 1962, decades after most of those of its neighbors. Moreover, Omans oil fields are generally smaller, more widely scattered, less productive, and more costly per barrel than in other Persian Gulf countries. The average well in Oman produces only around 400 barrels per day (bbl/d), about one-tenth the volume per well of those in neighboring countries. To compensate, Oman uses a variety of enhanced oil recovery (EOR) techniques. While these raise production levels, they increase the cost.
Oman has proven recoverable oil reserves of 5.5 billion barrels, the bulk of which are located in the countrys northern and central regions. The largest and traditionally most reliable fields are in the north. These fields, which include Yibal (the biggest), Fahud, al-Huwaisah, and several others, are now mature and face future declines in production. Omans total (i.e. including condensate and other liquids) production figure fell sharply from its height of 972,000 bbl/d in 2000 to 754,000 bbl/d in 2004. In 2005, however, output recovered slightly, averaging 780,000 bbl/d, as a result of the introduction of additional EOR measures, as well as increased production of natural gas liquids. If output continues at the present pace and no major new reserves are discovered, Oman has less than 20 years left as a significant oil-exporting nation. Given estimates suggesting that the amount of oil originally in place in Oman is around 50 billion barrels, finding ways to increase recoverability is a top priority. As part of its attempts to expand its reserves, in 2003 Oman signed a six-year contract with Spectrum Energy and Information Technology (UK) to have old seismic studies reprocessed.
Petroleum Development Oman (PDO) is the countrys second-largest employer after the government. The company is a consortium comprised of the Omani government (60 percent), Shell (34 percent), Total (4 percent), and Partex (2 percent). It holds over 60 percent of the countrys oil reserves, and accounts for 85 percent of production. PDOs main hopes of stemming its decrease in production involve increasing recovery rates, and discovering and exploiting new fields, particularly in the south. Among its southern prospects, PDO has the most hope for a cluster of fields that includes Ghafeer, Sarmad, and Harweel. PDO estimates there may be reserves of 250 million barrels in these fields, with a potential maximum production level of 100,000 bbl/d. One small new find was reported in July 2004, in the Shuaiba area in northwestern Oman, which tested at 2,600 bbl/d. PDO awarded a contract to Petrofac of the UK in November 2005 for development of natural gas injection infrastructure at the Harweel field. One of the difficulties that PDO will face in the south is the very large water cut in the fields. A proposed solution is the construction of a 300-kilometer (186-mile) pipeline that will carry water from the south for use in reinjection in the north where "water flooding" already has been used successfully on wells in the Yibal and Bahaja fields.
Despite PDOs dominance, several other companies are involved in Omans oil sector, particularly in offshore exploration. In March 2002, Total signed an oil and gas exploration and production-sharing agreement with the government, covering a block of around 4,250 square miles off the southeastern coast of Oman. As part of the agreement, Total agreed to spend at least $17 million on exploration over the initial two-year period. Maersk Oil Oman (a subsidiary of Danish energy group AP Moeller), Mitsui & Co. (Japan), Occidental (US) and Hunt Oil (US) have also recently committed to various offshore exploration projects. Chinas CNPC acquired a foothold in Oman in 2002, taking a 50 percent stake in Block 5 which it acquired after it was relinquished by the Japanese firm Japex. The other major Chinese oil company, Sinopec, acquired two onshore exploration blocks in southern Oman in August 2004. In June 2005, the Omani government awarded the Mukhaizna field to Occidental Petroleum, after it was relinquished by PDO. Occidental plans to introduce bring production at Mukhaizna from the current level of 10,000 bbl/d to 150,000 bbl/d by 2011, using large-scale steam injection. Most of Omans crude oil exports go to Asia, with China, Japan, South Korea, and India the largest importers. Chinas share of Omans oil exports slid somewhat in 2005, after rising sharply in the preceding two years, but was still over 200,000 bbl/d.
In 1982, Oman constructed its first refinery, at Mina al-Fahal. The plants capacity is now 85,000 bbl/d. Output from the facility, which is operated by the state-owned Oman Refinery Company (ORC), is used to meet local product demand. In June 2002, SK Engineering of South Korea was awarded a contract for the construction of a new desulfurization unit at Mina al-Fahal. A second refinery is under construction near the northern city of Sohar. Bids for construction of the project were solicited in March 2002, and JGC Corporation (Japan) was awarded the contract in May 2003. To facilitate this, Oman announced plans in April 2003 to build a $1 billion pipeline that will run the 162 miles between the Oman Refinery Company and the new refinery in Sohar. When both the pipeline and the refinery begin operation in mid-2006, the line is to transport a mixed feedstock of crude from PDO and long residue from the Oman Refinery to Sohar for processing. The refinerys capacity is expected to be 51,000 bbl/d of gasoline and 30,000 bbl/d each of diesel and fuel gas. The plant will also have a facility for extracting sulfur from gasoline and a catalytic cracker that will produce gas and gasoline from the leftover elements of the normal refining process.