Oman recently played host by a group of top-flight upstream investors of energy supermajor BP — a first-of-its kind visit that underscored the importance of its signature investment, the Khazzan tight gas development, in its global operations.
Bernard Looney, BP’s Chief Executive — Upstream, who led the group to Muscat, said the visit was a testament to the “extraordinary” partnership that BP has forged with the Omani government in unlocking Khazzan’s tight gas resources in Block 61 in central Oman. BP is the operator of the block with a 60 per cent equity interest. Oman Oil Company Exploration & Production (OOCEP), the upstream arm of Oman Oil Company, is a shareholder (30 per cent), and it is expected that the Malaysian state-owned energy firm Petronas will join soon taking 10 per cent of OOCEP.
“This visit exemplifies BP’s strategy in Oman,” said Looney. “It’s about early access, which occurred back in the 2007. It’s about very strong execution as reflected in the transfer of technology and learning from across BP, particularly in this example from North America, and it’s about growth in the future. Indeed, our business here in Oman, in collaboration with the Ministry of Oil & Gas and the Omani government, exemplifies what can happen when we work in partnership.”
The roughly 30-member team, comprising a mix of shareholders and analysts, spent two days in the Sultanate. Deliberations on the first day encompassed BP’s upstream operations around the globe. On the following day, the group flew into central Oman by charter flight for a ringside tour of the two-train gas processing plant in Khazzan — the centrepiece of BP Oman’s multibillion dollar tight gas development.
Oman, according to Looney, was a natural choice for the Upstream Investors Group weighing international destinations for their summit that occurs every two or so years. “It was a no-brainer to come to Muscat because what we have done together with Khazzan — country and company — is an extraordinary accomplishment,” he said.
Landmark project
Khazzan, representing Phase 1 of an estimated $16 billion investment that BP and its shareholders are making in Block 61, currently delivers 1 billion cubic feet (bcf) per day of gas into the Sultanate’s gas grid. Ghazeer, representing Phase 2 of this landmark project, will boost output to 1.5 bcf per day when it is brought into operation in 2021.
“Ghazeer is about 40 per cent complete to date, which is excellent because it is on schedule — if not slightly ahead — and on budget as well,” Looney, who is responsible for BP’s Upstream Segment, noted.
Despite its sizable commitment to Block 61, the energy giant is not ruling out possible investment in new exploration blocks or integrated gas developments. The latter business model, which grants investors full control over the complete value chain — from upstream to the midstream and downstream — has already elicited the interest of energy heavyweights such as Shell, Occidental and Total.
On potential BP interest in integrated gas schemes in the Sultanate, Looney responded: ‘The answer is ‘yes’! We have discussed such options with the Ministry of Oil & Gas over the past year or so. It’s an area we are interested in. We think it’s an area we can bring unique technology to bear, and we understand the country’s desires and needs in this regard, taking its local natural resource and converting it into something of value in country, rather than exporting it solely. We understand that need and obviously it will create jobs.”
The official stressed however that discussions on the issue haven’t yielded anything “concrete” to date. “Nevertheless, BP is very open to those conversations, and I hope there are things that we can bring that are unique in terms of our technology. I think time will tell where those conversations go,” he said.
