Oman development minister details Sultan Qaboos Volunteer Work Award

Remarkable growth for Omani economy in 2010

BP considers $15 billion gas project

Oman’s crude oil competes to become 3rd benchmark

International cable to link Sultanate to Frankfurt

HE Sheikh Mohammed Bin Said Al Kalbani, Minister of Social Development and head of the main committee of Sultan Qaboos Volunteer Work Award, said that the Sultan Qaboos Award for volunteer work will support the volunteer work in the Sultanate, as it will encourage all kinds of volunteer work.

Al Kalbani said in a statement that the Royal Directives of His Majesty Sultan Qaboos Bin Said gives top priority to that award which will motivate volunteer work concepts in the coming generations.

“The award is an appreciation to the associations, establishments, and individuals who do volunteer efforts in service to society,” he said.

He pointed out that the award aims at spreading the culture of volunteer work, as it is part of the culture of the developed Omani society, and it supports the positive values and role of domestic associations in this field.

Al Kalbani highlighted that social responsibility by private and public establishments is one of the aims of the award, which raises the spirit of solidarity among them.

Meanwhile, an annual report of economic development for the year 2010, issued by the Central Bank of Oman, affirmed that the Omani economy witnessed significant turnaround in GDP growth in 2010, primarily driven by recovery in crude oil prices in the international markets. Sustained domestic demand, supported by accommodative fiscal and monetary policies, also contributed to the economic recovery, amidst global uncertainties. External demand was robust following global recovery and consequent rise in crude oil prices in the international markets.

During 2010, the major policy challenge for the CBO was to secure a broad-based economic recovery through accommodative monetary policy. Liquidity condition was comfortable throughout the year leading to moderation of domestic interest rates.

Although inflationary pressures in Oman remained, by and large, under control in 2010, the recent increase in prices of food and other essential commodities in the international markets is a matter of concern for the CBO.

After the cyclical slowdown in 2009, the Omani economy recorded impressive recovery in 2010. The Sultanate’s Gross Domestic Product (GDP) at current prices grew by 23.4 percent in 2010 in contrast to a decline of 22.6 percent in the previous year. While nominal GDP directly emanating from the hydrocarbon sector registered a robust growth of 41.2 percent, the same from non-hydrocarbon activities witnessed a growth of 11.1 percent during 2010.

As a result, the share of petroleum activities in the overall GDP increased from 40.6 percent in 2009 to 46.5 percent in 2010 while that of non-petroleum activities declined from 61.6 percent to 55.5 percent during the same period.

Manufacturing sector recorded an impressive growth of 18.8 percent in 2010, while ‘electricity and water supply’, ‘mining and quarrying’ and ‘building and construction’ grew by 9.3 percent, 3 percent and 2.1 percent, respectively.

Deceleration in the growth of ‘building and construction’ sector indicates that the private sector is yet to regain confidence after slowdown in 2009. In 2010, value added in the services sector increased by 11 percent to RO 8.3 billion as against a decline of 1.7 percent to RO 7.5 billion in the previous year.

The share of services sector in GDP, however, declined to 37.5 percent in 2010 form 41.7 percent in the previous year.

Meanwhile, BP PLC is considering an investment of $15 billion over a 10-year period for the full-field development of its Block 61 tight gas fields in Oman, according to a senior executive of the firm.

“This will be a very large project…and will require approximately $15 billion in capital investment from BP to make that happen,” said Jonathan Edwards, vice-president of BP Oman.

“About $10 billion of that will go into the drilling of wells and the rest will go for surface facilities,” Evans said.

“We are proposing for the full field development of a gas processing plant with a capacity to process 1.2 bcfd, which will need 330 wells, and about 600 km of gathering system to connect all those wells,” Evans said.

“We have not yet reached an agreement with the government,” Evan said, adding that, “We have to submit a field development plan to the government, which we plan to do early next year.”

Evans noted that on the basis of field development plan, BP will negotiate commercial terms with the government. “The government has to agree for the scale of development that we are talking about,” he said.

If everything goes well, the first production of gas on commercial basis from the field is expected in late 2016 or early 2017. “We need 60 wells to start commercial production and thereafter, we will drill 20 wells every year for 10 years,” Evans said.

Evans’ remarks followed an announcement by BP of the successful completion of an extended well testing project, with the anticipated commercial gas production from its Khazzan and Makarem fields expected at about 1.2 bcfd.

“We are encouraged by the results of the extended well tests,” said Evans, who explained that the tests, “will help us as we now work towards declaration of commercialization by 2012-end.”

"We have already drilled eight wells and a ninth one is being drilled at the moment,” said Evans, who added that the stimulation and testing of the first three wells have been completed.

Evans said that teams in London and Muscat are working with the government of Oman to agree on the development concept for the Khazzan project, which will form the first phase of development on Block 61.

“This includes designs for wells and surface facilities,” said Evans, who added that BP had begun producing 60 MMcfd of gas from the test wells. He said seven wells have been successfully tested, with BP Oman planning to add two more wells by yearend.

Under the terms of the exploration and production-sharing agreement signed in January 2007, BP is required to submit a full field development plan to the government. “We plan to do this early next year, and on the basis of that, we will then negotiate commercial terms,” Evans said.

The agreement covers a 2,800 sq km area in central Oman, including the Khazzan and Makarem gas fields, which were discovered in 1993 but had remained undeveloped due to what BP called “the complexity of their tight gas reservoirs.”

At the time, BP said it signed “a major production-sharing agreement that will give the company access to two Middle East fields and associated accumulations that could yield resources of some 20-30 tcf of natural gas.”

In November 2009, BP completed drilling five of eight appraisal wells as part of its development program for the reserves on Block 61.

“BP will drill eight appraisal wells in total by 2011,” according to Jonathan Evans, BP Oman general manager. “So far we've done five wells, which have provided a lot of useful information on the nature and the scale of the reservoirs (OGJ Newsletter, June 7, 2010).”

BP has a 100% stake in Block 61, but Oman’s government may take 20% equity in the project at the time of commerciality.

The Chief Executive Officer of Dubai energy bourse said that future contracts posted for Omani oil have the ability to compete with the two main benchmarks in the world.

Dubai has launched Oman crude’s 2007 contracts to compete with Brent and West Texas crude oils, though no such goal has been achieved yet.

Last Thursday, there were 9,516 centers for future contracts of Oman crude, compared to record 1.6 million centers for the American crude in Nymex Mercantile Exchange in New York.

Some players on the market called for a third benchmark to be introduced. Thomas Liver said that bringing down the two main benchmarks is a big challenge and that producers and consumers began to value the price data that the Sultanate of Oman can offer.

Liver pointed out that Reuters Energy and Climate Summit did not fail. The double effect of the nuclear disaster in Japan and the sudden halt of most of the Libyan oil earlier this year points to the importance of trade via bourses for risk management.

On the other hand, Omantel has signed a contract with three international telecom partners from Iran, the UK and Russia, to provide a new express cable system that will link Frankfurt in Germany with the Gulf.

The agreement, signed in Teheran recently, is expected to strengthen Omantel’s position as a ‘Carrier of Carriers’ and help ensure that Oman becomes a gateway hub for the region in delivering high speed telecommunication services through the new Europe Persia Express Gateway (Epeg) system.

Currently most cables go through Egypt and the Gulf of Suez, but by developing this new route from Oman to Germany, operators will have a new alternative.

Each of the partners in Epeg will have the responsibility to construct and develop part of the network that runs through their country.

Senior Omantel executives were in Tehran to formally sign the agreement with UK-based Cable and Wireless, Rostelcom from Russia and Telecommunications Infrastructure Company (TIC) of Iran.

“Epeg is a system that has brought together a range of experienced international partners to build a unique system that will improve telecommunications services and provide new opportunities with our partners,” said Eng Abdulrahim Al Bahlani of Omantel.

“This will be our first major project with TIC from Iran and Rostelcom from Russia, while strengthening our long and fruitful partnership with Cable and Wireless,” he added.