Petroleum Development Oman
Encyclopedia
Petroleum Development of Oman (PDO) is the foremost exploration and production company in the Sultanate. It accounts for more than 90% of the country's crude-oil production and nearly all of its natural-gas supply. The Company is owned by the Government of Oman
which has a 60% interest, Royal Dutch Shell
which has a 34% interest, Total
which has a 4% interest and Partex
which has a 2% interest. The first economic find of oil
was made in 1962, and the first consignment of oil was exported in 1967.
granted a 75-year concession to the Iraq Petroleum Company
(IPC). Pausing only for the Second World War, exploration for oil was underway in Oman
.
The exploration and production operations were to be run on behalf of the IPC by Petroleum Development (Oman and Dhofar) Ltd. The operating company had four shareholders, each with an interest of 23.75%: the Royal Dutch/Shell Group, the Anglo-Persian Company (which would eventually become the British Petroleum Company, or BP), Compagnie Française des Pétroles (whose convoluted lineage would make it a predecessor of today’s TotalFina-Elf) and the Near East Development Company (whose likewise convoluted lineage would make it a subsidiary of today’s ExxonMobil). The remaining 5% stake was held by a fifth shareholder, Partex.
Having landed at Duqm in February 1954, IPC geologists were faced with tribal conflicts which made access to the most promising oil prospect, Jebel Fahud, difficult. They reached the jebel in October 1954 and began to survey the surrounding terrain. Supplies had to be transported from Duqm. In January 1956 the company started drilling its first well at Fahud but the hardships were all in vain: the well was dry. Later, when the supply line was switched to the Sumail Gap, warring tribes were able to disrupt convoys and bring operations to a halt.
Further dry wells were drilled and this lack of success, combined with worsening logistical problems and a glut of oil on the world market, led most of the partners to withdraw from the venture in 1960. Only Shell and Partex opted to remain in Oman to continue the search for oil. Their optimism was soon to pay off, however: they struck oil at Yibal in 1962 — and from these inauspicious beginnings an oil-producing nation was born.
The pipe laying was followed closely by the construction of an industrial complex at Saih al Maleh (later re-named Mina al Fahal), the building of a tank farm, the installation of single-buoy moorings for seagoing tankers and the erection of a 20-megawatt power plant. The whole development — including the pipeline, the coastal industrial area, the tank farm, the marine terminal, a chain of radio repeater stations and housing for staff at Ras al Hamra — cost $70 million.
The first export of Omani oil took place on 27 July 1967. The original debit note shows that the consignment consisted of 543800 barrels (86,457.3 m³) of oil valued at $1.42 a barrel. A month before, in June, the Compagnie Française des Pétroles rejoined the partnership by taking over two-thirds of Partex's equity share, resulting in the following shareholding in the company that by then had changed its name to Petroleum Development (Oman): Shell 85%, Compagnie Francaise des Petroles 10% and Partex 5%.
On 23 July 1970 His Majesty Sultan Qaboos took over from his father as ruler of the country. He made his first visit to the PD(O) offices on 18 August 1970.
The oil price hike in 1973 greatly improved the economics of producing oil in remote locations. As a consequence, the focus of exploration activity was moved to the eastern flank of the south Oman geological basin. Wells soon revealed the Amal and Amin fields, amongst others. The Marmul field, considered uneconomic to develop when it was discovered in 1957, was now shown to be commercially viable upon reappraisal. The high oil prices compensated for the fact that the Marmul crude oil was heavy and viscous. These and other oil fields in south Oman would play a significant role in the growth of reserves and production in the coming years.
The first half of the 1970s was important for other reasons as well. On 1 January 1974 the Government of Oman acquired a 25% shareholding in the Petroleum Development (Oman); six months later the shareholding was increased to 60%, backdated to the beginning of the year. As a result, the foreign interest in PD(O) was now made up of the Shell (34%), Compagnie Française des Petroles (4%) and Partex (2%). These shareholdings have remained unchanged to the present day. (The Company, however, underwent a change six years later. On 15 May 1980, it was registered by Royal Decree as a limited liability company under the name Petroleum Development Oman — now without parentheses in its name.
Meanwhile, the Company had become involved in setting up the Government Gas System , to provide natural gas from the interior to industry on the coast. And it was remarkably successful in that undertaking.
Then, in 1986, the oil price collapsed. Almost instantly PDO was required to cut costs while increasing production and maintaining reserves. This it did with remarkable success. The Company turned its focus on innovation and experimentation. Technological leaps in processing the huge volumes of data acquired in three-dimensional seismic surveys helped PDO to explore with great success during this period. Horizontal wells , which made their debut in 1986, yielded between two and four times the production from any one given well. (They have since become the norm in PDO.) Time and again the Company broke its own records for drilling wells in the shortest time and for drilling the longest horizontal wells.
When PDO's gas-exploration campaign in the early 1990s made it clear how bountiful the country's gas fields were, the Government decided to establish a completely new industry: the export of liquefied natural gas (LNG). In 1996 PDO concluded an agreement with the Government to develop the central Oman gas fields in order to supply gas to an LNG plant in Qalhat, near Sur. To fulfill its end of the agreement, the Company had to drill wells, hook them up to a new gas processing plant at Saih Rawl, and then transport the processed gas via a 352-kilometre pipeline to Qalhat. Furthermore, PDO would then be responsible for guaranteeing the delivery of gas for 25 years.
This upstream LNG project, costing $1.2 billion, is the single biggest project in PDO's history. And it was executed as planned. The Saih Rawl Central Processing Plant and the gas pipeline from Saih Rawl to Qalhat were dedicated to the nation in November 1999, the first downstream cargo of LNG was shipped to Korea in April 2000, and His Majesty the Sultan officially opened the LNG plant six months later.
Having built up such momentum in its oil production as it entered the 1990’s, the Company fully expected the trend to continue. Unfortunately, the Company’s field-development strategy for the start of the 21st century – based on incremental infill drilling with horizontal wells and extensive waterflooding – had its momentum dissipated before the waterflooding projects, which require comprehensive reservoir studies, could be fully implemented. The natural production-rate decline of its major oil fields eventually caught up with the Company at the start of the millennium. And to make matters worse, its business had fundamentally changed: its new fields were coming in smaller sizes; its new wells were delivering less oil; its costs were going up. The fact was that the Company’s operating model – the way its was carrying out its business – was not sustainable in the longer term.
Meanwhile, gas continues to be a growth area for the Company. A new gas-processing plant was commissioned in Saih Nihayda in 2005, and another one is due in 2008 for PDO's newest gas field in Kauther. With the addition of those two processing plants, nearly one-third of the hydrocarbon energy that PDO supplies will come from natural gas—the fuel that has a central role in the Government’s economic diversification plans.
PDO thus now faces a formidable set of challenges. But the execution of its EOR projects, the expansion of its gas production and the implementation new ways of working mean that, technically as well as socially and environmentally, PDO will remain in the forefront of the region’s oil and gas business.
of Oil & Gas, his Excellency Mohammed bin Hamad al Rumhy represent the Government of Oman, and five represent PDO's private shareholders Royal Dutch Shell
(Netherlands
and UK), Total
(France
), and Partex
(Portugal
).
, where it is loaded onto seagoing tankers at the discretion of the Company's shareholders. As such, the Company does not earn any money from the sale of oil; its shareholders do. The shareholders in turn cover all budgeted operating and capital expenditure.
fields and their associated production systems all on behalf of the Government of Oman. The Company delivers gas to the Government Gas System, which supplies fuel for most of Oman's power stations and some of its industries, and to the Oman LNG
plant at Qalhat
, near Sur
.
As part of its gas production operations, PDO also supplies some 50000 oilbbl/d of condensate liquid hydrocarbons that condense out of natural gas
and about 200 tonnes per day of liquefied petroleum gas, which is chiefly used for cooking.
in Muscat in 1995 to educate those in fossil fuel development in the country.
Oman
Oman , officially called the Sultanate of Oman , is an Arab state in southwest Asia on the southeast coast of the Arabian Peninsula. It is bordered by the United Arab Emirates to the northwest, Saudi Arabia to the west, and Yemen to the southwest. The coast is formed by the Arabian Sea on the...
which has a 60% interest, Royal Dutch Shell
Royal Dutch Shell
Royal Dutch Shell plc , commonly known as Shell, is a global oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the fifth-largest company in the world according to a composite measure by Forbes magazine and one of the six...
which has a 34% interest, Total
Total S.A.
Total S.A. is a French multinational oil company and one of the six "Supermajor" oil companies in the world.Its businesses cover the entire oil and gas chain, from crude oil and natural gas exploration and production to power generation, transportation, refining, petroleum product marketing, and...
which has a 4% interest and Partex
Partex
Partex Oil and Gas Corporation is an oil company which is fully owned by the Calouste Gulbenkian Foundation, from Lisbon, Portugal.-History:...
which has a 2% interest. The first economic find of oil
Oil
An oil is any substance that is liquid at ambient temperatures and does not mix with water but may mix with other oils and organic solvents. This general definition includes vegetable oils, volatile essential oils, petrochemical oils, and synthetic oils....
was made in 1962, and the first consignment of oil was exported in 1967.
Origins and history
Oman's growth into a successful oil- and gas-producing nation had humble beginnings — so humble, in fact, that it began with a dud. A geological survey of the country in 1925 found no conclusive evidence of oil. Twelve years later, however, when geologists began intensively searching for oil in neighbouring Saudi Arabia, Oman's Sultan Said bin TaimurSaid bin Taimur
Said bin Taimur was the sultan of Muscat and Oman from 10 February 1932 until his overthrow on 23 July 1970. His second wife was Mazoon al-Mashani...
granted a 75-year concession to the Iraq Petroleum Company
Iraq Petroleum Company
The Iraq Petroleum Company , until 1929 called Turkish Petroleum Company , was an oil company jointly owned by some of the world's largest oil companies, which had virtual monopoly on all oil exploration and production in Iraq from 1925 to 1961...
(IPC). Pausing only for the Second World War, exploration for oil was underway in Oman
Oman
Oman , officially called the Sultanate of Oman , is an Arab state in southwest Asia on the southeast coast of the Arabian Peninsula. It is bordered by the United Arab Emirates to the northwest, Saudi Arabia to the west, and Yemen to the southwest. The coast is formed by the Arabian Sea on the...
.
The exploration and production operations were to be run on behalf of the IPC by Petroleum Development (Oman and Dhofar) Ltd. The operating company had four shareholders, each with an interest of 23.75%: the Royal Dutch/Shell Group, the Anglo-Persian Company (which would eventually become the British Petroleum Company, or BP), Compagnie Française des Pétroles (whose convoluted lineage would make it a predecessor of today’s TotalFina-Elf) and the Near East Development Company (whose likewise convoluted lineage would make it a subsidiary of today’s ExxonMobil). The remaining 5% stake was held by a fifth shareholder, Partex.
Having landed at Duqm in February 1954, IPC geologists were faced with tribal conflicts which made access to the most promising oil prospect, Jebel Fahud, difficult. They reached the jebel in October 1954 and began to survey the surrounding terrain. Supplies had to be transported from Duqm. In January 1956 the company started drilling its first well at Fahud but the hardships were all in vain: the well was dry. Later, when the supply line was switched to the Sumail Gap, warring tribes were able to disrupt convoys and bring operations to a halt.
Further dry wells were drilled and this lack of success, combined with worsening logistical problems and a glut of oil on the world market, led most of the partners to withdraw from the venture in 1960. Only Shell and Partex opted to remain in Oman to continue the search for oil. Their optimism was soon to pay off, however: they struck oil at Yibal in 1962 — and from these inauspicious beginnings an oil-producing nation was born.
Emergence (1962–1970)
In 1963 the Natih field was discovered, followed closely by success at Fahud, only a few hundred metres from the original IPC well. Investment in a pipeline to the coast and all the other hardware necessary to transport and export Oman's crude could now be made. A 276-kilometre pipeline requiring 60,000 tons of steel pipe was laid, the labour being provided by the inhabitants of whichever villages happened to be near the worksite.The pipe laying was followed closely by the construction of an industrial complex at Saih al Maleh (later re-named Mina al Fahal), the building of a tank farm, the installation of single-buoy moorings for seagoing tankers and the erection of a 20-megawatt power plant. The whole development — including the pipeline, the coastal industrial area, the tank farm, the marine terminal, a chain of radio repeater stations and housing for staff at Ras al Hamra — cost $70 million.
The first export of Omani oil took place on 27 July 1967. The original debit note shows that the consignment consisted of 543800 barrels (86,457.3 m³) of oil valued at $1.42 a barrel. A month before, in June, the Compagnie Française des Pétroles rejoined the partnership by taking over two-thirds of Partex's equity share, resulting in the following shareholding in the company that by then had changed its name to Petroleum Development (Oman): Shell 85%, Compagnie Francaise des Petroles 10% and Partex 5%.
On 23 July 1970 His Majesty Sultan Qaboos took over from his father as ruler of the country. He made his first visit to the PD(O) offices on 18 August 1970.
Consolidation (1970–1979)
All through the 1970s, PD(O) strove to maintain its production and replace its reserves while developing its professionalism. Some significant discoveries early in the decade contributed to that objective: Ghaba North in 1972, followed by Saih Nihayda, Saih Rawl, Qarn Alam and Habur. All five fields were on stream by 1975, the crude oil being transported via a new 20 inches (508 mm) pipeline to the main pipeline 75 kilometers east of Fahud. Thanks in part to these new sources of oil, production averaged a respectable 341000 oilbbl/d in 1975.The oil price hike in 1973 greatly improved the economics of producing oil in remote locations. As a consequence, the focus of exploration activity was moved to the eastern flank of the south Oman geological basin. Wells soon revealed the Amal and Amin fields, amongst others. The Marmul field, considered uneconomic to develop when it was discovered in 1957, was now shown to be commercially viable upon reappraisal. The high oil prices compensated for the fact that the Marmul crude oil was heavy and viscous. These and other oil fields in south Oman would play a significant role in the growth of reserves and production in the coming years.
The first half of the 1970s was important for other reasons as well. On 1 January 1974 the Government of Oman acquired a 25% shareholding in the Petroleum Development (Oman); six months later the shareholding was increased to 60%, backdated to the beginning of the year. As a result, the foreign interest in PD(O) was now made up of the Shell (34%), Compagnie Française des Petroles (4%) and Partex (2%). These shareholdings have remained unchanged to the present day. (The Company, however, underwent a change six years later. On 15 May 1980, it was registered by Royal Decree as a limited liability company under the name Petroleum Development Oman — now without parentheses in its name.
Growth (1979–1994)
In the early 1980s production rose to new record levels, dispelling, it seemed, any doubts about the future of Oman's oil and gas industry. By the end of 1984 average daily production had risen to 400000 oilbbl/d and reserves stood at 3.8 Goilbbl.Meanwhile, the Company had become involved in setting up the Government Gas System , to provide natural gas from the interior to industry on the coast. And it was remarkably successful in that undertaking.
Then, in 1986, the oil price collapsed. Almost instantly PDO was required to cut costs while increasing production and maintaining reserves. This it did with remarkable success. The Company turned its focus on innovation and experimentation. Technological leaps in processing the huge volumes of data acquired in three-dimensional seismic surveys helped PDO to explore with great success during this period. Horizontal wells , which made their debut in 1986, yielded between two and four times the production from any one given well. (They have since become the norm in PDO.) Time and again the Company broke its own records for drilling wells in the shortest time and for drilling the longest horizontal wells.
Maturity (1994–2002)
By the end of 2000 PDO witnessed an increase in production. This was due to the increase in production arose from the application of the latest technology to increase oil recovery in existing fields. And some of the production increase over the years was made up of "new oil" from fields that were not only found but also developed at an ever-accelerating pace. During the period 1967-1980 all of PDO’s production came from 11 fields; by 1988, 50 fields provided the sum total of PDO’s oil output; by 1990 it was 60, and in 1999 it was nearly 100.When PDO's gas-exploration campaign in the early 1990s made it clear how bountiful the country's gas fields were, the Government decided to establish a completely new industry: the export of liquefied natural gas (LNG). In 1996 PDO concluded an agreement with the Government to develop the central Oman gas fields in order to supply gas to an LNG plant in Qalhat, near Sur. To fulfill its end of the agreement, the Company had to drill wells, hook them up to a new gas processing plant at Saih Rawl, and then transport the processed gas via a 352-kilometre pipeline to Qalhat. Furthermore, PDO would then be responsible for guaranteeing the delivery of gas for 25 years.
This upstream LNG project, costing $1.2 billion, is the single biggest project in PDO's history. And it was executed as planned. The Saih Rawl Central Processing Plant and the gas pipeline from Saih Rawl to Qalhat were dedicated to the nation in November 1999, the first downstream cargo of LNG was shipped to Korea in April 2000, and His Majesty the Sultan officially opened the LNG plant six months later.
Having built up such momentum in its oil production as it entered the 1990’s, the Company fully expected the trend to continue. Unfortunately, the Company’s field-development strategy for the start of the 21st century – based on incremental infill drilling with horizontal wells and extensive waterflooding – had its momentum dissipated before the waterflooding projects, which require comprehensive reservoir studies, could be fully implemented. The natural production-rate decline of its major oil fields eventually caught up with the Company at the start of the millennium. And to make matters worse, its business had fundamentally changed: its new fields were coming in smaller sizes; its new wells were delivering less oil; its costs were going up. The fact was that the Company’s operating model – the way its was carrying out its business – was not sustainable in the longer term.
Sustainability (2002–present)
Following a comprehensive review in 2002 that led to a sweeping change programme, PDO laid out ambitious production-recovery plans based not only on waterflooding but also on enhanced oil recovery (EOR) techniques: the application of heat, chemicals or gas solvents to alter the way oil or injected water flows in a reservoir. But, in order for them to be sustainable in the long run, the plans had to be executed for substantially less money than originally envisaged, making them all the more challenging. A total of $2 billion in cost savings over the five-year period 2002–2008 were incorporated into the Company’s budget. Fortunately, because of the long-term nature of investments that would be required, the Omani Government agreed at the end of 2004 to extend PDO’s exploration and production concession and operating agreements for 40 years – until 2044.Meanwhile, gas continues to be a growth area for the Company. A new gas-processing plant was commissioned in Saih Nihayda in 2005, and another one is due in 2008 for PDO's newest gas field in Kauther. With the addition of those two processing plants, nearly one-third of the hydrocarbon energy that PDO supplies will come from natural gas—the fuel that has a central role in the Government’s economic diversification plans.
PDO thus now faces a formidable set of challenges. But the execution of its EOR projects, the expansion of its gas production and the implementation new ways of working mean that, technically as well as socially and environmentally, PDO will remain in the forefront of the region’s oil and gas business.
Board of directors
A Board of Directors provides objectives and guidelines to the Managing Director. The Board consists of twelve members; seven "including the Chairman, who is the MinisterMinister (government)
A minister is a politician who holds significant public office in a national or regional government. Senior ministers are members of the cabinet....
of Oil & Gas, his Excellency Mohammed bin Hamad al Rumhy represent the Government of Oman, and five represent PDO's private shareholders Royal Dutch Shell
Royal Dutch Shell
Royal Dutch Shell plc , commonly known as Shell, is a global oil and gas company headquartered in The Hague, Netherlands and with its registered office in London, United Kingdom. It is the fifth-largest company in the world according to a composite measure by Forbes magazine and one of the six...
(Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
and UK), Total
Total S.A.
Total S.A. is a French multinational oil company and one of the six "Supermajor" oil companies in the world.Its businesses cover the entire oil and gas chain, from crude oil and natural gas exploration and production to power generation, transportation, refining, petroleum product marketing, and...
(France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
), and Partex
Partex
Partex Oil and Gas Corporation is an oil company which is fully owned by the Calouste Gulbenkian Foundation, from Lisbon, Portugal.-History:...
(Portugal
Portugal
Portugal , officially the Portuguese Republic is a country situated in southwestern Europe on the Iberian Peninsula. Portugal is the westernmost country of Europe, and is bordered by the Atlantic Ocean to the West and South and by Spain to the North and East. The Atlantic archipelagos of the...
).
Oil exploration and production
PDO finds oil fields and develops them into productive assets by drilling wells and constructing and operating various hydrocarbon treatment and transport facilities. The crude oil that is produced from the fields is not sold by the Company but rather delivered to a storage facility at Mina al FahalMina al Fahal
Mina al Fahal is a coastal area in the northeast of Oman, near to the country's capital, Muscat. It was renamed from Saih al Maleh as the petroleum processing plant was developed. It is a key area for the country's petroleum operations. Petroleum Development Oman is based at Mina al Fahal, and...
, where it is loaded onto seagoing tankers at the discretion of the Company's shareholders. As such, the Company does not earn any money from the sale of oil; its shareholders do. The shareholders in turn cover all budgeted operating and capital expenditure.
Revenue and profits
PDO's revenue in 2007 is higher than 2006 revenue because the rise of oil price which has reached $95 for a long time and the lowest price of a barrel has reached $67 this year. PDO has 92% of Oman's oil fields and Oman exports 790000 oilbbl/d. Oman consumes 69000 oilbbl/d which is 33% of Oman's energy and the rest (66%)is provided by natural gas. Supplying the oil costs $5 per barrel with profits going directly to PDO's shareholders.Gas exploration and Production
PDO also finds, develops and operates natural gasNatural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
fields and their associated production systems all on behalf of the Government of Oman. The Company delivers gas to the Government Gas System, which supplies fuel for most of Oman's power stations and some of its industries, and to the Oman LNG
Oman LNG
Oman LNG is a LNG plant in Qalhat near Sur, Oman. The company was established by the Royal decree of Sultan Qaboos of Oman in 1994. The construction was launched in November 1996, and the plant was commissioned in September 2000. The main shareholder is the Government of Oman in cooperation with...
plant at Qalhat
Qalhat
The ancient city of Qalhat, or Galhat, is located just over 20 km north of Sur, in the Ash Sharqiyah Region of northeastern Oman.- Site Description :...
, near Sur
Sur, Oman
Sur is a capital city of Ash Sharqiyah Region, northeastern Oman, on the coast of the Gulf of Oman. It is located at around , and is 93 miles southeast of the Omani capital Muscat. Historically the city is known for being an important destination point for sailors...
.
As part of its gas production operations, PDO also supplies some 50000 oilbbl/d of condensate liquid hydrocarbons that condense out of natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
and about 200 tonnes per day of liquefied petroleum gas, which is chiefly used for cooking.
Education and training
In addition, PDO plays a key role in educating and developing young Omani talent through its comprehensive education and training programmes. It also supports and encourages local businesses and communities through its Business Development Centre. PDO believes that the sustainable development of the country is furthered through its education and training initiatives and through its efforts to stimulate successful Omani businesses throughout the country. The PDO established the Oman Oil and Gas Exhibition CentreOman Oil and Gas Exhibition Centre
Oman Oil and Gas Exhibition Centre is a museum, located on Seih Al Maleh Street, Al-Qurum, Muscat Oman.The museum was established 1995 as a donation from Petroleum Development Oman . The museum is an interactive journey exploring the discovery, extraction and use of fossil fuels in Oman.Adjacent to...
in Muscat in 1995 to educate those in fossil fuel development in the country.