PETROLEUM SECTOR During 2000 the international oil market witnessed remarkable developments on both supply and demand sides. The most important of such developments was the OPEC decision to increase the oil production by 800,000 b/d to reach 25.4 million b/d. In spite of this increase in supply world oil demand has shot up in the beginning of the winter pushing the oil prices to a sky high, a price level which the market has never experienced during the last decade. The United States, the biggest oil consumer in the world, used its strategic crude oil reserves by drawing one million b/d during October 2000 as a means to reduce oil prices. As a result of the combined effort of oil producing countries coupled with other favourable international developments, oil prices began to look up. The price of Brent increased from nearly US $ 9 per barrel as at end of 1998 to around US $ 17 immediately after the OPEC agreement to cut the production, then to over US $ 25 by December 1999, and to US$ 26 by December 2000 with average amounted to US $ 28.57 during 2000. Average oil price for Oman crude which had dipped from US $ 18.62 per barrel in 1997 to US $ 11.92 in 1998 (by 36 per cent) went up to US $ 17.35 per barrel in 1999 and further to US$ 26.71 per barrel in 2000. Economic activity in the Sultanate is greatly influenced directly and indirectly by developments in the petroleum sectors. The petroleum sectors are responsible for a major share in the GDP. The petroleum sectors value added at current prices increased by 57.7 per cent to RO 3731.4 million in 2000 from RO 2365.8 million in 1999, while in terms of percentage, its share in the GDP went up to 49.1 percent in 2000 from 39.4 percent in 1999. Crude Oil Production: The policy pursued by the Government towards oil production is two-fold namely, the optimization of the ratio of low-cost oil to total production and the maintenance of a sustainable level of production over the medium and long terms. Keeping these broader objectives in view, Petroleum Development Oman Co. (PDO), together with other oil producing companies (Occidental Oman, Japex Oman, Novus Oman and Petrogas) increased their daily oil production during 2000. The number of oil producing wells was 109 in 1999 (of which 97 wells belong to PDO) as compared to 104 wells in 1998. Total oil production was 349.5 million barrels during 2000 as compared to 330.2 million barrels in 1999 registering an increase of 5.8 percent. Average production per day increased from 904.7 thousand b/d in 1999 to 957.4 thousand b/d in 2000. (Table 3.1)
Table 3.1 Oil Production & Exports (Million Barrels) Table 3.2 Direction of Oil Exports (In Million Barrels) Year Production (per cent) Change Exports (per cent) Country of Destination Change 1996 1997 1998 1996 324.5 3.7 Japan 297.6 3.9 90.5 85.9 81 1997 329.7 1.6 China 304.7 2.4 42.4 69.2 40 1998 327.2-0.8 Korea, South 300.1-1.557.0 50.3 62 1999 330.2 0.9 Taiwan 308.8 2.9 9.0 6.2 2 2000 349.5 5.8 Thailand 326.8 5.9 54.4 71.6 81 Philippines 11.1 14.5 17 Source: Ministry of Petroleum and Gas and Ministry of National Others Economy 33.2 7.0 14 Total 297.6 304.7 300 Source: Ministry of Oil & Gas and Ministry of National Economy Reserves Because of continued efforts to discover new oil fields, particularly by PDO, Oman s general oil reserves moved up to 5.850 billion barrels in 2000 registering an increase of 89.2 million barrel over its 1999 level. The New Projects Within the framework of encouraging international oil companies to invest in the oil industry in the Sultanate of Oman, the Ministry of Petroleum & Gas signed, in 1999, three new agreements with international Oil companies from USA, UK, Australia, Holland and Norway. These are: Deepwater Company, Philips Petroleum, Novus Australia Energy, Atlantis Holding Norway and Eagle Energy (Oman). These production sharing agreements cover exploration and development activities in specified areas. Moreover, PDO carried out various projects during 2000, aimed at developing existing oil fields and discovering new ones within the country s strategy of increasing reserves and raising production levels when required. Among the new projects which the Ministry of Oil and Gas was looking after during 2000 is the Gas pipe lines to Sohar and Salalah project and an Omani-Indian joint project to produce fertilizers in Sur. The estimated cost of the first project is around US $ 303 million and the cost of the fertilizers project is around US $ 862 million.
Exports Total crude oil exports reached 326.8 million barrels during 2000. Average daily exports showed an increase of 5.8 percent from 846 thousand barrels in 1999 to 895.3 thousand barrels in 2000. The share of oil exports in total exports of Omani origin increased from 76.4 percent in 1999 to 82.8 percent in 2000. China occupied the first place as the main importer of Omani crude oil, as its share in total exports of Oman crude oil increased from 12.8 percent in 1999 to 35.1 percent in 2000. Japan retreated to the second place as its share declined from 31 percent in 1999 to 22.4 per cent in 2000. The share of Korea, which ranked third, also dropped from 18.1 per cent in 1999 to 17.1 per cent in 2000. Thailand was in the fourth place with 10.8 percent share. Taiwan was the fifth largest importer of Omani oil. Its share decreased from 6.1 per cent in 1999 to 4.6 percent in 2000. The Philippines was in the sixth place with a share of 1.8 percent against 3.1 per cent in 1999. In addition to these countries, Oman exported crude oil to few more countries in 2000, the share of which was 8.2 percent of total oil exports in that year. Table 3.3 Oman s Oil Prices (USUS $/B) 1996 1997 1998 1999 2000 January 17.30 22.50 13.37 10.34 24.62 February 16.50 19.72 12.25 9.64 25.76 March 17.80 19.10 11.31 12.16 26.00 April 18.60 17.53 12.06 14.86 22.95 May 17.90 19.25 12.61 15.29 26.66 June 18.20 17.75 11.62 15.39 28.20 July 18.80 17.46 11.99 17.86 26.80 August 19.60 17.86 12.15 19.64 27.43 September 21.20 18.10 12.63 22.29 30.13 October 22.50 19.27 12.20 21.97 30.54 November 21.80 18.54 11.25 23.99 30.07 December 22.82 16.31 9.57 24.72 21.41 Average Jan-Dec 19.42 18.62 11.92 17.35 26.71 Source : Ministry of Oil & Gas and Ministry of National Economy.
Table 3.4 Oman Refinery Company - Crude Oil Input and Output by Type of Product (In Thousand Barrels) Input/Output 1996 1997 1998 1999 2000 Input 26692.0 23753.6 28672.5 28659.8 28648.0 Condensate 86.0-439.4 21.9 33.9 Crude Oil 26606.0 23754.0 28233.1 28637.9 28614.2 Output 26692.0 23753.6 28672.5 28659.8 28648.0 Gasoline Regular 90 996.0 903.4 1047.6 872.0 953.0 Super 97 3893.0 3179.2 4177.4 3838.9 3903.5 DP Kerosene 1251.0 1038.1 1127.3 1456.2 1643.0 Gasoil 5262.0 4853.7 6029.1 6297.0 6362.7 Butane 384.0 316.2 395.2 423.0 350.3 Long Residue (Bunker) 14089.0 12669.4 14948.8 14866.2 14796.5 Change in intermediate -32.0 0 0-2.3-1.8 products Fuel and Uses of ORC 849.0 793.6 947.1 908.4 640.8 Source: Oman Refinery Company. Oil Revenues The Government s net oil revenues increased significantly during 2000 by 43.2 per cent to RO 1721.0 million from RO 1201.6 million in 1999, due to higher production and prices of Oman s oil. Refinery Oil refining in the Sultanate of Oman started, for the first time, in November 1982 with the capacity of 50,000 b/d which increased to 80,000 b/d thereafter. Oman Oil Refinery Company is 99 per cent Government owned, with the Central Bank of Oman owning 1 percent. The Oil Refinery output at 28.7 million barrels in 1999 was nearly the same in 2000. At present, the Refinery produces five types of products viz LPG butane, Jet fuel, Gas oil and two grades of gasoline, plus residual. The details of inputs and outputs of the refined products are shown in Table 3.4. In 1992, a continuous catalyst regeneration (CCR) project was started. The major benefit of the CCR Unit has been to extend Refinery processing runs for 2-3 years instead of 6 months before shut down for maintenance. Within the frame work of the Ministry of Oil and Gas for developing the oil refining industry in Oman, it has been decided to construct a new refinery in Sohar area (Sohar Refinery). All necessary documentation including feasibility studies were ready since November 2000. The installed capacity of the said Refinery is 75,000
b/d liquefied gas oil, kerosene and other products. Natural Gas Natural gas is another important source of energy in the Sultanate of Oman. Therefore, the Government s plans aim at conserving this natural wealth and rationalizing its usage. As a result of the exploration programmes the Sultanate s proven natural gas reserves (associated and non-associated) increased to 29.80 trillion cubic feet in 2000. The increase was due to newly drilled wells as well as developing the existing ones. In 2000 some 547.2 billion cubic feet of natural gas was produced (249.6 billion c.f. associated and 297.6 billion c.f. non-associated) compared to 408.5 billion cubic feet (252 billion c.f. associated and 156.5 billion c.f. non-associated) in 1999. At present, gas is largely utilised by reinjecting it into the oil reservoirs to maintain pressure and sustain oil production. It is also used as fuel to generate power in desalination plants, cement factories and other industrial projects such as textiles, aluminium and batteries. LNG Project The Sultanate of Oman is developing new sources of income to complement its oil revenues. A major development in this context is the Liquified Natural Gas project (LNG). For this purpose Oman LNG Co. was founded in 1994. The share holders of this company are: the Government of Oman (51per cent), British / Deutch shell Co. (30per cent), French Total Co. (5.54per cent), Partex Co. (2per cent), Mitsui Co. (2.77per cent) Mitsubishi Co. (2.77per cent), Itochu Co. (0.92per cent) and Korea s LNG (5per cent). The Oman LNG project is divided into two parts: Upstream and Downstream. The Upstream part, which is managed by PDO on behalf of the Government, is concerned with the production of the gas and its transport by pipeline to the LNG plant, while the Downstream part, which is the responsibility of Oman LNG L.L.C., comprises a liquefaction complex, besides supporting infrastructure, shipping and marketing. The total cost of the project is estimated at US $ 4.75 billion. The production capacity of the project is 6.6 million tons of liquefied gas per annum, to be exported, mainly, to South Korea (4.1 million tons) and Japan (660,000 tons). Exports started in April 2000 after the LNG project was completed. 1. Upstream Part: In November 1996, the contractors (two Italian companies and Galfar Co. of Oman) started the engineering works and the construction of the gas treatment unit at Seih Rol. In mid-1999 the work which included the drilling of a number of new gas wells and the construction of a 32 inch pipe line linking the LNG plant with the Government s gas network, was completed. 2. Downstream Part: In November 1996, the agreement regarding the engineering works and construction of the liquefaction complex and supporting infrastructure was signed between Oman LNG (LLC) and Chiyoder/Foster Wheeler Co. In the same month Oman LNG Co.
reached an agreement with seven international banks to finance the downstream part of the project to the extent of US US $ 2 billion. In 1999 the first LNG Train was built, and on April 6, 2000 the first shipment of LNG was made to South Korea. The project was officially inaugurated in November 2000. Besides, a plant for the production of Butane was built in Seh Rol with the capacity of 40,000 metric tons annually. During 2000, Oman LNG had initiated steps to evaluate the potential for a third 3.3 million tones per annum capacity train to be added to the two-train liquefaction plant at Qalhat. The proposed expansion is set to boost the plant s output by 50 per cent to 9.9 million tones per annum, making it one of the world s largest LNG facilities. During 2000 a quantity of 2.3 million metric tons of LNG worth US$454.2 million (RO 174.6 million) was exported to Korea, USA, Japan and Spain, as well as 53,000 metric tons of by-product NGL, worth of US$ 11.7 million (RO 4.5 million). Mining & Quarrying: Mining & Quarrying sector has played an important role in Oman s economy since ancient times. To enhance this role, the Government has embarked on an intense programme of geological research and exploration in order to develop the country s mineral resources. These minerals include Copper, Chromite, Nickel, Iron, Gold and Silver. In addition Oman hosts deposits of many non-metallic minerals e.g. large quantities of Gypsum and limestone, which are being exploited for the production of cement. High quality marble is also quarried and sold on both the domestic and international markets. With regard to exploration, a program comprising detailed Geological Mapping and Ground Geophysics (IP & TM surveys) to identify potential areas of mineral presence, including one conducted with the assistance of Japan International Cooperation Agency (JICA), was started in 1997 and continued in 1999 in the Central Batinah Coast. Work so far carried out has resulted in the discovery of new potential areas for the copper and gold deposits. An airborne geophysical survey for Haushi, Huqf, Izki and Masirah Island was completed during 1998, the results of this survey was evaluated during 1999. Based on this evaluation potential areas were delineated to carryout detailed geophysical surveys and the Diamond Core Drilling. The Sultanate s Gold production stood at 549 kg. in 1997, 582 kg. in 1998, 597 kg. in 1999 and 551 kg. in 2000. Oman is also mining Silver. Oman s production of silver was 9851 ounces during 2000. This was extracted from Yankul and Sohar mines. The whole gold and silver productions were exported to the U.K. The Sultanate s production of Chromite went up considerably from 18,000 metric tons in 1997 to 30,000 metric tons in 1998, 26,009 metric tons in 1999 and 15,000 metric tons in 2000. The production of Chromite is fully exported. The main importers were Japan, U.K., Germany and some other EU countries.