PETROLEUM SECTOR V{tÑàxÜ g{üxx
PETROLEUM SECTOR International oil price which was relatively weak in 2001 was largely reversed in early 2002 due to the combined effect of revival of demand and production cuts effected by the OPEC members to arrest further slide in price. World oil price which had begun its upward path since the beginning of the year, hardened further during the latter part of 2002 when a series of non-economic factors raised concerns about supply disruption, including increased tensions in the Middle East and political developments in Venezuela. Average oil price for Oman crude increased from US $ 23 per barrel to US$ 24.29 per barrel in 2002 (+5.6%). The growth of Omani economy depends on the performance of hydrocarbon sector. The petroleum sectors are responsible for a major share in the GDP. The value added by the petroleum sectors at current prices increased marginally by 0.1 per cent to RO 3267.7 million in 2002 from RO 3264.4 million in 2001, while in terms of percentage, its share in the GDP dropped to 41.9 percent in 2002 from 42.6 percent in 2001. 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 term. Keeping these broader objectives in view, Petroleum Development Oman Co. (PDO), together with other oil producing companies (Occidental Oman, Japex Oman, Novus Oman, P.T.I.P, Total Elf, Hunt Oil Oman, Year Production % Change Exports % Change 1998 327.2-0.8 300.1-1.5 1999 330.2 0.9 308.8 2.9 2000 350.0 6.0 327.0 5.9 2001 349.0-0.3 332.0 1.5 2002 328.0-6.0 306.0-7.8 Source: Ministry of Petroleum and Gas and Ministry of National Economy Triton Oman and Mersek Oil Oman) compressed their daily oil production during 2002. During 2002, some 8 exploratory wells were drilled. Total oil and condensates production was 328 million barrels during 2002 as compared to 349 million barrels in 2001 registering a decrease of 6 percent. Average production per day thus decreased from around 956 thousand b/d in 2001 to 898 thousand b/d in 2002 (Table 3.1). 400 350 300 250 200 150 100 50 0 Reserves Table 3.1 Oil Production & Exports (Million Barrels) Oil Production & Exports (In Million Barrels) 1998 1999 2000 2001 2002 Production Exports Because of continued efforts to discover new oil fields, particularly by PDO, Oman s general oil and condensate reserves moved up to 5.706 billion barrels in 2002 registering an increase of 139 million barrel over its level in 2001. 21
V{tÑàxÜ g{üxx The New Projects Within the framework of encouraging the international oil companies to invest in the oil industry in the Sultanate of Oman, the Ministry of Oil & Gas signed, in 2002 four new agreements with international Oil companies. These are Novus Oman, Hunt Oil, Total Elf and P.T.T. These production sharing agreements cover exploration and development activities in specified areas. Moreover, PDO carried out various projects during 2002, aimed at developing existing oil fields and discovering new ones within the country s strategy of increasing reserves and raising production levels when required. Oman-Indian joint company to produce fertilizers in Sur is one among the new projects which Oman Oil Company was promoting during 2002. The estimated cost of this project is around US $ 970 million (with 50% owned by Oman Oil Co.). It is expected to start production during 2005. Besides, it has been decided to construct two factories in Sohar to produce some petrochemical products and an aluminium smelter in Sohar. In addition to these projects, the year 2002 witnessed the agreement signed between Oman oil company and the UAE Dolphin Energy Co. to export Omani natural gas to UAE. Oman Oil Company, also signed in the year under review a memorandum of understanding to purchase and transfer a fertilizers factory from Holland to Oman. Table 3.2 Direction of Oil Exports (In Million Barrels) Country of Destination 1998 1999 2000 2001 2002 Japan 81.6 95.8 73.2 90.1 80.9 China 40.5 39.4 114.7 53.6 54.6 Korea, South 62.4 55.9 55.9 58.9 46.7 Taiwan 2.2 18.8 15.1 5.7 19.2 Thailand 81.8 65.6 35.3 48.84 52.2 Philippines 17.5 9.5 6.0 10.5 6.3 Malaysia 13.4 10.9 Singapore 21.1 16.5 Others 14.1 23.8 26.7 29.5 18.8 Total 300.1 308.8 326.8 331.5 306.2 Source: Ministry of Oil & Gas and Ministry of National Economy thousand barrels in 2002. However, the share of oil exports in total exports of Omani origin decreased from 92.8 percent in 2001 to 92.7 percent in 2002. Its share in total exports (including re-exports) also decreased from 80.2 percent to 77 percent in 2002. Japan occupied the first place as the main importer of Omani crude oil, although its share in total exports of Oman crude oil decreased from 27.1 percent in 2001 to 26.4 percent in 2002. China advanced to the second place as its share increased from 16.2 percent in 2001 to 17.8 percent in 2002. The share of Thailand which ranked third, increased from 14.7 percent in 2001 to 17 percent in 2002. South Korea was in the fourth place sharing 15.3 percent. Taiwan was the fifth largest importer of Omani oil accounting for 6.2 percent of oil exports of Direction of Oil Exports 2002 Exports Japan 26.4 % China 17.8 % Total crude oil exports reached 306.2 million barrels in 2002 as compared with 331.5 million barrels in 2001. Average daily exports showed a decrease of 7.8 percent from 909.6 thousand barrels in 2001 to 838.4 Others 15.1 % Philippines 2.1 % Thailand 17.0 % Taiwan 6.3 % Korea, South 15.3 % 22
Petroleum Sector Oman. Singapore was in the sixth place with a share of 5.4 percent against 6.4 percent in 2001. Malaysia was in the 7 th place with a share of 3.6 percent and the Philippines occupied the 8 th place with a share of 2.1 percent in 2002. In addition to these countries, Oman exported crude oil to few more countries in 2002, the share of which all put together was 6.1 percent of total oil exports in that year. Oil Revenues The Government s net oil revenues increased significantly during 2002 by 17.4 percent to reach RO 2200.5 million from RO 1875 million in 2001. Refinery Table 3.3 Oman s Oil Prices (US $/B) 1998 1999 2000 2001 2002 January 13.37 10.34 24.62 22.85 18.78 February 12.25 9.64 25.76 24.82 19.33 March 11.31 12.16 26.00 23.45 23.35 April 12.06 14.86 22.95 24.38 25.05 May 12.61 15.29 26.66 26.05 25.27 June 11.62 15.39 28.20 25.95 24.45 July 11.99 17.86 26.80 23.70 25.14 August 12.15 19.64 27.43 24.75 25.54 September 12.63 22.29 30.13 24.32 27.18 October 12.20 21.97 30.54 19.75 26.89 November 11.25 23.99 30.07 17.85 23.89 December 9.57 24.72 21.41 18.10 26.66 Average Jan-Dec 11.92 17.35 26.71 23.00 24.29 Source: Ministry of Oil & Gas and Ministry of National Economy 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 reached 24 million barrels in 2001 and 30.6 million barrels in 2002. At present, the Refinery Table 3.4 Oman Refinery Company - Crude Oil Input and Output by Type of Product (In Thousand Barrels) Input/Output 1998 1999 2000 2001 2002 * Input 28672.5 28659.8 28648.0 24037.4 30629.9 Condensate 439.4 21.9 33.9 0.0 30629.9 Crude Oil 28233.1 28637.9 28614.2 24037.4 30629.9 Output 28672.5 28659.8 28648.0 24037.4 Gasoline Regular 90 1047.6 872.0 953.0 805.4 1316.7 Super 97 4177.4 3838.9 3903.5 3392.4 4111.7 DP Kerosene 1127.3 1456.2 1643.0 1489.6 2008.3 Gasoil 6029.1 6297.0 6362.7 5338.0 6658.4 Butane 395.2 423.0 350.3 366.0 545.4 Long Residue (Bunker) 14948.8 14866.2 14796.5 11980.0 14941.7 Change in intermediate products 0-2.3-1.8-32.0 52.3 Fuel and Uses of ORC 947.1 908.4 640.8 698.0 995.5 Source: Oman Refinery Company and Ministry of National Economy 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. Natural Gas * Provisional 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 25.1 trillion cubic feet in 2002 from 24.4 trillion cubic feet in 2001. The increase was due to newly drilled wells as well as better exploitation of the existing ones. In 2001, some 680.4 billion cubic feet of natural gas was produced (270.7 billion c.f. associated and 409.7 billion c.f. nonassociated). This was increased to 789.8 billion cubic feet (281.5 billion c.f. associated and 508.3 billion c.f. non- 23
associated) in 2002. At present, gas is largely utilised for 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. In 2002, however, domestic consumption of natural gas was nearly 300 million cubic meter, with the break up of Electricity (80%), Petroleum Development Oman PDO (11%), Manufacturing and others (7%) and Ministry of Defence (2%). The New Gas Projects During 2002, Oman Gas Company implemented several gas projects. These are: 2 gas pipe lines to Sohar and Salalah. During the year under review, Oman Gas Co. completed the construction of two projects in Barka and Salalah. Both these projects aim at easing the gas pressure. LNG Exports During 2002, LNG exports amounted to 6.5 million tons as compared to 5.9 million tons in 2001. LNG was exported to Korea, USA, France, Japan, Belgium and Spain, as well as 144,000 metric tons of by-product NGL exported to UAE. Mining & Quarrying: Mining & Quarrying sector has played an important role in Oman s economy since ancient times. To enhance the 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 possesses 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 both in the domestic and international markets. With regard to exploration, a project 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), is in progress. 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 few years back. Based on the evaluation of the results of the survey, potential areas have been delineated to carryout detailed geophysical surveys and the Diamond Core Drilling. The Sultanate s Gold production stood at 5123 ounces in 2002. Oman s production of Silver stood at 1006 ounces in 2002. 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, 30,150 metric tons in 2001 and 27.4 thousand metric tons in 2002. The production of Chromite is fully exported. The main importers were Japan, U.K., Germany and some other EU countries. 24