Oman Reaches Agreement With BP For Gas Field Development

Global oil giant BP will be partnering with Oman to jointly develop a major natural gas field in the country. The new oil field has been named Khazzan. The site is located about 220 miles, or about 350 kilometers, from Muscat, the Omani capital. The endeavor is technically challenging because the oil field is located in the country’s desert interior.

BP plans to use horizontal wells and advanced hydraulic fracturing to release the gas that is tightly embedded in the sandstone of the area. BP is planning to drill about 300 wells at the site. Some of the wells at the field are likely to be as deep as 15,000 feet (approximately 4,500 meters). The cost of developing the Khazzan field is estimated to be about $16 billion over 15 years, according to BP. BP has already spent about $1.5 billion on the project.

The approaches that the company plans to use at the new oil field are relatively new processes for the Middle East. So-called unconventional natural gas extraction efforts could begin in other areas of the Persian Gulf region and North Africa if the BP project successful in Oman. Paul Stevens, an analyst at research organization Chatham House, said, “This is the first real attempt to do something with unconventional gas in the region rather than talking about it.”

The energy industry thinks that there may be large undiscovered gas resources in the Persian Gulf and North African regions. However, unconventional gas extraction can be more expensive than conventional drilling, so the projects would only be profitable if producers received higher prices than those that prevail today. The low prices prevalent in much of the Middle East mean that exploring for gas is still often not profitable.

To encourage investment in industries that use gas and to keep consumer prices low, governments in the Middle East have long kept gas prices substantially below what would be paid on the world market. For example, the wholesale price of gas in Saudi Arabia is 75 cents per million British thermal units, while in the United States the price is about $4.50 per million B.T.U.’s. The price in Britain about $11.30 per million B.T.U.’s and in Japan, the price is almost $19 per million B.T.U.’s.

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