BP to start early Oman tight gas output in Aug

Wed May 26, 2010 9:46am EDT

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* Early output from appraisal wells to go to grid

* Output from tight gas fields under 230 mln cfd in 2010

* Full field development could come in 2015-2016

By Saleh al-Shaibany and Simon Webb

MUSCAT, May 26 (Reuters) - Oil major BP (BP.L) will start early production from tight gas fields in Oman in August, a senior Omani energy official said on Wednesday.

BP signed a concession in 2007 to develop the tight gas, which is in complex formations that are difficult to exploit. It aims to pump gas from appraisal wells to the Omani grid, which is short of gas to meet the demands of power and industry.

Appraisal well gas is typically flared, but BP has said from early stages of the project it would try to pump the fuel to market to help alleviate Oman's shortage. BP has previously said that output in 2011 could reach 200 million to 300 million cubic feet per day (cfd). The two fields BP is developing are the Khazzan and Makarem fields.

"BP will start producing gas from Khazzan and Makarem fields in August," Nasser al-Jashmi, the undersecretary of oil and gas ministry told reporters on the sidelines of a Thomson Reuters event in Muscat.

The fields are part of an area covering 2,800 square kilometres for which BP won the concessions.

Jashmi said that he expected output to total less than 1 million cubic metres from the early production this year. Output of 1 million cubic metres during the last five months of the year from August would be around 230 million cfd, according to Reuters calculations.

Volume was expected to grow further in 2011, Jashmi said. A full field development plan could come in 2015-2016, assuming that the appraisals for the fields pointed to the potential for a profitable project, Jashmi said.

The Sultanate's gas production increased to just over 3 billion cfd in the first quarter of 2010, up 3.9 percent on the year-earlier period.

A shortage of gas has left Oman with spare capacity that it is unable to fill at its export facilities for liquefied natural gas (LNG). Oman has also slowed projects that require gas feedstock, until it is sure that it will have the fuel to supply them.

"We will honour our obligations to supply gas to existing projects," Jashmi said. "But we have engaged in the last few years not to encourage any gas consuming projects until we are sure our gas reserves can absorb the incremental demand."

Like its Gulf neighbours, Oman has struggled to meet rising demand for gas from a power sector battling to satisfy growing consumption of electricity from an expanding economy.

Oman has said BP would invest $700 million in the fields. The fields could contain as much as 30 trillion cubic feet, which if confirmed would nearly double Oman's reserves of around 35 trillion cubic feet.

(Reporting by Saleh al-Shaibany and Simon Webb; Editing by William Hardy)

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