The minister told Oman Tribune on the sidelines of a PDO function on Sunday that gas supplies to the Sultanate from Qatar under the Dolphin project could begin as early as May or June.
Gas through the pipeline will flow at the rate of 200 million standard cubic feet a day.
“We are working on a compressor station in Al Buraimi and as soon as that is finished, gas will flow and we hope it will be around May-June,” he said.
I tipped you off to this in February BTW Muscat Confidential archive.
Oman produces around 60 million m3 per day from its own fields, so this represents about 9% of gas supply volumes. Now, why is Oman importing gas from Qatar?
France's Total and Occidental Petroleum of the United States each hold a 24.5 percent stake in Dolphin, with the remaining 51 percent held by the Abu Dhabi-owned Mubadala Development Co.(see the full article in the brilliant bastion of incisive journalism that is The Times of Oman Dolphin Gas article
So, as promised, the reason for the import of gas into a country that seemed to have lots of its own.
The key piece of info is to be found in the ownership of the Dophin project, which is now importing into the UAE around 3.5 billion cubic feet (99 million cubic metres) of gas per day from its concessions in the giant Qatar gas field. A couple of years ago, the Oman Government transferred the operations for developing the giant Mukhasina oil field away from Petroleum Development Oman to Occidental and Mubadala. The oil field is apparently a very heavy oil, and getting the most out of it means injecting steam to heat the oil. Now to generate that steam, you need to burn gas. Lots of gas. This is reason why the MOG awarded the field to Oxy – not because PDO couldn't do the job, but because Oxy promised that in return for getting the oil field they would provide the gas from their Dolphin project. I still haven't been able to find out the effective price Oman is paying for that imported gas.
As Oman is already facing more gas demand in future than they have in current reserves, this was a deal that Oman could not resist. It also helped justify the sale of gas to the Sohar and Salalah industries at give away prices (equivalent to just $5 per barrel oil price), which is why its attractive to refine Aluminum in Oman even though Oman doesn’t have any domestic bauxite aluminum ore).
The deal worked well in other ways. The cost of building the pipeline between UAE and Oman was effectively paid by supplying UAE with gas from Oman for a couple of years (around 125 million ft3/d) to help start-up the UAE gas-fired power stations before the Dolphin gas would arrive. Oman knew that the pipe flow could then be reversed later to enable Oman to import gas from Qatar indirectly.
My sources tell me the Occidental Mukhasina project is not exactly going to plan though. They are behind schedule, not producing as much oil as they promised, costs are rising, and even worse, around 27 of their new wells were totally damaged by injecting so much steam that they exceeded the maximum design temperature of the steel parts inside the wells, which then collapsed. My sources said this was done on the instructions of Oxy senior management in an attempt to try and meet their production targets, even though their engineers warned them of the risk.
So, thats the deal. Oman effectively gave a piece of the Mukhaisna oil field to Occidental and the Abu Ghabi Government, in order to have spare gas to sell at a huge discount to the Gas based industries. It would be interesting for the Majlis Al Shura committee to investigate the economics of all this, tying together the gas impriots, the Mukhasina deal, and the gas contracts to Sohar.
I'm sure its a great deal for Oman (for why else would it be done?), but it would sure be nice for the Government to be able to demonstrate that to an independent committee of the peoples representatives, wouldn't it?