Photo: BG drilling for gas in Block 61, taken from Johnathon D Woods flickr
Map: BG got the long thin red coloured gas field next to Saudi. BP has the red gas field to the north-east of BG's one. Map ripped from Tethis Oil press release.
The Government owned 100% of the gas rights, but there was only 1 (very expensive) well and the results were disappointing - PDO couldn't get it to flow very well. So the Ministry of Oil and Gas decided to get an overseas company in to try and do better, but without the MOG needing to contribute a dime. Sweet.
BG bid and was awarded the 1500km2 area to see what they could do, with a $150 million "work programme" that involved new seismic, studying things and drilling 8 wells.
BG did just as they promised, and while my sources say they confirmed PDO's discovery, they couldn't get the wells to produce very well either. The rates were apparently all between 1 - 8 million cubic feet a day, and also produced a lot of liquid HC called condensate which is worth as much as oil.
The key problem was that their deal meant they had to agree a gas price with the Omani Government before they could go ahead and develop it. This they failed to do, with the Government offering too little and/or BG asking too much. I haven't yet got the exact prices and economics, but my people are crunching the numbers and I'll update you next week. It could be the deal was just too much work for too little reward as far as BG was concerned. They have plenty of other things to invest in elsewhere.
So BG has walked, presumably taking with them their offer to set up their regional ME base in Oman. BG did not respond to my requests for comments.
Instead, I'm told the Government's fledgling Oil and Gas Company, Oman Oil E&P, will be given the job of producing the gas. That means they'll get to keep the wells BG drilled, plus all their reports and stuff, all for free!
I wonder if having Oman Oil take the project over was the plan all along? This way the locals get an almost economic development on a silver platter, with all the risks removed, and a nice little sand pit to play in while they learn the ropes. The Government could also force Petroleum Development Oman (who apparently need lots of gas to produce their oil) to buy the gas at a price that, by definition, makes it economic.
It won't be easy even then I'm informed, as that valuable condensate could make the gas rate from the wells drop even more as the pressure drops and the wells become sort of blocked with fluid.
I also wonder how this bodes for embattled BP, who did a similar gas deal with an old PDO discovery (except for a rumoured 650 million!) in nearby block
This is what
During 2008 and 2009, BG Group drilled seven wells to target depth on Block 60, which contains the Abu Butabul gas and condensate discovery. The Group has carried out sufficient appraisal work to delineate the main section of the field and no further appraisal wells are planned to be drilled.
Focus now shifts to finding optimum ways to develop the field. Abu Butabul is a tight gas discovery and the ability to get gas to flow effectively and efficiently will be key to determining commercial viability. The Group is aiming to move to project sanction in 2010 and targeting production start-up from the field by 2012.