Monday, November 3, 2008

Minister of Oil and Gas confirms slow-down will delay Duqm

HE Dr. Rumhy, Minister of Oil and Gas confirmed today that, because Oman has been using project finance (semantics for non-Governmental borrowing) to fund many of the development projects, the current global environment will cause delays in projects if financing isn't available, with special reference to the plans for a refinery and petrochemical plant in Duqm.

Dr. Rumhy also commented that the gas deal with the Iranians on Kish development were still in the air.

There are three big problems with the Iranian deal:
- how much per Mscf will Oman have to pay Iran?
- who will fund the development? (a project that will probably require more than $10 billion!)
- who in Oman can afford to pay a high price for that gas? Certainly not the new Sohar & Salalah projects.

Yes, some of the gas could be exported as LNG, but the profitability will be close to zero on that - Oman might end up paying as much for the feedstock gas as they would make in LNG sales after costs, and why invest $10+ billion just so Iran can make money from your LNG plants?

See Reuters

Crisis may slow Oman energy projects -oilmin
ABU DHABI, Nov 3 (Reuters) -
A global financial crisis will affect Oman's oil and gas development projects and may cause delays, Omani Minister of Oil and Gas Mohammad bin Hamad bin Seif al-Rumhy said on Monday.

Qatar, top oil exporter Saudi Arabia, the United Arab Emirates, and three other Gulf states have more than $2 trillion of projects under construction, buoyed by bumper oil revenues that have helped their economies triple in size since 2002.

But a looming global recession now threatens to scupper the plans of countries that have spent fortunes building massive economic, energy and industrial zones, tourist and leisure hubs.

"The recent financial problems will have an impact because most of our projects are on project finance," Rumhy told Reuters at an oil and gas conference. "It is a more challenging environment than six months ago. If we can't borrow, we will have to delay."

Rumhy named the Duqm refinery and petrochemical complex project as one of the developments that could face delays.

"Oman's development plans will continue but certain projects will be revisited," he added.

The government announced plans at the end of 2006 to build the Duqm Refining and Petrochemical Complex, which would see the construction of Oman's third refinery at al-Duqm in the southeast of the country.

The plan, which is faced with rising costs, would include a 300,000-bpd refinery and a petrochemicals facility including a polypropylene plant with a capacity of 1.2 million to 1.5 million tonnes a year. Commercial production had been set for 2012.

Rumhy also said he expected Oman's oil production to rise to 800,000 barrels per day (bpd) in 2009 from 750,000 to 760,000 bpd this year and gas output to remain steady at 60 million cubic metres per day.

He added that Oman was still in talks with Iran to import gas, but no agreements had been reached yet.
The two countries are in negotiations on the sale of 1 billion cubic feet per day of Iranian gas to Oman, news agency ISNA had reported.

Analysts say that Gulf Arab states will keep raising public spending in the face of the world financial crisis, but at a slower pace, even as an oil price slump and credit woes put the brakes on an economic boom. (Reporting by Simon Webb and Stanley Carvalho; Writing by Ramthan Hussain; Editing by Clarence Fernandez)

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