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Oman
Inc.(Block 32), Philips Petroleum Oman Ltd (Block 36) and Triton
Oman Inc.(Block 22). In January 1997, the Saudi Arabian Nimr Petroleum
Company signed an agreement with the Government to invest $50.5
million over a period of eight years to explore for oil and gas
in the northeast of the Sultanate (Block 3). In July 1997, a Canadian
company, Gulf Stream Resources Ltd signed an agreement to explore
in Northern Oman (Block 30) and in September 1997, Occidental
Oman Inc signed an agreement to explore in the same area (Block
31). During 1998, three new agreements were signed with international
companies for exploration in the offshore waters of Musandam and
for areas of northern Oman - Occidental (Block 27), Triton (Block
40) and Amoco (Blocks 15 & 44). In March 1999, the Government
signed an agreement with Shell Deep Water Oman to assess the oil
and gas potential of an area of 18,267km2 in the Gulf of Oman
(Block 18).An onshore production sharing agreement was signed
with Phillips Petroleum Oman Ltd.(Block 38)and a third agreement
is expected to be signed by the end of the year. In June 1999,
it was confirmed that PDO had discovered a new oil field in southern
Oman after drilling and testing three wells, which have demonstrated
the commercial viability of the reservoir. Further evaluation
of the structure is needed but this is the most significant new
find in the last five years.
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Production |
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In
1980, Elf became the second company to produce oil, followed by
Occidental Oman Inc., Japex Oman Ltd and Novus. The oil from these
companies, which accounts for about 6% of Oman's total oil production,
is transported and exported via the PDO facilities. In 1998, Elf
relinquished its acreage and installations which were taken over
by MB Petroleum.
Oman's
oil production in 1998 from over 100 fields increased to around
900,000 barrels per day and was only marginally higher than production
in 1997. With effect from the beginning of May 1998, the decision
was taken by the Government to cut PDO oil production by 30,000
barrels per day from this level in the interests of the oil producing
states and to help stabilise the oil price on world markets. A
further 20,000 barrel per day reduction was made in July, bringing
the daily average down to 810,000 barrels per day.
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Reserves |
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At
the beginning of 1999, total recoverable oil reserves stood at
5.5 million barrels. Additional reserves could be recovered but
at a higher cost. Several discoveries have been made in recent
years by PDO and the Oman Occidental Company. PDO is developing
the al-Mukhaizna field to come on stream in the year 2000 with
production of 15,000 barrels per day. It
is the Ministry of Petroleum and Minerals' policy to restrict
production to a level that does not exceed 6.5% of remaining reserves
per annum
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Traning
& Omanisation |
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The
oil industry is a capital, rather than labour, intensive industry,
but human resources are of the utmost importance. PDO has a long
record of training Omanis and has made good progress with Omanisation.
In early 1999, 77% of its 4,400 employees were Omanis. This figure
excludes 580 Omanis on full time training courses at home and
abroad. The target set for the year 2000 is 86% with complete
Omanisation by the year 2007. In 1998, there were 1,028 Omanis
in supervisory and management positions and about $27million was
spent on training, of which half goes on full time sponsorship
of students on degree courses.
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Crude
Oil Exports |
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Total
exports for 1999 were 301.2 million barrels compared to 303.2
million barrels in 1997. All
of Oman's crude oil is exported from the oil terminal at Mina
al-Fahal. Most of it goes to the Far East with Japan, Thailand,
China and Korea being the major importers during 1998. The
average price of Omani crude oil in 1998 was $11.92 per barrel
compared to $18.67 per barrel in 1997. However, the price of the
Oman blend fell from $23 per barrel at the beginning of 1997 to
as low as $10 per barrel in the first quarter of 1998, rallying
early 1999 as a result of the production cuts by the oil producing
states.
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Retail
Market |
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All
refined products used to be imported into Oman, until 1982 when
the Oman Refinery at Mina al-Fahal came on stream with a capacity
of 50,000 barrels per day. This capacity was increased in 1987
to 80,000 barrels per day to meet the needs of the local market.
In August 1996, an agreement was signed with BP to provide technical
services to the refinery, which will be upgraded, but no large
expansion is planned in the Mina al-Fahal industrial area. Plans
for a second refinery in Sohar are being actively considered.
It will be a catalytic cracker unit with a 75,000 barrels per
day capacity. The project is expected to be completed by the year
2003. During 1998, 2 million barrels of crude oil were supplied
to the refinery, which had to import just over 1 million barrels
of refined product to meet demand.
Oman's
third LPG processing plant at Saih Rawl will come on stream 1999/2000
as part of the Oman LNG project with a production capacity of
40,000 tonnes per annum. At present, LPG is produced at the Yibal
Gas plant (25,000 tonnes p.a.) and by the Oman Refinery (40,000
tonnes p.a.). The domestic market demand has been growing by about
5% every year. Total demand in 1998 was 79,141 tonnes, which meant
that some 20-25,000 tonnes had to be imported. With an annual
capacity of over 100,000 tonnes in the year 2000, there will be
no more need for imports and Oman will be more than self-sufficient
in domestic cooking gas.
Until
recently, all the products of the Oman Refinery Company were marketed
through the Shell and BP retail networks. Shell has 115 service
stations and BP 75, which are owned and run by Omani dealers.
Neither company is allowed to establish any new sites in order
to allow the Oman Refinery Company to distribute fuels through
its own marketing company established in 1994 with the brand name
Al-Maha and the national colours for its livery. By January 1999,
Al-Maha had opened a total of 36 service stations. In July 1997,
Shell Oman Marketing Company (SAOG) divested 51% of its capital
in shares to local investors. 40% of the shares were floated on
the Muscat Securities Market, while the remaining 11% was reserved
for existing Omani shareholders and service station dealers. BP
Oman followed a similar strategy with a share offer to the public
in August 1998.
Towards
the end of 1996, fuel cards were first introduced into Oman. Since
then, credit cards have been widely accepted throughout the service
station network, replacing cash for fuel purchases. Following
the European pattern, 'Select' and 'BP Express' convenience stores
are part of the service provided by the dealers.
Some
lubricants are still imported into Oman, but the lubricants blending
plant at Mina al-Fahal, which is operated by Shell Marketing Oman
(SAOG), has been able to supply most of the Sultanate's needs
as well as exporting to neighbouring countries. In 1996, it was
awarded His Majesty the Sultan's Cup for Industry and since then
has won the cup for a second time, as well as being the first
company in Oman to achieve ISO 9002 certification.
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Oman
Oil Company |
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The
Government established the wholly state-owned Oman Oil Company
in the late 80's in order to enter into foreign joint ventures
and oil trading operations. Since then, a number of projects have
been considered. An ambitious plan to lay a deep sea gas pipeline
to India has been shelved, but the company is actively involved
in other projects, notably the Caspian pipeline consortium in
Kazakhstan in which it has a 7% shareholding, the Oman fertilizer
project and a joint venture refinery project in India. In
November 1998, OOC signed a participation agreement with Arco
and Exxon to explore for oil and gas in two offshore blocks in
the Kazakhstan sector of the Caspian Sea, subject to the approval
of the Government of Kazakhstan.
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Oman
LNG Project |
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Oman's
LNG project forms an integral part of the Sultanate's strategic
and economic vision of the future. It is not only the biggest single
construction project ever undertaken in Oman, but it is also one
of the largest in the world and one of the fastest to come on stream
- less than nine years from the major discovery of gas. The first
customer export shipment will be made in April 2000.
The
company, Oman LNG LLC, was set up by Royal Decree to handle the
downstream operations of this gas export project, namely the liquefaction,
transportation and sales of LNG. The shareholders are the Government
51%, Shell 30%, Total 5.54%, KOLNG 5%, Partex 2%, Mitsubishi 2.77%,
Mitsui 2.77%, Itochu 0.92%. The upstream part of the project is
wholly owned by the Government, but is operated by Petroleum Development
Oman, which has responsibility for field appraisal and development,
gas processing and transport by pipeline to the liquefaction plant
at Qalhat near Sur.
Oman
LNG's contribution to Omani society
The
Company will provide a new source of national income in addition
to oil revenues, as well as lessening dependency on oil exports.
Indeed, this overall project is expected to increase oil and gas
revenues by 18%, with the LNG plant contributing to almost 10%
of today’s Gross National Product.
Apart
from Oman LNG's own training programmes, the Company also plays
a key role in helping Omanis learn the skills needed to set up
and run their own businesses. It also assists Omani companies
and businessmen to develop the competencies required to help them
win contracts at the LNG plant.
The
company is contributing funds to the Intilaaqah programme - an
on going scheme designed to train young Omanis in establishing
their own businesses. In 1997, Oman LNG paid for the training
of 39 students, and this year, the company is funding 40 more
students on the programme. The total value of Oman LNG’s
funds to the Intilaaqah programme to date, is around half a million
dollars (RO194,000). In addition to funding the Intillaqah programme,
the Company has set up a scholarship scheme for Omani students
to go overseas for higher education.
The
company is running a campaign to encourage Omani businessmen and
companies to bid for contracts that will arise once the plant
becomes operational. Information is available which lists all
the contracts for goods and services required by the plant during
its 25 operational life.
The
company has been involved in a number of other projects benefiting
Omani society. Oman LNG is funding a $40 million (RO15.5 million)
240-bed hospital in Sur which will be operational in the year
2000. It has also paid over $1.5 million (RO600,000) for construction
of a new section of the Sur Corniche Road and RO100,000 for building
the Bir Bwera Road in Sur.
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Project
Development |
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The
gas fields in Central Oman, discovered between 1989 - 1991, are
being developed by PDO for the Government at a cost of US$1.4
billion. Current expectations of Oman's total reserves of gas
stand at 29 trillion cubic feet (Tcf), of which 25 Tcf are non-associated
reserves. The Government is optimistic that larger quantities
of gas remain to be discovered. Total proven gas reserves at the
beginning of 1999 stood at 20 Tcf, of which 19 Tcf were non-associated
gas. These figures indicate that there are ample reserves to supply
not only the LNG project, but also to provide gas for the polyolefin
and aluminium projects at Sohar. Moreover, the gas going to Sur
will also supply the planned fertiliser project and provide a
source of energy for domestic power generation and other small
industries. The
gas will be transported from three fields in Central Oman to Sur
via a 360km, 48 inch diameter pipeline.
The
LNG plant in Qalhat is designed to produce a nominal 6.6 million
tonnes of LNG per year from two LNG process trains. Following
an international tender, Chiyoda/Foster Wheeler was awarded the
US$1.2 billion Engineering, Procurement and Construction (EPC)
contract in November 1996. To handle the construction of the Qalhat
LNG Complex, an Omani joint venture has been formed between the
main contractor and two Omani companies - Zubair Enterprises and
the Suhail Bahwan Establishment. Civil construction work on the
site of the plant and marine facilities, which is situated on
the coast, 15km north of Sur, began in November 1996, when the
foundation stone was laid by His Majesty the Sultan. Construction
of the plant is now well advanced and should be completed by mid
2000. The site is to be known as Qalhat after the nearby ancient
seaport of that name.
The
project will, in part, be funded through a US$2 billion financing
arrangement signed in November 1996 with a large group of international
and Omani banks, supported by export credit agencies: ECGD of
the UK, US-Exim of the USA, NCM of the Netherlands and SACE of
Italy. Oman LNG has achieved 80% financing, a percentage of project
financing which is unprecedented for a development of this nature
in the Middle East. The rest of the finance is being provided
by the shareholders in the project.
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Human
Resources |
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One
of Oman LNG's key objectives is to facilitate and implement the
development of a skilled Omani workforce. The natural gas processing
industry is relatively new in Oman and a qualified workforce is
not readily available in the required proportions. To achieve
higher levels of Omanisation, the company has undertaken the sponsorship
and development of several training programmes, either directly
or indirectly through its contractors. Up to 500 young Omanis
have undergone skills development programmes. Some of these young
people have qualified to work in the construction industry, while
trainees under Oman LNG technical and skills training programmes
are intended to work and develop their skills up to senior staff
positions in Oman LNG's plant organisation. Currently 88 operator/trainees
are undergoing training at Oman Refinery.
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Marketing |
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In
October 1996, the Sale and Purchase Agreement (SPA) for two thirds
of the plant output (4.1 million tonnes per annum) was concluded
with the Korea Gas Corporation (KOGAS) for a period of 25 years,
commencing in the year 2000. This is the largest ever single gas
contract between two companies. KOGAS has five LNG tankers under
construction and is committed to build a sixth to transport the
gas from Oman to Korea.
The
agreement with Osaka Gas of Japan to buy 0.7 million tonnes per
year for 25 years was successfully completed when a full SPA was
signed in October 1998. Deliveries will commence in November 2000.
In December 1998, Oman LNG signed a SPA to sell 1.6 million tonnes
per year of LNG to Dabhol Power Company in India for a period
of 20 years with first cargo delivery expected towards the end
of 2001.
A
Sale and Purchase Agreement with Total to sell more than 130,000
tonnes of natural gas liquids (NGL) was also signed in June 1999.
Total is expected to lift the first cargo of NGL between April
and May 2000.
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Agriculture |
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Although
many employment opportunities are being created with the diversification
and development in other sectors of the economy, well over half
the population is still dependent on the agriculture and fisheries
sectors of the economy when related activities, such as wholesale,
retail, transport and other services are taken into account.
According
to the last agricultural census carried out in 1992/93, about
102,659 people work in agriculture of whom nearly a third are
women. This represents almost 12% of Oman’s working population.
In the current country-wide drive for Omanisation, regulations
have been issued by the Ministry of Social Affairs, Labour and
Vocational Training prohibiting expatriates from handling agricultural
machinery.
A
large percentage of the population live in rural areas and many
others own land and property in the countryside even though they
live and work in the towns. It is a major challenge for the Government
to prevent a rural exodus by setting up programmes of rural education
and to ensure that communities make the best use of limited water
resources for maximum productivity. The protection of agricultural
land is of huge concern to the Ministry. In 1995, a single flood
protection barrier in the Wilayat of Ibri cost RO 646,000. This
kind of barrier, which is 1.6 km in length and 3.5m high, is essential
to prevent erosion and loss of valuable agricultural land. During
1998, there were insufficient funds to erect any flood protection
barriers. However, the Ministry has surveyed 74 locations for
possible projects from 536 applications for barriers. A team has
been set up to find methods of improving their construction and
ways of sharing the cost with the local community that will benefit
from their erection.
Self-sufficiency
in food production
In
view of the restraints imposed by water resources, one of the
main objectives in managing the agricultural sector is to maximise
economic returns without adversely affecting the delicate water
balance. The policy is to create sustainable agricultural methods
and crops which will provide continuous employment opportunities
for Omanis and reduce the deficit in the food trade balance. However,
Oman with its growing population and rapidly changing society
will remain a net food importing country.
The
current self-sufficiency rates are encouraging. The latest estimates
indicate that Oman is 64% self-sufficient in vegetables, 53% in
milk, 46% in beef, 44% in eggs and 23% in mutton. Sufficient quantities
of dates and some other fruits are produced so that they can be
exported as well as meeting local demand. The production of tomatoes,
potatoes and alfalfa has doubled in recent years.
Agriculture
and fisheries are Oman's main non-oil exports. This sector accounts
for nearly 25% of the non-oil exports and in 1997 contributed
RO153.4 million to the GNP, an increase of 4.4% over the previous
year when its contribution was RO147.2 million. Provisional figures
for 1998 indicate a further increase. If the industries and services
that depend on agriculture for raw materials, jobs and commercial
enterprise are taken into account, the total contribution to the
GNP is very much higher.
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Livestock |
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Oman
is a leading livestock producer in the Arabian peninsula with
around 240,260 sheep, 854,060 goats, 213,120 cattle and 98,550
camels. Over 70% of the cattle and camels are reared in Dhofar
where nearly two thirds of the population depend on animal husbandry
for their livelihood. However, Dhofar only holds 26% of the total
livestock in Oman. Grazing lands are coming under increasing pressure
in Dhofar and the government is working through extension programmes
to ensure that livestock is only raised on sound economic and
environmental grounds. An integrated management programme is being
introduced to minimise the adverse effects of camel over-grazing
in the Dhofar mountains.
Immunisation
and welfare of livestock are an important element of the Ministry's
livestock programme. A nationwide campaign costing over RO 4 million
was begun in 1992, the aim of which is to immunise all livestock
against common animal diseases. In March 1996, the Government
stated that there had been no cases of BSE in Oman.
In
conjunction with the Ministry of Regional Municipalities and the
Environment, strict adherence to the regulations imposed by CITES
(Convention for International Trade on Endangered Species) is
implemented by the Ministry on the import of certain animals and
birds.
Local
production of 2,757 tonnes of beef and 3,086 tonnes of mutton
does not yet meet local needs, but there are plans to increase
not only meat production, but also egg and poultry production,
by establishing a number of large to medium size projects in conjunction
with the private sector, using Government guaranteed soft loans.
The Ministry aims to increase milk production and management of
dairy herds by giving farmers assistance and equipment, as well
as introducing modern techniques of artificial insemination. During
the fifth Five-Year Plan, exports of fish and agricultural produce
have been increasing substantially as these and a number of other
projects are completed, such as the new fishing harbours currently
under construction.
In
1997, a fully-integrated poultry project was launched in Dhofar
at a cost of RO 12.8 million. One of the largest projects of its
kind in the Gulf and the first to be established in Oman, it has
a capacity for 94,000 hens to produce 15 million eggs annually.
The plant includes storage for 11,000 tonnes of frozen poultry.
About half the production from this project is intended for export.
It is expected that this and other similar projects will halve
Oman’s current annual imports of frozen chicken.
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Water
Resources |
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Water
resources are critical to the future of agricultural development
in Oman, which lies in an arid part of the world. Although much
of the country is desert or semi-desert, the mountains attract
rainfall which is retained in the limestone formations in the
north; while in the south, the Dhofar range and coastal plain
catch the regular light monsoon rains from June to September.
The Ministry works closely with the Ministry of Water Resources
to ensure that the best use is made of available water resources.
The
Ministry encourages modern methods of irrigation to save water
and has introduced modern irrigation systems through a cost sharing
programme to 2,314 farms that are served by groundwater wells.
At Nizwa, a pilot project was established to show farmers how
to make better use of the traditional falaj system of irrigation.
The fruit and vegetables to be planted are chosen carefully for
their qualities and water requirements. The Ministry gives advice
and provides seeds, insecticides, fertilisers and other agricultural
assistance in order to raise productivity. It encourages the use
of drought-resistant fodder crops and the local production of
animal fodder concentrate from fish and plant waste.
HM
the Sultan's Award
In
order to encourage farmers, His Majesty the Sultan has instituted
the annual award of a cup to the Wilayat showing the best overall
agricultural performance. This is coupled with a cash prize and
a number of other awards for special categories. In January 1999,
the cup was presented to the Wilayat of Shinas. The runners up
were the Wilayat of al-Khabourah followed by the Wilayat of Mahdhah.
The Wilayat of al-Mudhaibi came top in the agricultural production
section and received a Ministry award. The Wilayat of Nizwa won
a prize for livestock production and the Wilayat of Khasab, a
prize for fisheries production.
Government
subsidies
Government
subsidies are used to provide technology to the farmer and train
him in modern methods as well as to give him guidance and advice.
The amount of subsidy allocated during the fourth Five-Year plan
was RO 6.4 million for agricultural machinery in addition to seeds,
fertiliser and other necessities. Subsidies for livestock amounted
to RO 4.3 million and included assistance to small goat and poultry
farms. Subsidies were also approved for modern irrigation projects,
making the total spent on agriculture during the plan RO 17.7
million. The Ministry is altering its policy on subsidies in the
current Five-Year Plan to finance larger and more technologically-oriented
projects. The basic subsidies given to farmers over the last 20
years are being removed since they now have the experience to
manage their farms without Government assistance and can take
out loans where necessary. The Ministry is therefore adopting
a new approach. Innovations and technology are being introduced
and instead of subsidies, support is given to farmers with training
and demonstrations of new agriculture equipment, irrigation systems
and improved crop varieties.
Wheat,
which was a traditional Omani crop in parts of the Sultanate is
grown less these days and does not take up more than 315 hectares
of cultivable land. The annual production of grain is 1,400 tonnes.
It is only grown when there is ample water and is then used as
part of the crop rotation system to assist in managing soil fertility
and to conserve local varieties of seed grain. Prices of imported
wheat are a great deal less than the locally grown produce and
there is therefore no intention for Oman to become self-sufficient
in cereals. The emphasis is on cultivating crops that give a good
return. However, because wheat is a strategically important crop,
the Ministry conducts a research programme so that it could be
grown in the future if the need arises.
Date
Cultivation
Renewed
interest is being paid to dates, which were Oman's largest export
in the 19th century. Nearly 10 million date palms thrive along
the Batinah coast and in the gardens of the Interior. They occupy
about 60% of the cultivable land and produce high yields of good
quality fruit. Annual production of dates is estimated to be between
150,000 and 175,000 tonnes. The season lasts from May to October
with different varieties fruiting throughout this period. The
Ministry has a department of date research which is actively involved
in cloning seedlings to further improve quality and productivity.
Between RO 150,000 - RO 200,000 is spent annually on controlling
the destructive dubas bug by aerial spraying with specially equipped
helicopters. Fortunately, Oman is so far free of the red palm
weevil Rhynchophorus ferrugineus, which was imported into the
Arabian peninsula from Pakistan. Oman has never had a policy of
importing date palms and is now keeping a close watch on the palms
in areas near the border to prevent the infestation of this destructive
parasite. The Ministry has introduced an integrated pest management
programme to include use of special pesticides, removal of infected
palms, research and extension work to heighten public awareness
and equip farmers with the knowledge to protect their palms.
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