BP seals £9.8bn gas project in the Omani desert

BP will drill some 300 wells to flush gas trapped deep under the Omani desert over the next 15 years in a £9.8bn project that Oman is relying on to keep its economy growing.

The Khazzan tight gas project, which aims to extract around one billion cubic feet (bcf) per day of gas from sandstone at depths of up to 4,500 metres in central Oman, is a showcase for BP’s tight gas extraction technology.

Its success is vital for a country whose own gas exports have been eaten away by its voracious appetite for energy.

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“Today’s signing is an important step in the Sultanate of Oman’s plans to meet growing demand for energy over the coming decades and to contribute to economic development in Oman,” the country’s oil and gas minister, Mohammed Al Rumhy, said in a statement after the signing in Muscat.

“The Khazzan project is the largest new upstream project in Oman and a pioneering development in the region in unlocking technically challenging tight gas through technology.”

BP will have a 60 per cent operating stake in the project, which involves a 15-year programme of drilling into sandstone thousands of metres below the surface to extract gas using hydraulic fracturing technology developed in the United States.

BP expects to invest around $9.60bn over the full field development, in accordance with its 60 per cent stake in the $16bn project, a BP spokesman said.

State-owned Oman Oil Company Exploration & Production (OOCEP) will have a 40 per cent stake. The $16bn total investment estimate includes around $1.5bn already spent.

After months of haggling, Muscat agreed in mid-2013 on the price at which BP could sell gas it can squeeze from deep under the desert of central Oman.

Neither side would reveal the price they had agreed to make the project worthwhile for BP, but BP chief executive Bob Dudley said the price was competitive within BP’s global investment portfolio.

“We are a company who have said that we will use a very disciplined capital framework and for the rest of the decade we will keep BP’s capital investments between $24bn and $27bn a year,” Mr Dudley said.

“There are other projects that we have put aside but this is one that is big, it is important and it is a good partnership.

“It fits with our strategy as a company to develop large reservoirs.”