Boston, MA -- (SBWIRE) -- 12/05/2012 -- BMI View: With some major mission-critical energy projects in the pipeline, there is reason for confidence in Oman's approach to investment in its hydrocarbons sector. With BP preparing to make a commitment to proceed with a $20bn tight gas development in Oman, one of the more encouraging signs is the willingness of the authorities to consider more commercial gas prices as an incentive for international oil companies (IOCs). A precedent has been set with a fertiliser project, which will involve buying gas at an escalating price - up to US$3/MMBTU, which is well above the traditional Gulf US$1/MMBTU domestic price levels.

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We highlight these trends and developments in Oman's oil & gas sector:

- BMI sees Oman's proven oil reserves rising from 5.5bn barrels (bbl) in 2011 to 5.9bn bbl by 2013/14, but falling to less than 5.2bn bbl over the long-term forecast period to 2021. The success of enhanced oil recovery (EOR) is critical both in terms of raising estimates of recoverable oil, and in terms of oil production levels.
- Total production of crude oil and condensates increased 2.35% to 28.58mn barrels, or 921,985b/d, in August 2012 compared to the previous month. Total exports stood at 24.98mn barrels, equivalent to 808,000 barrels per day (b/d), according to Oil & Gas Ministry figures. China was the biggest single customer during August with 24.4% followed by Taiwan 15.8% of total exports.
- Petroleum Development Oman (PDO) is preparing to spend significant amounts to boost exploration and production (E&P) activities in the next five years. According to reports, the company will invest US$26bn, as part of a longer-term plan to spend US$60-70bn in the oil & gas sector over the next 10 years.
- However, Oman's attempts to boost oil production above 1bn b/d over the long term are far from assured, and the most likely scenario is for a near-term upward rise as the impact of EOR makes itself felt in the next four-to-five years. Gas production also faces challenges. If BP's tight gas development does not prove successful, the sultanate will struggle to secure substantial new volumes of gas for both export and domestic industries.

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