This report examines the risks and opportunities linked to Oman's gas, LNG and wider energy fundamentals, be it in terms of supply and demand, policy, upstream & LNG strategy and interplay with other fuels. It looks at the dynamics between macroeconomic fundamentals and trends (taking into account recent COVID impact), the role of gas in Oman's energy mix, including in the power and industrial sectors; the impact of upstream developments and the changes in its LNG portfolio.
Table of Contents
1 Introduction:
1.1 Overview
- A strategic geography
- History
- A new era
- Sultan Qaboos legacy
- Arab Spring and social instability risk
- Foreign policy
- Geopolitical versus economic risks
- Domestic changes
1.2 Economic indicators
- Economic structure
- GDP structure
- Income dominated by hydrocarbon
- Deficit
- Debt rates
- Borrowing strategy
- Downgraded
- Asset sale
1.3 Economic reforms, a slow process
- Maintaining political and social stability
- Spending
- Subsidies
- Tax reforms
- VAT and Excise tax
- Income tax
- Diversification/Tanfeedh
2. What is driving gas demand in Oman?
2.1 Gas dominance in primary energy mix
- Sectorial demand
2.2 Power sector
- Historical trends
- Cost-Reflective Tariffs
- Subsidy Reforms
- Power generation
- Reducing gas dominance
- Gas demand forecast for power generation
- Future capacity
- Renewables
- Hydrogen
- Coal
- Spot electricity trading
2.3 Industries
- Ports’ developments
- Duqm
- Sohar
- Salalah
- Cement projects
- Fertilisers and aluminium
3. Gas supplies: from pipeline imports to domestic resources
3.1 Reserves
- Geology
3.2 Production
- Gross production
- EOR
- Oil gas ratio
- Marketed production
- Gas
- Condensates
- Reduced concentration of players
3.3 Growing gas reserves
- Khazzan growth
- Phase 1: challenges and costs
- Phase 2: capitalising on initial phase
- Other projects
- Additional discoveries
- LNG bunkering, but no GTL
- Further exploration efforts
- Tenders
- Bilateral deals
- Push for unconventionals
3.4 Pipeline imports
- Qatari Gas
- Iran pipeline
4 What is the role of LNG?
4.1 Competing with domestic demand
- Record exports
- Stagnating volumes
4.2 LNG Marketing
- Long-term contracts
- Capacity expansion
- New train in 2006
- Debottlenecking
- Pricing
4.3 Changing Strategy
- Contracts’ expiry
- Widening the pool of buyers
- LNG Bunkering
5 Conclusions
Executive Summary
The Sultanate of Oman has been going through a remarkable renewal of its gas and LNG industry since the late 2010s. Its gas revival since the start-up of the Khazzan tight gas and condensate field in late 2017, combined with renewed exploration momentum on the upstream front, has opened up new opportunities for its domestic gas market and its role as one of the longest-established LNG exporters in the Gulf region and in the world.
The nation has come a long way. Increased domestic production, combined with improved gas demand management especially in its power sector, has allowed the country to reverse its supply and demand balance at home and revive its LNG business, while a few years ago, Oman had contemplated mothballing some its existing liquefaction capacity.
Today, gas remains at the heart of Oman’s strategy to fuel grand plans for economic diversification away from high reliance on oil income, in the prospect of dwindling oil reserves and amid high cost of enhanced oil recovery technologies at ageing fields. The stakes are far-reaching as new downstream and industrial investments are designed to boost in-country value, reduce one of the highest unemployment rates in the Gulf and address deeply entrenched socio-economic vulnerabilities displayed by dramatic protests during the 2011 Arab Spring.
But rapid changes on global oil and gas markets since the coronavirus pandemic, combined with budgetary constraints caused by lower oil prices, mean Oman is having to prove more agile in shaping a gas policy that fits in and supports ongoing efforts to address economic, political and even geopolitical challenges.
This report examines the risks and opportunities linked to its gas and wider energy fundamentals, be it in terms of supply and demand, policy, upstream & LNG strategy and interplay with other fuels.
In the context of the growing energy transition agenda, Oman has also been pushing to boost its renewables energy capacity and is already positioning itself to become a hydrogen producer and exporter.
This coincides with the upcoming expiry of some of its oil-indexed long-term supply LNG contracts which marks the end of an era for Oman as an LNG exporter. Most importantly, this calls for increased commercial flexibility to sustain LNG export revenues considering the cost of developing non-associated gas reserves and limited gas price incentives on the domestic market. In this regard, Oman has yet to create fresh policy signals at home in order to boost gas investments that shape a solid gas value chain and allow authorities to make the most of a window of opportunity for the fuel in a fast-changing energy landscape. This should support the transition to a cleaner energy mix, whilst fostering the development of new revenue streams at home for the interest of Oman’s sustainable economic, political and social development for the longer term.
Companies Mentioned
- BP
- CEDIGAZ
- Center for Statistics and Information (NCSI)
- Dolphin Energy
- Energy Development Oman (EDO)
- Eni
- Gas Natural Fenosa
- Glasspoint
- Itochu Corp
- KOGAS
- Kuwait Petroleum International (KPI)
- Mitsubishi Corp.
- Occidental Petroleum
- Oman Cement Company
- Oman LNG
- Oman Oil Company
- Oman Oil Company Exploration & Production (OOCEP)
- Oman Power and Water Procurement Company (OPWP)
- OQ
- OQ Gas Networks
- ORPIC
- Osaka Gas
- Osaka Gas National
- Partex
- Petroleum Development Oman (PDO)
- Petronas
- PTTEP. EOG
- Qalhat LNG
- Shell
- Sohar Cement and Oman's Raysut Company
- TANFEEDH
- Thethys Oil
- Total
