The current cost of production per barrel has gone up substantially and this weighs heavily on oil output - MUSCAT — The total amount of crude oil produced by the Sultanate since the inception of its mainstay hydrocarbon industry represents only 16 per cent of reserves discovered to date, Dr Mohammed bin Hamed al Rumhy, Minister of Oil and Gas, revealed here yesterday.
Addressing a high-level panel of members of the Majlis Addawla, Dr Al Rumhy said the ministry is keen to exploit the potential of every producing well unless there are compelling reasons preventing such an endeavour. The meeting was held in the context of His Majesty Sultan Qaboos’s directives stressing the importance of enhanced co-operation and co-ordination between the Council of Ministers and the Majlis Addawla.
In attendance from the Majlis Addawla were a number of members including Dr Yahya bin Mahfoudh al Mantheri, Chairman, and the secretary-general. In his review of the oil and gas sector, Dr Al Rumhy underlined efforts by the ministry to boost production and attract investment into this vital economic sector.
The minister also sought to dispel what he described as “misconceptions” in the minds of many citizens pertaining to oil and gas output and the Exploration and Production Sharing Agreements inked with oil companies. At the same time, Dr Al Rumhy affirmed the ministry’s commitment to increasing oil output, the success of which is dependent on prevailing circumstances and challenges.
A key factor weighing on output is the cost of production per barrel which has gone up in comparison with trends prevailing during past years, he said. “Besides, oil is not a lake that we can tap when we wish. On the contrary, there are a number of technical challenges that deter many international companies from investing in the hydrocarbon sector.” “In fact, there are companies that quit exploring for oil in the Sultanate because they found lower cost options in other parts of the world,” he stated.
Dr Al Rumhy also noted that oil wells typically remain in production for periods lasting no less than 10 years. A lot of time, money and effort is expended during this period, he said, warning that production costs will rise in the coming years. Moreover, in an effort to conserve oil for future generations, the ministry endeavours to strike a balance between production levels and booking new reserves.
Ultimately, the objective is to raise output gradually over the long term, thereby avoiding the pitfalls faced by many countries that suffered a decline in oil production. In fact, some oil producing countries that topped the ranks of oil exporters during the last century and today left with no oil and are no longer members of Opec, he noted.
He reviewed the oil agreements between the government and investing companies and said that there are two kinds of these companies, one is connected with the Petroleum Development Oman (PDO) and the other is linked to other companies and each has its own share in these agreements
He said the dynamics governing the production and sale price of natural gas were quite different from those governing oil. Unlike oil, markets for gas must be finalised in advance before it is produced. This poses major challenges in determining prices, unlike oil which enjoys strong demand internationally.
Dr Al Rumhy also appreciated the role played by young Omani as technically competent employees of oil companies. Answering queries from the Majlis Addawla members, the minister welcomed opportunities to clarify issues and concerns given the vital role of oil as a principal source of revenue for the national budget. — ONA