Oman latest to insist that oil, gas is 'here to stay'

Omani and Oman-focused energy officials this week joined a growing chorus of voices to reiterate the pivotal role that hydrocarbons have in the energy mix, even as state-owned companies scramble to increase their share of renewables production.

Some producers cite the risk of leaving costly, stranded oil and gas assets as renewable energy alternatives become more favoured.

"This is a common concern among producers who are focusing on short-term developments to maximize cash flow — [but] if we continue to do that, with the clean energy transition, will we be left with stranded assets in the long-term", state-controlled PDO's technical director Sami Baqi told the Oman Petroleum and Crude Show conference in Muscat this week. "We need to redefine and revamp our operation model to produce in a sustainable manner."

"We are in an era where most of the production does not come from the easy oil but comes from difficult oil," Oman's energy ministry undersecretary Mohsin Al Hadhrami said. "It requires more improved and enhanced oil recovery (EOR) type technologies to extract it."

Oman is heavily reliant on tertiary extraction technologies like EOR given its maturing asset base and complicated geology.

"We know that most of the oil fields [in the region] are maturing and costs are going to escalate, so we need to be mindful of it while discussing cleaner solutions going forward," Hadhrami said.

PDO, Oman's largest hydrocarbon producer, aims for 19pc of its output to come from EOR projects by 2025, and has said it is looking at 'cleaner' ways to implement the technology. PDO in November started a pilot project to inject captured CO2 for EOR at its oil reservoirs.

Baqi's concerns were echoed by PDO's carbon capture, utilisation and storage (CCUS) manager Nabil Al-Bulushi, who said even solutions like CCUS can be expensive and come with their own challenges. There is a need for a proper ecosystem or regulatory policies to avoid delays in executing such projects, he said.

When it comes to challenges associated with commercialising green hydrogen, Saudi state-controlled Aramco's head of upstream Yousef Al-Tahan said higher costs already make hydrogen more expensive than any other energy sources.

"Not only should the costs go down, but the market has to be matured to take in the hydrogen," he said. "We also need pipelines and facilities that are able to handle hydrogen, especially when it gets converted to ammonia."

Gas here to stay

Oman, like many of its neighbors in the Mideast Gulf, insists gas needs to be part of the global journey towards cleaner energies.

"Asia-Pacific is still heavily reliant on coal, this is an area where gas can play an important role," Shell Oman's development manager Salim Al Amri said at the event. "I think there is no doubt that gas is here to stay."

Oman is a particularly interesting case as it "has moved from a position of gas shortage to surplus", Al Amri said, enabled by key developments in tight gas. "Output from fields like Khazzan and Mabrouk will continue to produce nearly 50pc of output even by 2025, which is indicative of how important tight gas developments are," he said. The Khazzan tight gas field has 10.5 trillion ft³ of recoverable gas reserves. Mabrouk North East is due to reach 500mn ft³/d by mid-2024.

But even as natural gas is touted as the transition fuel, executives from major producers like state-owned OQ and PDO warned there are technical risks associated with extracting the fuel, including encountering complex tight reservoirs, water production and difficult geology.

By Rithika Krishna