CAPITAL: Muscat

MONETARY UNIT: Omani Riyal

REFINING CAPACITY: 85,000 b/d

OIL PRODUCTION: 904,500 b/d

OIL RESERVES: 5.283 billion bbl

GAS RESERVES: 28.4 tcf

In March 1998 Mohammed Hamed Saif Al Rumhy, Oman`s new minister of oil and gas, told reporters of plans to encourage foreign companies to explore for and develop gas reserves as well as oil.

Al Rumhy said that the use of gas to aid industrialization in Oman would have a higher priority than building a third liquefaction train at the Oman LNG plant, then under construction.

He said Oman`s gas reserves stood at 25.3 tcf of nonassociated gas and 3.1 tcf of associated gas. The plan was to increases total gas reserves to 35-40 tcf by early in the next century.

Besides the Oman LNG export project, Oman also looked to build a fertilizer complex, a polyethylene plant with BP Chemicals Ltd. as operator, and an aluminum plant, all in the Sohar area.

The Omani government was also looking to increase oil production by the Petroleum Development Oman (PDO) venture and foreign operators to more than 1 million b/d.

In 1998 production by PDO was anticipated to average 845,000 b/d, while Occidental Petroleum Corp. produced 46,000 b/d from its Suneinah concession, Japex produced almost 9,000 b/d, and Elf Aquitaine SA produced 2,500 b/d in Sahmah field.

Al Rumhy said that PDO`s plan to boost its own production to 850,000 b/d by 2000 might not be feasible because the low oil price and budgetary restraints required some PDO projects to be slowed, notably development of the deep Athel formation in Al Shomou and Al Noor fields and outside.

In November three foreign operators announced a plan to join forces for gas exploration and production in northern Oman.

Amoco Corp., Occidental Petroleum Corp., and Finland`s Neste Oy decided to form a joint venture to explore for and produce natural gas in the region.

They planned to conduct a joint appraisal program for existing gas finds and to find new reservoirs in 14,000 sq km of acreage licensed to the partners. The common area of interest covered Blocks 9, 15, 27, 31, and 44.

Amoco Oman Gas BV took a 60% interest in the venture, with Occidental of Oman holding 26% and Neste (E&P) BV 14%. Occidental planned to lead initial exploration and appraisal work, due to begin in late 1998.

Amoco was to lead infrastructure development and gas marketing. The venture planned to develop fields, a gas gathering system, a processing plant, and transmission lines to the city of Sohar and the Amoco-operated Sharjah gas hub in the U.A.E.

David Nagel, president of Amoco Oman Gas, said, "Amoco, Occidental, and Neste believe they have developed a first class plan for the commercialization of remote natural gas reserves in northern Oman.

"The development and production of natural gas from northern Oman will help satisfy the growing demand for natural gas and encourage continued economic development in the area.

"The development plan includes the construction of significant new natural gas infrastructure in northern Oman plus efficient utilization of existing processing, transportation, and sales facilities in the U.A.E.

"The joint venture partners anticipate that the large Sharjah gas hub will eventually be linked with other large gas hubs in the region to form part of the proposed Gulf Cooperation Council gas grid."

LNG action

In other activity, Oman LNG LLC signed a sale and purchase agreement with Japan`s Osaka Gas Ltd. for delivery of 700,000 metric tons/year of liquefied natural gas for 25 years beginning in November 2000

Oman LNG was building two 3.3 million ton/year LNG trains at Qalhat on Oman`s northeast coast, the first of which was scheduled to be brought on stream on Jan. 1, 2000. Gas for the liquefaction and export plant was to arrive through a 360 km pipeline from fields in central Oman.

Osaka Gas had already started building an LNG tanker to carry the gas from Oman to its terminal in Japan. Earlier Oman LNG signed a sales deal with Korea Gas Corp. for 4.1 million tons/year of LNG.

In December Oman LNG announced it had signed an agreement for delivery of liquefied natural gas to India, thus concluding negotiations for the entire output of the plant.

The concluding sales agreement was with the Dabhol Power Co. in India`s Maharashtra state. It called for delivery of 1.6 million tons/year of LNG over 20 years beginning in late 2001.

Oman LNG said the deal was unique in involving the first import of LNG to India and because it was the first LNG contract in Asia signed with an independent power project.

The deal followed an earlier heads of agreement, in which Dabhol Power settled the main commercial terms for delivery of 1.2 million tons/year of LNG but was at the time considering increasing the volume delivered.

The independent power producer intended to build an LNG tanker to ship its gas from Qalhat to the terminal it planned to build in India. Dabhol`s project was a 2,450 MW power plant being built 240 km south of Mumbai.

Dabhol`s first 826 MW unit was due to be commissioned around year-end in 1998, and the plant was to have been run on naphtha until the LNG deliveries began. Power from the plant was contracted to be sold to the Maharashtra State Electricity Board (MSEB).

By the end of 1998 the $2 billion Oman LNG project was said to be more than 80% complete, with construction ahead of schedule.

Oman LNG partners were the government of Oman 51%, Royal Dutch/Shell 30%, Total SA 5.54%, Korea LNG 5%, Portugal`s Partex 2%, Mitsubishi Corp. 2.77%, Mitsui & Co. 2.77%, and Itochu Corp. 0.92%.

Partners in Dabhol Power`s first phase were Enron Corp. 50%, MSEB 30%, GE Capital 10%, and Bechtel Enterprises 10%. Partners in the second phase were Enron 80%, GE Capital 10% and Bechtel 10%, with MSEB reserving the right to take equity.