BP to Award Four Contracts on $750M Oman Gas Program

DUBAI Sep 24, 2007 (Dow Jones Newswires)

BP PLC (BP), Europe's second largest oil company, plans to award four contracts by year-end as part of a $750-million appraisal program covering two natural gas fields in Oman, a company spokesman said Sunday.

BP plans to award contracts for seismic data acquisition, processing, drilling rigs and front-end engineering design, or FEED, the BP spokesman said.

"Contracts will be awarded in the fourth quarter," with work on the FEED contract to start by year-end, the spokesman added.

The acquisition of seismic data at the fields is also planned to begin before the end of the year pending "crew availability," the spokesman said.

The FEED contract will take between six to nine months to complete. Contracts for designs and constructions will be awarded subsequently, the spokesman added.

BP in January signed an exploration and production sharing agreement with the Omani government for block 61, which contains up to 30 trillion cubic feet of natural gas, almost equal to Oman's existing gas reserves.

The concession covers an area of 2,800 square kilometers in central Oman, including the Khazzan and Makarem gas fields, which were discovered in 1993 but haven't been developed due to the complexity of their tight gas reservoirs.

Tight gas is found in reservoirs with low porosity and low permeability, making its extraction more difficult and more expensive.

A BP official told Omani media earlier this week that the company would spend an estimated $750 million on the five-and-a-half year appraisal program, with gas production potentially to reach 2 billion cubic feet a day by 2020.

Gas demand is rising rapidly in Oman, which has a population of 2.5 million, due to increased needs for power generation, development of industries such as petrochemicals, and conventional and enhanced oil recovery projects.

Gas projects such as Khazzan and Makarem offer international oil companies including BP a rare opportunity to participate in an otherwise largely closed hydrocarbons sector in the Middle East.

Regional countries on the other hand are keen to attract specialist technology and funding for the complicated and costly developments.

In the United Arab Emirates, several Western companies including ExxonMobil Corp. and ConocoPhillips are vying for a $10-billion project to tap sour gas, or gas with a lot of sulfur that has to be removed, near Abu Dhabi.

In Saudi Arabia, international companies including Royal Dutch Shell PLC have signed up to help state-run Saudi Arabian Oil Co. explore and produce natural gas in the vast Empty Quarter desert.

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