American shale revolution techniques head to Arabian Gulf as BP wins Oman gas project approval

Extended Well Test Project: BP workers at the Extended Well Test Project for Khazzan, in Block 61, around 300km south of Muscat. This pilot project includes a 70-million-cubic-feet-a-day compression facility and 10 appraisal wells drilled to date, and has been helping to demonstrate the potential of a much larger scale development. Courtesy of BPShow less

BP won a green light yesterday for a major tight gas project in Oman that will bring many of the techniques of the American shale revolution to the Arabian Gulf.

A gas sales agreement and revised production-sharing agreement signed by BP and the government paves the way for US$16 billion of investment in Oman’s Khazzan field.

Under the plan, BP will drill about 300 wells to produce 1 billion cubic feet of gas per day, equal to a third of Oman’s current gas supplies.

“Today’s signing is an important step in the sultanate of Oman’s plans to meet growing demand for energy over the coming decades and to contribute to economic development in Oman,” said Mohammed Al Rumhy, the Omani oil minister. “The Khazzan project is the largest new upstream project in Oman and a pioneering development in the region in unlocking technically challenging tight gas through technology.”

The sultanate is eager to ramp up fuel supplies to meet growing domestic power consumption. Besides the tight gas development, this month it will complete a pilot test for a technology that uses solar heat, rather than heat generated by gas turbines, to produce oil from aged fields. In August, Oman signed a memorandum of understanding with Iran to build a pipeline transporting Iranian gas under the Sea of Oman.

Construction at Khazzan is scheduled to start next year, and first gas is expected in 2017. Khazzan is part of Block 61, which holds an estimated 100 trillion cubic feet of gas in a 2,800 square kilometre area.

The development plan includes a 500km pipeline network and horizontal drilling and hydraulic fracturing, the same technology used to unlock gas from shale formations in the US. Unlike shale gas, which is trapped in sedimentary rock that must be blasted apart with chemicals and sand to allow gas to flow, tight gas is sealed in non-porous rock-like sandstone or limestone, often as deep as 10,000ft below the ground.

BP and Oman Oil, a 40 per cent joint venture partner in the project, also agreed to launch a feasibility study for a 1 million tonne per year acetic acid plant in Duqm that would launch in 2019. Acetic acid, which is naturally found in vinegar, can be used in downstream industries ranging from photo film to fabric production.