Eni signs up for Oman offshore hunt

Italian major Eni has acquired rights over the only maritime block offered during the Oman’s latest licensing round, launched late last year. The move comes as a considerable fillip to Muscat’s long-standing efforts to find and develop offshore oil and gas reserves.

The allocation was made in the context of a broader co-operation agreement with state-owned Oman Oil Co. (OOC). It coheres with the broader strategy of enlisting the assistance of IOCs to partner the parastatal’s upstream arm in developing undeveloped acreage across the sultanate.

The block is the only one of four offered during the bid round to have been allocated thus far – presumed to reflect a continued bearishness in the industry rendering investment in Oman’s challenging and dispersed fields relatively unattractive.

The memorandum of understanding (MoU) signed in Milan by OOC CEO Isam al-Zadjali and his Eni counterpart, Claudio Descalzi, called for the two parties to “to explore co-operation opportunities in the oil and gas sector”. It granted the Italian firm, in partnership with OOC subsidiary Oman Oil Company for Exploration & Production (OOCEP), exploration rights in Block 52 – with neither the size of the respective shareholdings nor the precise nature of the licence agreement revealed.

The block covers a 90,760-square km area off the sultanate’s southeast coast and was described in information released by the Ministry of Oil & Gas (MOG) when launching the latest licensing round in October as being primarily an oil target.

As in the rest of Oman’s offshore territory, the area has a long history of unsuccessful exploration. Ireland’s Circle Oil relinquished the licence in 2015 as part of a wider withdrawal from the country in response to the global industry downturn. Previous work had been carried out by the US’ Sun Oil, Amoco – subsequently acquired by BP – and Petroleum Development Oman (PDO).

The last of these – the government-led joint venture with Royal Dutch Shell that is the sultanate’s largest oil and gas producer – drilled the only well in the block in 1991.

Circle said it had found good leads but was unable to attract partners to share the undeniable risk. Meanwhile, the MOG made a case in the bid round documentation for prospective bidders to renew the exploration efforts. It said that the southern and “potentially attractive deeper water” areas were only recently added to the block, while the northern portion had undergone various shape changes, causing it to pass between concession operators.

A wider strategy was enacted by Muscat in the four-block auction of providing more comprehensive information than in past rounds on the acreage on offer. This reflected the fact that all had recently been relinquished by the latest in lines of operators as well as the diminished risk appetite of IOCs under prevailing market conditions.

However, with Block 52 the first to be awarded – more than two months after a decision had been due – and under unique and unusual terms, the approach appears thus far to have proved unsuccessful.

Block 52 was a particularly challenging prospect, with more than a century of exploration off the mainland coast having yet to yield production. However, the MOG’s pitch rested heavily on the renewed hopes raised by the first commercial discovery in the area in 2014 by Masirah Oil, a subsidiary of Singapore’s Rex International, in the adjacent Block 50 to the north.

A second well completed last year was said to have confirmed the presence of a working petroleum system and plans for early production were only abandoned in the wake of the oil price slump shortly after the first strike.

The other concessions awaiting award from the bid round are the 15,438-square km Block 49 in the Rub’ al-Khali Basin along the border with Saudi Arabia – also exited by Circle in 2015 – and the contiguous Blocks 30 and 31 in the north-west. These were both operated previously by Norway’s DNO and are said by the ministry to be predominantly tight gas plays.

All were scheduled to have been allocated by the end of the first quarter. In January OOCEP revealed that it had submitted a joint bid for Block 30 with the US’ Occidental Petroleum (Oxy) – the sultanate’s largest existing independent foreign producer and operator of two adjacent concessions – making the lack of an agreement particularly puzzling.

Al-Zadjali earlier in the year laid out a local expansion strategy for OOCEP calling for partnership with leading IOCs to boost reserves and production from the sultanate’s diverse and complex fields. In April, he signed a heads of agreement (HoA) with Shell for exploration in the 25,600-square km Block 42 in the north-east.

Harnessing Eni’s technical prowess in offshore exploration – demonstrated in the Middle East with the discovery of Egypt’s giant Zohr gas field two years ago – for the Italian company’s first investment in the country was a particular coup.

Descalzi explained the move in the context of a “strategy aimed at diversifying our exploration portfolio across basins with liquid hydrocarbon potential while keeping high-quality stakes throughout the exploration phase”.

In November, the Italian firm signed an agreement with the Bahraini government’s National Oil & Gas Authority (NOGA) to “study and assess the potential of some exploration and production assets in the country” and granted access to existing data on onshore and offshore fields.

Manama has likewise long harboured unfulfilled ambitions to find and develop offshore reserves as its sole onshore oilfield experiences long-term decline.

Source: www.oilpro.com