Oman’s attractive landscape

• On new discoveries: “We are now developing the Hasirah formation in Block 7. We will then develop the Ramlat structure. We also have some very attractive exploration structures immediately adjacent to Sahmah, such as Sahmah E, Sahmah SE, Sahmah Sth. In Block 15 we have several structures to be drilled in 2018 that have a similar geological setting to the recently discovered Ataya field.”

• On Oman’s banking sector: “The banking sector in Oman has evolved considerably in the past few years with quite a few new products available. The recent increases in oil price have enabled the banks to participate in funding the upstream oil industry to a greater extent.”

Most TOGY interviews are published exclusively on our business intelligence platform, TOGYiN, but you can find the full interview with Andrew Sutherland below.

What is your assessment of the E&P landscape in Oman?
Oman’s E&P landscape is very attractive in terms of the technical risk, which is relatively low. Oman has significantly lower risk compared to Australia, for instance, or most places in Asia.
The fiscal terms are reasonably attractive in Oman. They’re not as generous as those of a Western country, but compared to other PSCs they are quite attractive. From that point of view, it’s a good place to invest.
Industry safety standards are strong in Oman. The international oilfield services companies such as Schlumberger and Halliburton have very rigorous HSE standards that have largely been implemented in HCF’s operations.

What are the main risks or challenges that you encounter in developing blocks in Oman?
There are exploration risks in terms of finding suitable targets, but these are much lower than in other countries where I’ve worked. There are also production risks: Drilling conditions in Oman can be challenging.
The subsurface in HCF’s permits can be complicated in terms of stacked reservoirs and their distribution. Many of our reservoirs are relatively tight in terms of porosity and permeability, requiring stimulation to optimise production.

What is Hydrocarbon Finder’s current focus?
The focus now is, firstly, to increase production to ensure HCF’s financial viability. Secondly, we are starting to develop some of our other structures, which will also increase production in the medium term.
We are now developing the Hasirah formation in Block 7. We will then develop the Ramlat structure. We also have some very attractive exploration structures immediately adjacent to Sahmah, such as Sahmah E, Sahmah SE, Sahmah Sth. In block 15 we have several structures to be drilled in 2018 that have a similar geological setting to the recently discovered Ataya field.

How is the recovery of the oil price impacting E&P companies in Oman?
We’re in a situation in which we’re trying to maximise oil production regardless of the oil price. However, when the oil price is low, you have fewer options. Some of the enhanced production techniques can be expensive and like anywhere, secondary and tertiary recovery techniques are often not viable at lower prices.
The other issue is the development of new fields. At a lower oil price, recovering development costs can be difficult. To date, HCF has been focused on maximising our existing production.

What types of techniques have you used to increase production?
To date, HCF has focused on in-field drilling. We do have a water injection programme to maintain reservoir pressure and increase production and recovery. Work is currently being undertaken to quantify the value of implementing a full waterflood programme. HCF is about to test the effectiveness of fracking tight formations to increase production rates and access additional reserves. We have evaluated other enhancements such as nitrogen injection and EOR. HCF will continue to evaluate production enhancement techniques with implementation decisions made based on their predicted economic value.

What E&P opportunities do you see among onshore and offshore plays in Oman?
Today we’re very focused on our existing assets. There was a recent bidding round [launched in September 2017], and HCF decided that investing in our existing acreage made better economic sense than pursuing new acreage. However, once we achieve our production targets, there will be funds to look at other opportunities.
Hydrocarbon Finder’s current strategy is to focus on Oman’s onshore areas that are considered lower-risk targets and can be explored and developed at much lower costs than the offshore areas.

Are you considering partnering with other companies for onshore opportunities in the medium term?
That is a common model worldwide. We participate in the Block 66 joint venture, which is operated by MOL. Odin has a 10% interest in Block 15. We haven’t actively looked for new blocks. Having joint-venture partners in our current acreage is something we are seriously considering.

In terms of infrastructure and logistics, do you identify any shortages when bringing the product to the market?
Oman has reasonably good infrastructure. In addition, we have the major oil hub of Dubai nearby. Block 7 is fairly remote, so we have logistics issues there. However, with careful planning most of the issues with infrastructure and logistics can be negated.

What is your analysis of the capabilities of related sectors such as banking and education to develop upstream projects?
The banking sector in Oman has evolved considerably in the past few years with quite a few new products available. The recent increases in oil price have enabled the banks to participate in funding the upstream oil industry to a greater extent.
Regarding education, the graduates we have dealt with have been of a very high calibre. There will always be specialised areas for which you have to bring people in from outside, though with the talent pool and quality of Oman’s education facilities we have the human resources to optimise HCF’s potential.

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