Petroleum Development Oman
|Industry||Oil & Gas|
1925 (as Petroleum Development of Oman and Dhofar ) |
1967 (as Petroleum Development Oman )
|Revenue||$11.4 billion (2007)|
Oman Government - 60% Royal Dutch Shell - 34% |
Total - 4%
Partex - 2%
Number of employees
Petroleum Development Oman (PDO) is the major exploration and production company in the Sultanate. It accounts for about 70% of the country's crude-oil production and nearly all of its natural-gas supply. The Company is owned by the Government of Oman (which has a 60% interest), the Shell Group (which has a 34% interest), Total (which has a 4% interest) and Partex (which has a 2% interest). Gas fields and processing plants are operated by PDO exclusively on behalf of the Government.
Origins and history
A geological survey of the country in 1925 by the D'Arcy Exploration Company found no conclusive evidence of oil. Twelve years later, however, when geologists began intensively searching for oil in neighboring Saudi Arabia, Oman's Sultan Said bin Taimur granted a 75-year concession to the Iraq Petroleum Company (IPC). Pausing only for the Second World War, exploration for oil was underway in Oman.
The exploration and production operations were to be run on behalf of the IPC by Petroleum Development (Oman and Dhofar) Ltd. The operating company had four shareholders, each with an interest of 23.75%: the Royal Dutch/Shell Group, the Anglo-Persian Company (which would eventually become the British Petroleum Company, or BP), Compagnie Française des Pétroles (a predecessor of today’s Total) and the Near East Development Company (whose shareholders were Standard Oil of New Jersey and Socony-Vacuum, today’s ExxonMobil). The remaining 5% stake was held by a fifth shareholder, Partex, representing the interests of the oil magnate, Calouste Gulbenkian.
Having landed at Duqm in February 1954, IPC geologists were faced with tribal conflicts which made access to the most promising oil prospect, Jebel Fahud, difficult. They reached the jebel in October 1954 and began to survey the surrounding terrain. Supplies had to be transported from Duqm. In January 1956 the company started drilling its first well at Fahud but the hardships were all in vain: the well was dry. Later, when the supply line was switched to the Sumail Gap, warring tribes were able to disrupt convoys and bring operations to a halt.
Further dry wells were drilled and this lack of success, combined with worsening logistical problems and a glut of oil on the world market, led most of the partners to withdraw from the venture in 1960. Only Shell and Partex opted to remain in Oman to continue the search for oil. Their optimism was soon to pay off, however: they struck commercial oil at Yibal in April 1962 — and from these inauspicious beginnings an oil-producing nation was born.
In 1963 the Natih field was discovered, followed closely by success at Fahud, only a few hundred metres from the original IPC well. Investment in a pipeline to the coast and all the other hardware necessary to transport and export Oman's crude could now be made. A 276-kilometre pipeline requiring 60,000 tons of steel pipe was laid, the labour being provided by the inhabitants of whichever villages happened to be near the worksite.
The pipe laying was followed closely by the construction of an industrial complex at Saih al Maleh (later renamed Mina al Fahal), the building of a tank farm, the installation of single-buoy moorings for seagoing tankers and the erection of a 20-megawatt power plant. The whole development — including the pipeline, the coastal industrial area, the tank farm, the marine terminal, a chain of radio repeater stations and housing for staff at Ras al Hamra — cost $70 million.
The first export of Omani oil took place on 27 July 1967. The original debit note shows that the consignment consisted of 543,800 barrels (86,460 m3) of oil valued at $1.42 a barrel. A month before, in June, the Compagnie Française des Pétroles rejoined the partnership by taking over two-thirds of Partex's equity share, resulting in the following shareholding in the company that by then had changed its name to Petroleum Development (Oman): Shell 85%, Compagnie Francaise des Petroles 10% and Partex 5%.
On 23 July 1970 His Majesty Sultan Qaboos took over from his father as ruler of the country. He made his first visit to the PD(O) offices on 18 August 1970.
All through the 1970s, PD(O) strove to maintain its production and replace its reserves while developing its professionalism. Some significant discoveries early in the decade contributed to that objective: Ghaba North in 1972, followed by Saih Nihayda, Saih Rawl, Qarn Alam and Habur. All five fields were on stream by 1975, the crude oil being transported via a new 20-inch (510 mm) pipeline to the main pipeline 75 kilometers east of Fahud. Thanks in part to these new sources of oil, production averaged a respectable 341,000 barrels per day (54,200 m3/d) in
The first half of the 1970s was important for other reasons as well. On 1 January 1974 the Government of Oman acquired a 25% shareholding in the Petroleum Development (Oman); six months later the shareholding was increased to 60%, backdated to the beginning of the year. As a result, the foreign interest in PD(O) was now made up of the Shell (34%), Compagnie Française des Petroles (4%) and Partex (2%). These shareholdings have remained unchanged to the present day. (The Company, however, underwent a change six years later. On 15 May 1980, it was registered by Royal Decree as a limited liability company under the name Petroleum Development Oman — now without parentheses in its name.
In the early 1980s production rose to new record levels, dispelling, it seemed, any doubts about the future of Oman's oil and gas industry. By the end of 1984 average daily production had risen to 400,000 barrels per day (64,000 m3/d) and reserves stood at 3.8 billion barrels (600,000,000 m3).
Meanwhile, the Company had become involved in setting up the Government Gas System, to provide natural gas from the interior to industry on the coast. And it was remarkably successful in that undertaking.
Then, in 1986, the oil price collapsed. Almost instantly PDO was required to cut costs while increasing production and maintaining reserves. This it did with remarkable success. The Company turned its focus on innovation and experimentation. Technological leaps in processing the huge volumes of data acquired in three-dimensional seismic surveys helped PDO to explore with great success during this period. Horizontal wells, which made their debut in 1986, yielded between two and four times the production from any one given well. (They have since become the norm in PDO.) Time and again the Company broke its own records for drilling wells in the shortest time and for drilling the longest horizontal wells.
By the end of 2000 PDO witnessed an increase in production. This was due to the increase in production arose from the application of the latest technology to increase oil recovery in existing fields. And some of the production increase over the years was made up of "new oil" from fields that were not only found but also developed at an ever-accelerating pace. During the period 1967-1980 all of PDO’s production came from 11 fields; by 1988, 50 fields provided the sum total of PDO’s oil output; by 1990 it was 60, and in 1999 it was nearly 100.
When PDO's gas-exploration campaign in the early 1990s made it clear how bountiful the country's gas fields were, the Government decided to establish a completely new industry: the export of liquefied natural gas (LNG). In 1996 PDO concluded an agreement with the Government to develop the central Oman gas fields in order to supply gas to an LNG plant in Qalhat, near Sur. To fulfill its end of the agreement, the Company had to drill wells, hook them up to a new gas processing plant at Saih Rawl, and then transport the processed gas via a 352-kilometre pipeline to Qalhat. Furthermore, PDO would then be responsible for guaranteeing the delivery of gas for 25 years.
This upstream LNG project, costing $1.2 billion, is the single biggest project in PDO's history. And it was executed as planned. The Saih Rawl Central Processing Plant and the gas pipeline from Saih Rawl to Qalhat were dedicated to the nation in November 1999, the first downstream cargo of LNG was shipped to Korea in April 2000, and His Majesty the Sultan officially opened the LNG plant six months later.
Having built up such momentum in its oil production as it entered the 1990s, the Company fully expected the trend to continue. Unfortunately, the Company’s field-development strategy for the start of the 21st century – based on incremental infill drilling with horizontal wells and extensive waterflooding – had its momentum dissipated before the waterflooding projects, which require comprehensive reservoir studies, could be fully implemented. The natural production-rate decline of its major oil fields eventually caught up with the Company at the start of the millennium. And to make matters worse, its business had fundamentally changed: its new fields were coming in smaller sizes; its new wells were delivering less oil; its costs were going up. The fact was that the Company’s operating model – the way it was carrying out its business – was not sustainable in the longer term.
Following a comprehensive review in 2002 that led to a sweeping change programme, PDO laid out ambitious production-recovery plans based not only on waterflooding but also on enhanced oil recovery (EOR) techniques: the application of heat, chemicals or gas solvents to alter the way oil or injected water flows in a reservoir. But, in order for them to be sustainable in the long run, the plans had to be executed for substantially less money than originally envisaged, making them all the more challenging. A total of $2 billion in cost savings over the five-year period 2002–2008 were incorporated into the Company’s budget. Fortunately, because of the long-term nature of investments that would be required, the Omani Government agreed at the end of 2004 to extend PDO’s exploration and production concession and operating agreements for 40 years – until 2044.
Meanwhile, gas continues to be a growth area for the Company. A new gas-processing plant was commissioned in Saih Nihayda in 2005, and another one is due in 2008 for PDO's newest gas field in Kauther. With the addition of those two processing plants, nearly one-third of the hydrocarbon energy that PDO supplies will come from natural gas—the fuel that has a central role in the Government’s economic diversification plans.
PDO thus now faces a formidable set of challenges. But the execution of its EOR projects, the expansion of its gas production and the implementation new ways of working mean that, technically as well as socially and environmentally, PDO will remain in the forefront of the region’s oil and gas business.
Board of directors
A Board of Directors provides objectives and guidelines to the Managing Director. The Board consists of twelve members; seven "including the Chairman, who is the Minister of Oil & Gas, his Excellency Mohammed bin Hamad al Rumhy represent the Government of Oman, and five represent PDO's private shareholders Royal Dutch Shell (Netherlands and UK), Total (France), and Partex (Portugal).
Oil exploration and production
PDO finds oil fields and develops them into productive assets by drilling wells and constructing and operating various hydrocarbon treatment and transport facilities. The crude oil that is produced from the fields is not sold by the Company but rather delivered to a storage facility at Mina al Fahal, where it is loaded onto seagoing tankers at the discretion of the Company's shareholders. As such, the Company does not earn any money from the sale of oil; its shareholders do. The shareholders in turn cover all budgeted operating and capital expenditure.
Gas exploration and Production
PDO also finds, develops and operates natural gas fields and their associated production systems all on behalf of the Government of Oman. The Company delivers gas to the Government Gas System, which supplies fuel for most of Oman's power stations and some of its industries, and to the Oman LNG plant at Qalhat, near Sur. As part of its gas production operations, PDO also supplies some 50,000 barrels per day (7,900 m3/d) of condensate liquid hydrocarbons that condense out of natural gas and about 200 tonnes per day of liquefied petroleum gas, which is mainly used for cooking.
Education and training
In addition, PDO plays a key role in educating and developing young Omani talent through its comprehensive education and training programmes. It also supports and encourages local businesses and communities through its Business Development Centre. PDO believes that the sustainable development of the country is furthered through its education and training initiatives and through its efforts to stimulate successful Omani businesses throughout the country. The PDO established the Oman Oil and Gas Exhibition Centre in Muscat in 1995 to educate those in fossil fuel development in the country.
- Clark, Sir Terence, From Underground to Overseas: The Story of Petroleum Development Oman, Stacey International 2007, ISBN 978-1-905299-46-1.
- Morton, Michael Quentin (May 2006. 1st edition), In the Heart of the Desert (In the Heart of the Desert ed.), Aylesford, Kent, United Kingdom: Green Mountain Press (UK), ISBN 978-0-9552212-0-0, 095522120X Check date values in:
- Don Sheridan (2000), Fahud, the Leopard Mountain, Dublin: Vico Press, ISBN 0-9537758-1-X, 095377581X
- PDO. "PDO's History". Retrieved 12 April 2013.