Oman renews oil concession pacts with Shell, Total and Partex

Dec 20, 2004 01:00 AM

The government marked the beginning of a new era in its partnership with Shell, Total and Partex by renewing the Block 6 concession and operating agreements for another 40 years.
The concession and operating agreements signed by the government and the private investors address the rights of the concessionaries -- both the government and private investors -- to carry out petroleum operations for oil in Block 6 for the next 40 years, effective from January 2005 to December 2044.

Shell, Total and Partex Oman hold 34 %, 4 % and 2 %, stakes respectively, in the Petroleum Development Oman (PDO), which operates Block 6. PDO is 60 % owned by the government of Oman. In fact, the agreements are renewed some eight years before the old agreements ending in 2012. PDO, which is the major exploration and oil production company in Oman, will continue to operate the concession on behalf of the concessionaries.
The agreements were signed by Dr Mohammed bin Hamad bin Saif Al Romhi, minister of oil and gas;Malcolm Brinded, executive director of Shell of Companies; Jean Luc Porcheron of Total; Dr Emilio Rui Vilar of Partex; and John Malcolm of PDO.

PDO's production accounts for about 90 % of Oman's crude oil production and under an existing separate agreement operates on behalf of the government, all of its natural gas supply.
"The Ministry of Oil and Gas was given the task of negotiating with our major partner, Shell, a year ago. When we negotiated a 40-year contract, it really, entails more than a commercial and technical agreement."

"The duration of 40 years was not chosen randomly but has many facets behind it. It contains the relationship between Oman and our partners. It contains the friendship and understanding between the Sultanate and Shell, Total and Partex. This is extremely important to Oman and forms the core of the negotiating principle as laid down clearly by His Majesty's directives to the ministry for conducting the negotiation with our partners in PDO," said Romhi.
"Another important message of a 40-year agreement is that Oman will be producing oil for at least another 40 years. Precisely, the Sultanate will be in this business for at least another 40 years," Romhi underlined.

On behalf of the private shareholders, Malcolm Brinded, executive director of Shell of Companies said: "It is a true testament to the depth of our relationship that we have concluded these new agreements to take the partnership to December 31, 2044. As PDO's technical adviser, Shell, in particular, is committed to continue to deploy our people and technology to help Oman and Omanis to realise their aspirations."
"As we look forward on this historic day, we can see that there are also broader global economic and political uncertainties. While energy prices this year have been at highs not seen for a long time, primarily as a result of high demand in the Far East, particularly China, their recent decline shows that energy markets are likely to remain volatile," Malcolm added.

"In addition to managing these global uncertainties, the government, like many other governments in the region, also has to address its own economic and social challenges. But if the past is any indication of the future, His Majesty's government will continue to be one of the most successful countries in facing these challenges," the Shell executive said.
Ministers, undersecretaries, senior government officials, ambassadors and senior representatives from the PDO, Shell, Total, Partex and a number of senior delegates from the oil and gas sectors attended the historic ceremony.

The average price realised for Oman crude as at the end of September 2004 stood at $ 33.70, a barrel. Oman's daily average production of oil as at the end of September-end stood at 782,300. The daily average oil production of PDO stands lower at 650,000 barrels and gas at 45 mm cm. Oil and gas not only deliver much needed revenues to the country, but also serve its people directly in the form of electricity, to support desalination and other industrial and domestic uses.
PDO, which employs nearly 17,000 people (directly and indirectly), expected that its output would get back to around 800,000 bpd by the end of the decade. The oil pioneer hopes to bottom out in terms of production in 2005. Since December 2003, the production fell by more than 6 % to 660,000 as against 702,000.

Since December 1999, the daily production plunged by 21 % -- from 832,000 barrels to the present 660,000 barrels. PDO's production accounts for more than 90 % of the country's oil production. It accounts for nearly 40 % of the country's gross domestic product.
Technically, a sharp increase in underlying costs has been negatively affecting the company's output for the past several years.

Source: Times of Oman
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