It is reported that the Ministry of Oil and Gas is in the process of implementing a new pricing scheme governing gas supplies to major industrial users in the Sultanate, in what is billed as a huge breakthrough for the government's efforts to generate higher revenues from this vital resource.
According to a high ranking official of the Ministry, a number of agreements are lined up for signature over the course of the next three months under which major users will commit to revised pricing terms for supplies of natural gas as feedstock and fuel. The new pricing system will help drive the government's goal of developing Oman's unconventional gas resources, as well as sustain gas supply to the industrial and power sector over the long term.
Mr Ali bin Thabit al Battashi, adviser to the Minister for Strategic Planning and Investments, said that "We have had to adjust the gas prices because the cost of producing gas in Oman has gone up, and to ensure the future supply of gas to all the major users we've had to increase the cost of feedstock to the major gas users."
Importantly, the move will help offset the steep cost of harnessing the prodigious volumes of tight gas in BP's Khazzan Makarem gas fields in Block 61, as well as difficult gas reserves in Petroleum Development Oman's Block 6 concession.
The Adviser said that "We are negotiating with BP for the Khazzan Makarem gas field, which is a huge resource. In order to address the long term requirement for gas, we need to have this gas field in production quite soon. Signing revised agreements with major gas users gives us the ability to ensure we can proceed with BP on a fast track basis. We are also in the middle of negotiations for the long term with the private shareholders of PDO Shell, Total and Partex. This is to ensure there is gas for future enhanced oil recovery projects in PDO, which will benefit the nation enormously."
The Ministry signed amendment agreements to Gas Sales Agreements with two major industrial users in the Sultanate, with further such pacts slated to be inked in the coming months. These deals represent the crystallization of nearly 14 months of intensive and often tough negotiations with the shareholders of the major users, almost all of which have since acceded in principle to the new pricing scheme.
Mr Al Battashi said that "Let me assure you most of the major gas users are on board, with negotiations ongoing with one last user. By the end of September 2012, I'm confident we will have all the major gas users if not 90% on board. After all, this is a national issue. There is a realization in the gas sector that gas prices of seven, eight, nine years ago are no longer valid. The prices of raw materials have shot up since 2008; so has the price of feedstock and products such as urea and methanol. People see they should share their windfall profits in the country where are based, and I'm confident this will happen."
Source - Oman Daily Observer
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