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Oman and its oil heritage

The Sultanate of Oman occupies a strategically important location on the south-eastern edge of the Arabian Peninsula by the mouth of the Persian Gulf. For centuries, the Omani Sultanate was a great empire that competed with Britain and Portugal for influence over the Indian Ocean and Persion Gulf countries. At its peak in the 19th Century, its influence extended as far south as Zanzibar and across the Strait of Hormuz to what is now Iran and Pakistan.

These days, Oman is a modest but respectable oil producer, averaging just over a million barrels a day in 2016. Its proven oil reserves were estimated at 5.3 billion barrels in 2016.

The D’Arcy Exploration Company first surveyed Oman in 1925 but found no evidence of oil. Some 12 years later, however, when exploration started in earnest in Saudi Arabia, Oman was once again a potential target for oil exploration.

The Iraqi Petroleum Company (IPC) was awarded a 75-year concession, with Petroleum Development (Oman and Dhofar) Limited running exploration and production on its behalf. This company’s shareholders included the predecessors of many of today’s well-known oil giants, such as Shell, BP, and ExxonMobil, which also now produces premium-quality slideway oils like Mobil Vactra 2.

The IPC’s geologists landed at Duqm in February 1954 but faced tribal conflicts that complicated their access to the most promising prospect. When they finally drilled their first well in 1956, it was found to be dry. They later switched their supply line to the Somali Gap, but it turned out that warring tribes could disrupt their convoys, bringing operations to a standstill.

Following more dry wells, many of the participating companies withdrew from the venture, leaving just Shell and Partex. These two companies were rewarded in April 1962 when oil was found in commercial quantities at Yabil. Further finds soon followed, including one just a few hundred metres from the first IPC well. After building the required infrastructure, Oman became an oil exporting country in July 1967.

In the 1970s, Oman’s government acquired a 25% stake in Petroleum Development (Oman), which it later increased to 60%. Today, Petroleum Development Oman (the parentheses were removed) accounts for around 70% of crude oil production in the country.

According to the EIA, Oman currently relies on enhanced oil recovery to increase its production. To offset the increased production costs, the government offers generous terms to those international oil companies willing to bring their technology and expertise to the country’s difficult-to-recover hydrocarbon reserves.

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