Oil major BP plc (BP) has inked a 30-year agreement with the government of Oman relating to the drilling of the Khazzan tight gas project.
BP intends to drill about 300 wells to extract gas confined in the depths of the Omani desert over the next 15 years. The company has proposed to invest $16 billion in the project, including about $1.5 billion already spent.
Located in the South of Block 61, the Khazzan project is expected to yield its first gas in late 2017, while the construction is scheduled to commence in 2014. The gas production is expected to plateau in 2018. The project seeks to pull out about 1 billion cubic feet per day of gas from 4,500 meters deep sandstone in central Oman.
The Khazzan endeavor will witness the implementation of some new technology. Being a tight gas project, BP has developed some new technology including horizontal wells and fracking to flush out gas from deep limestone.
The revised exploration and production sharing agreement and a gas sales agreement is initially for 30 years. It also has provisions for further evaluation of additional gas resources within Block 61, which will likely be developed in the ensuing project phases.
BP will operate the project with a 60% stake, while the remaining 40% will be held by state-owned Oman Oil Company Exploration & Production. The investments in the project will be made on the basis of their holdings.
The project is crucial for the growth of Oman’s economy, where the energy demand is gradually increasing and oil reserves are exhausted. The country is looking at various options to fulfill its energy demand. In Aug 2013, a deal to import oil into the country was signed with Iran.
BP carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the oil and gas sector include Harvest Natural Resources Inc. (HNR), Abraxas Petroleum Corp. (AXAS) and Tesco Corp. (TESO). All these stocks hold a Zacks Rank #1 (Strong Buy).
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