Oman's EDO has begun fundraising for hydrocarbon activities: oil minister

Dubai — Petroleum Development Oman, or PDO, has a budget of $4 billion for its capital expenditures and operational costs in 2021, and the fundraising for this is underway, Oman's oil minister Mohammed Al-Rumhy told S&P Global Platts in an interview.

PDO, which produces the bulk of Oman's crude, is 60% owned by the Omani government. Royal Dutch Shell holds 34% stake, Total owns 4% and Partex has 2%.

In December, the sultanate created Energy Development Oman, or EDO, a new government entity that has been given the charge to represent the government's stake in PDO, and also to raise financing independently of the Sultanate's Ministry of Energy, which can be secured against its projects. PDO's main asset is Block 6, which is Oman's largest field and produces approximately 650,000 b/d, and is undergoing further development.

The legal framework for the establishment of EDO is now finished. Oman's government-owned gas projects are in the process of being transferred to EDO, Rumhy said.

"EDO will own 100% of gas inside Block 6, and 60% of the oil. So, it will fund 100% gas and 60% oil from July or August, when the EDO will take over the responsibility of funding," the minister said.

PDO's foreign partners will fund the remaining 40% of the budget, which includes exploration and development of new assets.

"What EDO is doing now is come up with a five-year program for PDO and gas. The funding will be annualized, with roughly a fifth for 2021. They've already started, and appointed a financial adviser," said Ruhmy. "We are looking at the first tranche being around $5 billion, and there will be a second and third tranche."

This $5 billion would cover EDO's funding obligations for PDO and Oman's gas projects for two years. Meanwhile, Oman's gas program for this year is expected to cost $1.3 billion, for both opex and capex, according to the minister.

The creation of EDO is the latest move in the restructuring of Oman's oil and gas entities.

In 2019, the Omani government also integrated state-owned Oman Oil with several other mid and downstream companies to create OQ. There is a medium-term plan to IPO a 20% to 25% stake of OQ, when more favorable market conditions arise.

On May 18, PDO announced it has created a subsidiary focused on services, known as PDO Services, or PDO-S, which will be utilized to leverage and commercialize PDO's technical and operating capabilities, accelerate technology transfer and transition PDO and Oman to new energies, while supporting a knowledge-based economy in the country.

Oman pumped an average of 740,000 b/d of crude in April, slightly surpassing its OPEC+ quota of 732,000 b/d, according to the S&P Global Platts OPEC survey. However, it has a maximum production capacity of about 1 million b/d.

While Oman's focus is on managing the natural decline of its production, there is some scope to increase its production capacity through condensate associated with gas projects, and also some heavy oil developments.

"There are opportunities to increase production, but it needs investment. We have some heavy oil but it needs some kind of EOR [enhanced oil recovery]. If the price stays where it is and the market grows, we could produce a little bit more over time," Rumhy said. "We've been focusing on looking for gas, and every time you discover gas there is a good chance you will discover condensates."

Condensates are exempt from the OPEC production quota.

"In Oman, we are a small producer, so 5,000 b/d or 10,000 b/d means a lot. We are talking about tens of thousands of barrels. In oil, managing the natural decline is our focus. In gas, we have an opportunity to add a few thousand barrels of condensate," the oil minister said.

Oman's economy has been severely hit by the oil price crash and the pandemic. It is estimated to have accrued a deficit of 17% of GDP in 2020, according to the International Monetary Fund. Revenues from the Sultanate's hydrocarbon sector account for about 80% of its national budget.