Dubai — Oman is planning to raise its crude production to up to 1.1 million b/d when the OPEC+ supply accord expires, a source from the sultanate's Ministry of Oil and Gas told S&P Global Platts.
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The OPEC+ deal is set to run through April 2022, though ministers have said it could be extended if market conditions call for more production restraint.
"If there is not a new agreement, we will increase to the maximum capacity," said the source, who asked not to be identified because the deliberations were ongoing. "What the maximum capacity is, nobody yet knows. It depends on wells and other technical issues. However, it is not expected to be more than 1.1 million b/d."
Hydrocarbons-dependent Oman had recently reached a maximum production capacity of about 1 million b/d but the source said that has dwindled due to the need to shut down wells to comply with its quota under the OPEC+ agreement.
Oman is the Middle East's largest oil producer that is not a member of OPEC, but it is a party to the OPEC+ pact along with Russia, Kazakhstan and six other oil-producing countries.
It pumped 720,000 b/d of crude in December, according to the latest Platts survey of OPEC+ production, matching its quota, which increased to 732,000 b/d for January-March.
In February, Oman's output of crude and condensate combined is expected to be around 910,000 b/d in February, the source said.
"To shut down wells and then bring them back, you have to spend," the source said. "You lose capacity once you close wells, so our maximum capacity is what we are producing now."
The increases in production will be gradual, and the level of investment needed to raise capacity over 1 million b/d has not yet been determined, the source added.
Struggling to grow
Oman, which derives 76% of its government revenue from oil and gas activities, warned in a bond prospectus in December that if low oil prices continue for an extended period, it may have to cancel or scale back planned future development of its reserves.
Those reserves as of the end of 2019 stood at 4.8 billion barrels of oil equivalent, according to the prospectus, which was seen by Platts.
"Future growth in reserves is generally expected to be limited to the successful implementation of enhanced oil recovery techniques," the prospectus said.
"As a result, if there is any failure to make use of such techniques, or if such techniques prove excessively costly (particularly in the context of low oil prices) or fail to help grow oil and gas reserves, a long-term slowdown in oil production may become more likely."
Oman has set up a new upstream oil and gas company, Energy Development Oman, to develop projects and independently raise financing.
It will take a stake in the country's more established energy company Petroleum Development Oman, and most of its activities will be related to PDO's prolific Block 6, Oman's largest field with recent production of about 650,000 b/d.
PDO, which produces the bulk of Oman's crude, is 60% owned by the Omani government. Shell holds 34%, Total 4% and Partex 2%. The company now has 192 producing oil fields, 52 gas fields, 29 production stations and around 9,000 active wells.
EDO could not immediately be reached for comment.