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BP to develop $16 billion tight gas project in Oman

12.17.2013  | 

Construction will begin next year with first gas expected by 2017, BP said in a statement. The 30-year project will deliver about 1 Bcfd of gas at peak and 25,000 bpd of gas condensate.

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By ROBERT TUTTLE

LONDON (Bloomberg) -- BP signed an agreement with Oman to develop the $16 billion Khazzan tight-gas project.

Construction will begin next year with first gas expected by 2017, the company said in a statement. The 30-year project will deliver about 1 Bcfd of gas at peak and 25,000 bpd of gas condensate.

“It is one of the largest projects we will be investing in in the next four years, during the major investment phase,” CEO Bob Dudley told reporters in Muscat. He declined to disclose the agreed price for gas. “The price is less relevant than ensuring a reasonable rate of return.”

Dudley is trying to return BP to growth after divesting more than $60 billion in assets in the wake of the 2010 Deepwater Horizon blast, which killed 11 people and set off the largest offshore oil spill in United States history. BP shares have languished about 30 % below the pre-spill level as the company faces billions of dollars in fines and settlement payouts.

BP will own 60 % of the venture and Oman Oil will hold 40 %, Oman Oil Minister Mohammed al-Rumhy said.

The Khazzan project involves unlocking gas from rocks underground. Eleven initial wells have already been drilled, BP said. Khazzan will account for one-third of the country’s gas output, according to the statement.

Oman and Persian Gulf neighbors face rising gas demand for power and industry amid limited supplies. Some are turning to more technically challenging and expensive projects to produce the fuel. Saudi Arabia seeks to extract gas from shale.

Oman, which has reduced liquefied natural gas exports to meet rising domestic demand, reached a preliminary agreement to import natural gas from Iran in August.



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