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Last Updated: Wednesday, 15 February 2006, 23:42 GMT
Second lease of life for Omani oil wells
By Jeremy Howell
BBC World, Middle East Business Report, in Oman

Oil is almost never found in convenient places.

Steam injection equipment
Kit injecting steam into wells help get the oil out

The huge oilfield of Qarn Alam is no exception.

From Muscat, Oman's capital, you have to hitch a ride in one of Petroleum Development Oman's propeller planes, and fly 350 kilometres over the mountains to the edge of the "Empty Quarter" desert.

Here, underneath a landscape of flat sands studded with wellheads, lie more than a billion barrels-worth of oil.

In oil industry parlance, it is a "giant".

International oil companies spend decades, and hundreds of millions of dollars, in the search for fields like this.

Heavy oil

Qarn Alam was discovered in the 1970s.

For the first decade, oil flowed freely to the surface from where it lay, 500 metres below the surface.

But now, the flow has diminished to a trickle; only 1,000 barrels a day, which makes Qarn Alam a disappointing under-achiever.

"The oil here is very heavy'" says Sami Baqi, the project manager at Qarn Alam.

"It doesn't flow freely from the rocks.

"There's a very slight oil rim from which we are producing. If we continue to produce the way we are producing, it will take hundreds of years to deplete this field."

Oman cannot afford to wait this long. It needs more oil now.

Over the past five years, national oil production has fallen from 800,000 barrels a day to 633,000 barrels a day.

Recovering more oil

Petroleum Development Oman has been spending hundreds of millions of dollars on developing new ways of boosting output from reluctant giants like Qarn Alam.

Sami Baqi, the project manager at Qarn Alam
Heavy oil is tricky to recover, says Sami Baqi

When oil wells are first drilled, the oil normally flows up freely under its own pressure.

When it stops doing so, the usual fix is to pump water into the well, to increase the oil pressure. But that does not work in fields like Qarn Alam or in other fields where the oil is viscous.

Most of it stays trapped in a criss-cross of rock seams known as the "matrix", and you cannot get to it with a drill-bit.

To be collected, the oil must be made to flow into open channels underground called "fractures".

Petroleum Development Oman has recently completed a pilot project at Qarn Alam in which engineers injected steam into the oil well, thus heating the oil and making it thinner, which made it flow out of the matrix and down into the fractures.

"You know when it has worked," says Sami Baqi, "because on the surface, the ground crumples as the oil underneath suddenly flows out of the rocks."

"If we were to carry on producing the way we are producing, we will recover only 3% of the oil down there, but the pilot project shows that if we use steam injection we can recover 25% to 30%."

That equates to between 250 million and 300 million barrels of oil, which at current prices would yield Oman an extra $18bn (10bn) in revenue.

Difficult investment decisions

The Qarn Alam steam recovery project is set to become the largest of its kind anywhere in the world.

Dr Abdulla Lamki
Dr Lamki says Oman has ever had easy access to oil

In other fields, Petroleum Development Oman is experimenting with injecting gas, and polymers, into oil wells.

These techniques, which are one stage up in technology from water injection, are known as "enhanced oil recovery".

The company plans to introduce them in about a third of Oman's oil wells.

On average, it is estimated this could increase the amount of recoverable reserves in the fields from between 10 or 20% of the total to 40%.

"These projects are very expensive," says John Malcolm, managing director of Petroleum Development Oman.

"Together, they will cost billions of dollars.

"The fact that oil prices are high now helps our shareholders take these very difficult investment decisions."

The shareholders include the Oman government, which is the majority owner, as well as Shell and other international oil companies.

Maximising recovery

It seems tough on Oman that it has to spend so much money, and do so much science, to extract its oil when in neighbouring countries like Saudi Arabia and the UAE, oil flows readily to the surface.

Oil production equipment under construction
New oil recovery techniques could be exported

But over time, this could work to Oman's advantage.

Enhanced recovery could become a major export technology in its own right, when other countries in the region find their oilfields are also beginning to run low.

"We have never had easy oil in Oman", says Abdullah Lamki, deputy managing director at Petroleum Development Oman.

"Compared to Saudi and the Emirates, our productivity is low; our reservoirs are more challenging. We have had to embark on enhanced recovery. But I expect some of the other Gulf states may be following our lead in maybe 10 or 20 years time."

The most obvious candidates are Bahrain, where crude oil output has shrunk in recent years to 40,000 barrels per day, and Kuwait, which is planning to increase recovery in its northern field, where the oil is known to be hard to extract.

As oil recovery techniques are developed and spread across countries, it may change the economics of the oil industry.

"There is always a balance between finding new fields and maximising recovery from the existing, mature fields," says Mr Malcolm.

"But in the future, you will see a greater emphasis on maximising recovery, and that will require enhanced recovery techniques".

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