OMAN REMAINS IN THE HUNT FOR GAS

C O N F I D E N T I A L MUSCAT 000303

SIPDIS

SIPDIS

STATE FOR NEA/ARP, EEB/ESC

E.O. 12958: DECL: 04/22/2018
TAGS: PREL ECON ENRG EPET IR MU
SUBJECT: OMAN REMAINS IN THE HUNT FOR GAS

REF: A. MUSCAT 297

B. MUSCAT 200

Classified By: Ambassador Gary A. Grappo for Reasons 1.4 (b and d)


1. (SBU) On April 22, Omani media outlets carried front-page
stories on the signing of a memorandum of understanding (MoU)
regarding the "joint development" of the Kish gas field with
Iran and the exporting of Iranian gas to Oman. The MoU was
reportedly signed by the Iranian Deputy Minister of Oil and
Omani Minister of Commerce and Industry Maqbool bin Ali
Sultan. (Note: Maqbool also serves as Chairman of Oman Oil,
the government company heavily invested in gas-based
industrial projects in Sohar. End Note.) While further
details on the agreement were characteristically scant in the
Omani press, Iranian media reported the project was valued at
$7 billion, with the potential to increase to $12 billion.


2. (U) The signing in Tehran took place during "Oil and Gas
West Asia," Oman's showcase biennial oil and gas exhibition.
During the opening plenary, Dolphin Energy General Manager
Ibrahim al-Ansari told conference attendees that the
three-nation project would deliver Qatari gas to Oman during
the second half of 2008. Oman's importation of gas
represents a reversal of its fortunes, as it had been
exporting limited amounts of gas to the United Arab Emirates
for a specific project in Fujairah via the Dolphin line since

2004. Ansari remarked that Oman would receive 200 million
standard cubic feet (scf) of gas on a daily basis for 25
years, thus "securing a long-term energy source at
competitive prices."


3. (C) On the margins of the conference, Econoff spoke with
Dolphin Energy official Stephen Kemball about Oman's intake
of gas from the Dolphin project. Kemball noted that most of
Oman's supply would go to Occidental Oman's Mukhainza field
to aid in oil recovery efforts. (Note: Occidental is an
investor in the Dolphin project. End Note.) While he stated
that the pipeline's traffic may expand to 3.2 billion scf
from its current 2 billion scf of volume once the Qatari
government frees up additional supply, he clarified that none
of the additional quantities would be destined for Oman.
"Oman's in a tough place," mused Kemball. "They sold their
gas dirt cheap to the Asians, and now they have limited
options in securing additional supplies from the region."
Asked about the possibility of Oman working with Iran on
joint exploration projects, Kemball did not provide a direct
response, but stated that French company Total was the only
foreign entity well positioned to profitably do business in
the Iranian hydrocarbon sector. He added, however, that
because Iran's oil ministry was in such disarray, "It would
be difficult for (the ministry) to work with anyone."


4. (C) Comment: As reported reftels, there remains a good
deal of skepticism from both public and private sector
sources that continuing discussions on Omani-Iranian joint
gas explorations initiatives will actually produce meaningful
results, in spite of Iranian media efforts to trumpet the
possibilities or imply that a completed deal is within reach.
Of greater importance to Oman is the success of BG Oman and
BP Oman in unlocking hard to get gas reserves in blocks 60
(Abu Butabul) and 61 (Khazzan and Makarem),respectively.
Significant progress in ramping up its domestic production
would diminish the sense of urgency behind Oman's discussions
with Iran on joint gas initiatives. End Comment.
GRAPPO