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The Independent (UK): Shell suffers Oman oilfield setback

The Independent (UK): Shell suffers Oman oilfield setback

Philip Thornton

May 02, 2005

Shell, the oil company, suffered a fresh blow yesterday after it lost the right to develop a large oilfield in Oman after a dispute over how to boost output.

The Gulf state said it had reassigned its Mukhaizna oilfield to Occidental of the US and a United Arab Emirates partner.

According to reports in the region, Oman wanted Shell, the dominant foreign investor in the sector, to pump in more cash to boost production. Oman, a non-Opec producer, had wanted to raise output from Mukhaizna from 10,000 barrels a day to at least 80,000, according to reports.

The official Oman News Agency said Occidental would invest more than $2bn (pounds 1.05bn) to increase production from the field to 150,000 barrels a day within the next few years.

The news may come as a setback for Shell, which is seeking to boost reserves that took a hit last year after it overbooked on several large projects. Mukhaizna holds estimated reserves of 2.4 billion barrels. Shell remains the dominant foreign investor in Oman’s energy sector thanks its 34 per cent stake in Petroleum Development Oman (PDO), which controls 94 per cent of production.

Shell insisted it could still be involved in the project. A spokeswoman said: ‘We can confirm that PDO is considering alternative options to the development of Mukhaizna and we welcome the government’s offer for Shell to play a major role whatever contractual structure is selected.’ She said Shell was confident it would be able to double the recovery rate from the other 100 oilfields it has under production in the country.

Last October Shell merged its UK and Dutch halves into a single company under the control of a unified board with Jeroen van der Veer, the chairman of its committee of managing directors, as chief executive of the merged company.

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