Overview
Oman’s oil industry spans upstream exploration and production and downstream refining and petrochemicals. Optimising value across the full chain is critical for maximising returns from finite hydrocarbon resources.
Upstream Oil Sector in Oman
Oman’s upstream sector, led by PDO and supported by companies like Occidental, BP, and CCED, produces roughly one million barrels per day of crude oil and condensate. Mature fields in the interior require increasingly sophisticated enhanced oil recovery methods, raising production costs. Upstream investment focuses on maintaining production levels, developing tight gas resources, and exploring frontier areas. The upstream sector is the primary source of government hydrocarbon revenue.
Downstream Oil Sector in Oman
The downstream sector includes the Mina al-Fahal refinery (106,000 bpd), the new Duqm refinery (230,000 bpd), and the Sohar petrochemical complex. OQ Group manages most downstream operations. The Duqm refinery, a joint venture with Kuwait, is designed to process crude for export of refined products and petrochemicals. Downstream operations add value to crude oil and create manufacturing employment. The sector is capital-intensive with longer investment horizons.
Key Differences
Upstream generates the highest direct revenue but is declining as fields mature. Downstream adds value but requires significant capital investment and operational expertise. Upstream profits are highly sensitive to oil prices, while downstream margins depend on refining spreads and product demand. Upstream is more established in Oman, while downstream capacity has expanded significantly with the Duqm refinery.
Verdict / Bottom Line
Oman should continue investing in enhanced oil recovery to maintain upstream production while expanding downstream capacity to capture more value from each barrel. The Duqm refinery represents a strategic step toward becoming a refining and petrochemical hub. Integrating upstream production with downstream processing maximises the economic return from Oman’s hydrocarbon endowment.