BP has agreed a price for any gas produced from Oman’s Khazzan project as part of a commercial framework agreement with the government, the British energy company said on Thursday.
BP has been negotiating for months over the price it will get for selling to the local market any gas produced from Khazzan where it is tight or hard to bring out gas.
“We are pleased to have reached a price agreement that is acceptable to the government of Oman and delivers value to BP,” a BP spokesman said, but declined to disclose the price.
“This commercial agreement provides a strong basis for BP to move ahead toward a final investment decision on Khazzan, which we hope to accomplish by the end of 2013.”
Artificially low government-controlled prices typical across the energy-rich Gulf region have discouraged new projects needed to meet its rapidly rising demand for natural gas.
BP has already spent hundreds of millions of dollars on the project since winning the concession in 2007, but had to agree a sales price that covers the relatively high cost of extracting gas trapped in rocks deep underground before committing to it.
Small non-OPEC oil producer Oman has been focusing on developing its gas industry to meet its booming domestic demand while maintaining its exports of liquefied natural gas.
Khazzan, a showcase project for BP’s unconventional gas technology, is expected to start production in 2017 and reach full output of around 1 billion cubic feet per day a year later.