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Top Oman drilling firm Abraj plans regional expansion

Abraj
Abraj hits the road towards expansion in the Gulf and wider region
  • Abraj plans initial public offering on Muscat Stock Exchange
  • Oman’s onshore drilling market forecast to grow at 2.5% annually
  • Developing fracking services for deep tight gas wells

Omani oil and gas service company Abraj has set its sights firmly on exporting to the Gulf and the wider region.

That’s according to Salah Al Harthy, business development director, Abraj Energy Services, Oman’s leading drilling firm and a subsidiary of state-owned OQ (formerly known as Oman Oil Company).

“Abraj has significant expansion opportunities in Oman and is targeting bringing additional rigs to market, adding other major international oil and gas companies to its customer base,” he told AGBI. 

In 2021, the company generated $323 million in revenues and $121 million in earnings before interest, taxes, depreciation, and amortisation, which grew at a 21 percent compound annual growth rate over the past three years.

The company has said it plans to launch an initial public offering on the Muscat Stock Exchange as it eyes regional expansion.

Al Harthy said Abraj’s robust financial standing is supported by stable, contracted income from a diversified blue-chip customer base including OQ, PDO, BP, and Oxy Oman and enhanced by the company’s extensive order backlog of 700 million Omani rials ($1.8 billion).

“Drilling and well services is an attractive and resilient sector in Oman’s energy industry,” said Al Harthy.

“With a diverse landscape of both national and international oil companies operating in the country, the total production in Oman is forecast to reach two mmboe/d [million barrels of oil equivalent per day] by 2027, with gas production accounting for nearly 50 percent.

“The demand for rigs is expected to grow as this production increases. Between 2021 and 2027, Oman’s onshore drilling market is forecasted to grow at a compounded annual growth rate of 2.5 percent,” he added.

Person, Human, Clothing
Abraj launched its new brand image this summer. Pictured centre: Salah Al Harthy, business development director at Abraj Energy Services

Abraj was the first Mena-based company to launch integrated fracking services, pioneering the development of unconventional deep tight gas wells.

Hydraulic fracturing, or fracking as it is more commonly known, is a drilling technique for extracting oil, natural gas, geothermal energy, or water from shale rock deep underground.

It is considered the most efficient way to access hard to reach or otherwise inaccessible reserves, and given that Oman has one of the most challenging terrains in the Middle East, fracking is a priority technology for sustaining Oman’s hydrocarbon output.

Oil fracking has grown from five percent of total frack activities in Oman in 2018 to 25 percent in 2021, and Al Harthy said this will only increase.

Beyond Oman, Abraj has ambitions to expand its services offering internationally in the Mena region, he said. 

The company has been prequalified to provide various drilling, workover and well services in Kuwait, Saudi Arabia, and Algeria. 

“To date, Abraj has drilled over 5,000 km in oil and gas developments across Oman, and our modern and diversified fleet of 25 drilling rigs at a [more than] 95 percent utilisation rates and represents a leading market share of 29 percent of all contracted rigs in Oman,” Al Harthy added.

“Oman stands out from other drilling markets in the Mena region, mainly, due to its longer duration of drilling contracts. This makes Abraj more resilient to market cyclicality and allows for more stable rates given that day rates are fixed for a longer period.”

Fuelling the economy

Although the 2020 oil price crash hit Oman hard, it has since recovered with a rebound in oil prices to above pre-pandemic levels. 

“We recognise that global oil prices are constantly fluctuating as external factors impact market cycles,” Al Harthy said. 

“During the economic cycles it’s important for the country to continue its production and therefore support the oil and gas industry for continuation of that business.

“Oman remains one of the lowest in cost of production in the world. Therefore, even when oil prices fall, we are still able to produce and avoid losses.”

Oil has fuelled the Omani economy since the sultanate began commercial production in 1967, supporting the Gulf Arab state’s infrastructure, including electric utilities, roads, public education, and medical services.

The government derives roughly 70 percent of its annual budget from oil and gas revenues through taxation and joint ownership of some of the most productive fields, and the industry accounts for 30 percent of Oman’s gross domestic product.

According to data from the International Trade Administration, Oman can produce upwards of one million barrels per day of crude oil and condensates, but it honours OPEC+ quotas.

Oman’s oil reserves primarily consist of heavy crude, with China as its predominant export market.

In June 2022, the Ministry of Energy and Minerals (MEM) announced that Oman’s crude oil reserves stood at 5.2 billion barrels, and gas reserves at around 24 trillion cubic feet.

MEM also announced that it had made new oil discoveries that would raise Oman’s production by 50,000 to 100,000 barrels in the coming two to three years.

Building, Factory, Refinery
Oman’s 2022 government budget estimated oil revenues of $27.6 billion. Picture: Reuters

Oman’s oil sector in facts and figures

  • Oman’s 2022 government budget estimated revenues of $27.6 billion, based on average oil prices of $50 per barrel, with oil and gas accounting for 42 and 26 percent of total revenue, respectively. 
  • The government reported revenues of $17.4 billion (and a $2 billion surplus) in the first half of 2022 based on an average oil price of $87 per barrel. It is on track to record its first annual surplus in a decade.
  • State-owned Petroleum Development Oman holds most of Oman’s oil reserves and is its largest oil and gas operator. US firm Occidental Petroleum is the second largest operator and has the largest presence of any foreign firm in Oman.