Dec. 5 (Bloomberg) -- Royal Dutch Shell Plc, Europe's second-
largest oil company, expects production from its venture in Oman
will drop for a fifth year as it cuts costs and drills fewer wells
to prolong the life of its fields.
Petroleum Development Oman, which pumps 90 percent of the
nation's oil, expects output to fall by 5 percent to about 600,000
barrels a day by next year before recovering after 2008, when
projects to revive supplies from existing wells go online, John
Malcolm, Petroleum Development's managing director, said in a
speech to be given today in Muscat, Oman's capital.
``We do no favors to Oman in going all out in one year to get
a feast of oil only to be followed by a year of famine,'' he said,
according to a copy of his speech. The company will cut back
drilling in preference of injecting water and steam into the
ground to flush out hard-to-get oil, he said.
Oman is the largest oil producer in the Persian Gulf that's
not a member of the Organization of Petroleum Exporting Countries.
The nation wants to offer other international oil companies a
bigger share of its reserves, eroding Shell's position, in return
for investment to help reverse a nationwide decline in output.
Occidental Petroleum Corp., the fourth-largest U.S. oil
company, replaced Shell as the government's main foreign partner
to boost production from its sixth-largest deposit to 150,000
barrels a day, from about 10,000 barrels in May. The government
wants to introduce more competition among companies to help revive
output.
The monarchy, ruled by Sultan Qaboos bin Saeed since he
deposed his father in a bloodless coup in 1970, relies on oil
revenue for as much as 75 percent of its export earnings and 40
percent of its gross domestic product, according to the U.S.
Department of Energy.
Oil production, including crude oil and condensate, fell 5.4
percent to 782,480 barrels a day through August of this year from
the same period last year, the Ministry of Economy said. Oman may
have less than 20 years left as a major oil exporter if output
keeps declining at the same pace and no new reserves are found,
the U.S. Department of Energy said.
Shell is the largest foreign shareholder in Petroleum
Development Oman, with a 34 percent stake.
