PDO exceeds $1.6bn expenditure cut target in 2016
The majority state-owned oil producer had launched several initiatives to curtail expenditure last year when oil prices began their free fall causing serious fiscal problems for oil-dependent economies.
The Petroleum Development Oman (PDO) exceeded its target of cutting down expenditure during 2016, according to a top-level official at the PDO.
The PDO had planned to cut $1.6bn in 2016 in light of the dwindling crude oil prices. The company’s managing director, Raul Restucci, this week said the state-owned firm has exceeded the target by $100mn-$200mn.
“We have exceeded our target of reducing expenditure by around $100mn-200mn and are very happy with the performance,” he told the media at a PDO event aimed at ramping up social investments.
The majority state-owned oil producer had launched several initiatives to curtail expenditure last year when oil prices began their free fall that saw a barrel of black gold dropping from $115 to $28, causing serious fiscal problems for oil-dependent economies.
Most of these initiatives, including contract optimisation renewals, smart contracts and lean business strategies, were designed to save millions of dollars in the process. Restucci said optimisation and cost cutting measures will continue in 2017 as well.
“The 2016 initiatives will be carried into 2017. The process of minimising capital requirements, optimisation, ways of self-financing and staying on course with our programmes will continue throughout 2017,” added the PDO chief.
The PDO officials have often said exploration and incremental activities in oil and gas sector have not been affected due to low oil prices. Restucci said 2017 will be no different.
“The PDO has been working in more than 600 wells and this will continue in 2017 and even in 2018. There are two mega projects we are working on and they will go ahead normally. New technologies are being tested for optimising production and they will go on too,” he said.
However, Restucci added that although the PDO is looking at incremental growth in crude oil production, it has been rescheduled as the Ministry of Oil and Gas has to comply with its commitment on output cut made to the Opec.
According to the deal in Vienna on December 11, Oman agreed to cut oil output by 45,000 barrels per day (bpd) to support Opec and independent producers which plan to achieve a target of 1.8mn bpd in a bid to suppress global glut and drive prices higher. The PDO accounts for 70% of oil production and nearly all of its natural gas. Restucci said the output cuts will stem from optimisation and shutdown of high cost activities.
“The PDO will be cutting an equitable amount of production and a decision will be taken in a few days after a meeting with government officials. We will optimise. There will be areas where we will accelerate shutdown and any high cost activity will be deferred to accommodate cuts,” he said.
Oil and gas sector was under tremendous pressure after prices started falling from summer of 2014, with contracts running dry and job market threatened. However, the PDO weathered the storm with little direct firing of employees, especially nationals. Restucci said oil prices presently are ideal for PDO’s plan to create 50,000 jobs.
“We are on course to create 50,000 jobs and global oil prices do not matter a lot. At this price, however, there will be no problem in achieving the target,” he said.