KEY FACTS: PROJECT C31/0631 – “GREENING THE DESERT

Date: 7th March 2005

  1. Introduction

This note provides the key information on the Petroleum Development Oman “Greening the Desert” business opportunity. It is intended to seek interest from the forestry or other industries to invest in this unique opportunity.

  1. Background

Petroleum Development Oman (PDO) is the main oil and gas exploration and production company in Oman. Its shareholders are the Government of the Sultanate of Oman, Shell, Partex and Total.

PDO produces more than 200,000 m3/day of water along with the oil – and this is in PDO’s Nimr (South Oman) facilities alone. Currently this water stream is disposed of by injecting into a deep disposal reservoir, the operational costs being approximately 0.075 US$/m3. (7.5 US cents/m3)

PDO has been investigating low cost alternatives for the disposal of this produced water for many years. The most promising alternative to deep water disposal is the “Greening the Desert” technology, which has been tested over the last 5 years. Greening the Desert elements include Reed Beds, bio-saline agriculture and forestry.

  1. Nimr produced water quality

The Nimr produced water is only treated in primary equipment (Corrugated Plate Interceptors), which reduce the oil in water content to approximately 250 ppm (parts per million). The salinity of the water is low (~ 7,000 ppm) and makes it suitable for agriculture. The water is not suitable for drinking purposes in view of its oil contamination, salinity and high concentrations of Boron (4 mg/l) and Fluoride (1.9 mg/l).

  1. Reed Beds

Reed Beds have been successfully grown in Nimr and are able to reduce the oil in water contents to less than 5 ppm. The flow per bed of 0.35 ha is about 450 m3/d. The photograph below provides an impression: (figure 1). The Reed Bed effluent feeds a bio-saline agriculture plot. Acacia and Atriplex grow very well and a mini forest can be established (see fig. 2), but grass is more difficult to grow. The location in Nimr in which the trial had been carried out is shown in Fig 3.

  1. Bio-saline Agriculture and Forestry

The reed bed water is suitable for bio-saline agriculture and forestry. Products can be harvested and sold within Oman or exported through the Sallalah port. There is possibility of carbon dioxide sequestration and related revenue via the Kyoto Protocol.

  1. Up scaling reed bed/agro-forestry

An independent feasibility study conducted by PDO concluded that it is technically, financially and socially feasibility to upscale the reed bed/agro forestry in Nimr into a commercial project. A summary of the study is shown in Appendix 1 for guidance. However, it is expected that the companies shall have their own independent assessment on the feasibility of their proposed projects and not necessarily be guided by the data given in the summary or the report.

  1. Business opportunity

PDO is now seeking suggestions and expressions of interest from any companies who have:

1) Current and previous experience of physical and/or biological cleaning methods for contaminated water, and,

2) Suggestions, ideas and a willingness to invest in an economically viable use of the cleaned water.

PDO would make available, to the Company with the best business plan, 45,000m3/day of Nimr produced water of the above indicated quality (250/ppm oil in water) for a period of 20 years. PDO will also provide any required area of land (unimproved desert land) needed for the project. The successful company will need to make all investments associated with the clean-up and use of the water. All revenues would be for the successful company’s own account.

  1. PDO Expectations and Preferences

PDO considers that the most appropriate use for the cleaned water is for sustainable bio-saline agriculture and forestry. The additional benefits of this would be “Greening the Desert”, improved amenities for the local population and employment opportunities, and biodiversity/wildlife support. However, there are other possible projects (for example, reed beds alone for production of fibrous pulp; other non-food/fodder crops; crops for industrial alcohol production: final remaining high salinity water for industrial salt production or a combination of these as well as eco-tourism) and PDO is open to suggestions. However, the following restrictions shall apply:

1)Intermediate and final product must not enter the food chain.

2)The water use must be complete, with no final pollutant requiring disposal, unless such is properly taken care of in the business plan. (The business plan must be environmentally and socially friendly).

3)The project should be economically viable in its own right. However, If required, PDO may be willing to support the project with an investment of up to a maximum of 0.075 US$/m3 of disposed water.

4)The Company must take full responsibility for the successful clean-up and use or disposal of the water supplied.

5)PDO has a proprietary interest in the reed bed research undertaken by PDO to date, and expects to share any such interest in the continued development of such reed bed technology.

6) A full environmental, social and health impact shall be carried out to minimize and mitigate any adverse effects.

9. Submittal of Interest

Interested companies should submit the following for PDO’s review and consideration:

1)A profile of the company or companies involved.

2)Evidence of company financial viability.

3)Evidence of previous experience and/or technical capability relating to cleaning of contaminated water and environmentally friendly use of such cleaned water.

4)A description of the suggested project.

5)An initial business plan for the suggested project. (The business plan will be subject to future detailed clarification).

6)Any further information which may assist PDO in evaluating the submission (such as proposed Omani involvement).

PDO shalltreat the details of the proposed project and business plan as strictly confidential.

10. Contact Address

Interested Companies are requested to contact with details the following:

D.V.Janardhana Rao,

Supply Chain Analyst- FPR/24

Petroleum Development Oman

PO Box 81, Postal code 113

Muscat, Sultanate of Oman

Tel (968) 24674177

Fax (968) 24673348

Email:

Figure (1): Flourishing Reed Beds in Nimr

Figure (2): 11 months old acacias plants



Appendix 1

Potential for up-scaling Nimr reed bed facilities, Oman

Feasibility Study by:

A. Schrevel, P.J.G.J. Hellegers R.W.O. Soppe

Alterra-ILRI and LEI, Wageningen UR

May 2004

Executive summary

  1. Upscaling of the Nimr biosaline agriculture facilities, Oman, into a large scale Reed Bed and Eucalyptus Combination is technically, financially, and socially feasible:
  2. technically, because by directing the flow (45,000 m3/day) of oil contaminated water through reed beds and subsequently feeding the treated water to Eucalyptus trees requires technology that is available and because the water downstream of the Eucalyptus trees will be of manageable quality
  3. financially, because at 0.05 $/m3 (with a range of 0.075 $/m3 in the worst case and 0.025 $/m3 in the best case) the contract price – the amount that PDO has to pay to allow the contractor to break even – compares favourably to disposing oil-contaminated water in deep aquifers, as is standard practice presently (the present total value of DWD is 0.11 $/m3, consisting of 0.075 $/m3 operating cost and 0.028 $/m3 capital cost)
  4. socially, provided that the local population is directly involved in decision making and their access to water as a resource to improve their standard of living is improved, to this is added that
  5. the environmental impact were not studied separately, but were included in the technical analysis; separate detailed environmental impact statement needs to be done, but from this feasibility study it is not expected that major problems will appear.
  6. A new design is required for the upscaled reed bed and Eucalyptus combination project, rather than an inflated design of the existing pilot project. Points of attention in this design are water use reliability and treatment reliability of the reedbed and eucalyptus system, health and safety of this system, salt movement and salt accumulation, and limited soil depth.
  7. Different objectives exist for PDO and a contractor bidding on the tender. While PDO wants to evapotranspire the water at high reliability, thus not necessarily at a financially optimal design, a contractor running a financially profitable farming operation wants to design their operation at minimal cost.
  8. The contract price of water is very sensitive to a change in the capital costs of reed beds. Mechanical pretreatment seems to be an interesting option, as it reduces the required size of reed bed area (and consequently the associated capital costs) considerably. Included in the financial assessment are all costs from the tap point from which processed water is obtained onwards; not included are the costs of bringing the processed water to the tap point (over a distance of possibly 20 km).
  9. The envisaged project has three beneficiaries (rather than the two that prevailed in the plans thus far): PDO, the contractor that will win the tender, and the local people. Although the water even after treatment is unsuitable for many uses, it still is water that is applied in a desert environment. Local people will show an interest in it. Not to recognise this interest could lead to relation problems; not to use this project to contribute to the improvement of standards of living of the local people means that an opportunity is missed.
  10. The standard PDO procedure to engage the stakeholders (local people) can be started, albeit with an important alternative objective: the aim is to work out with the people and their representatives how the project can be used to structurally improve the living conditions of the local people (water is the medium). The people and their representatives must be allowed to decide for themselves which actions they consider appropriate, given the potential and limitations of the project.
  11. Monitoring of the technical, financial, environmental and social aspects of the project is important, especially because the project will be a new experience. Monitoring should be organised in such a way that conclusions are drawn during the course of the project and can lead to changes in project implementation (action research, rather than ex-post evaluation).
  12. Decommissioning the project implies i) removing physical assets and waste products (soil, liner, salts) and ii) communicating with local stakeholders. With respect to the latter the team advices to agree on details in a Service Level Agreement at the start of the project

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