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Exploration and production

Rights

Who holds the rights to oil and gas reserves in your jurisdiction?

The Oil and Gas Law (Royal Decree 8/2011) provides that, irrespective of their location in Oman,  petroleum substances in their natural form are the sultanate’s property.

Is there a distinction between surface and subsurface rights?

The Oil and Gas Law provides that oil and gas substances, irrespective of their location in Oman, are the sultanate’s property. As such, the rights to oil and gas substances may be transferred only pursuant to the Oil and Gas Law. The government may grant surface and sub-surface rights to oil and gas resources to third parties by way of an exploration and production sharing agreement (EPSA) which must be ratified by royal decree and issued by the sultan.

What rules and procedures govern the grant of rights for exploration and production purposes (eg, through licences, leases, concessions, service contracts, production sharing agreements)?

The Directorate General of Management of Petroleum Investments under the Ministry of Oil and Gas governs the concession regime. The Council for Financial Affairs and Energy Resources sets out the broad policy guidelines to achieve various government objectives. These activities are generally carried out by virtue of agreements entered into with the government (ie, the EPSAs ratified by royal decree or by direct royal decree). Those granted concession rights may enter into service agreements with third parties in order to meet their functions and responsibilities under the EPSA.

Concession agreements require ratification by royal decree. The Oil and Gas Law prescribes no specific procedure to be followed while applying to the government for a concession, with the exception that the applicant must be technically and financially qualified to carry out the investment project as assessed by the Ministry of Oil and Gas in accordance with Article 10 of the Oil and Gas Law.  

Tender documents floated by the Ministry of Oil and Gas in relation to a new block will contain the necessary details for preparing and submitting the bids to the ministry, as well as the financial and technical qualifications expected from an applicant. Alongside their bids, bidders must usually submit to the ministry (among other things):

  • a letter of intent;
  • a signed confidentiality agreement; and
  • a non-refundable deposit.

The Oil and Gas Law contains no specific procedures regarding application costs or timeframes. 

What criteria are considered in awarding exploration and production rights (eg, are there any restrictions on the participation of foreign investors/companies)?

In accordance with the Oil and Gas Law, concessions may be granted only to technically and financially qualified applicants. While the Oil and Gas Law does not require specific types of company to apply for a concession, concession holders will either be required to incorporate a subsidiary under the Commercial Companies Law (Royal Decree 18/2019) or to register a branch office in Oman. Article 24 of the Commercial Law (Royal Decree 55/90) states that non-Omanis may not engage in business in Oman unless permitted to do so by applicable Omani laws.

Thus, in order for a foreign company to undertake petroleum activities, it must establish a business presence in Oman after complying with the Foreign Capital Investment Law (Royal Decree 102/94), which provides that the capital of a commercial company established in Oman must be at least 30% owned by an Omani national. That said, the government may exempt an applicant from this requirement if the applicant can prove that its project will significantly contribute to the development of the national economy. Notably, a branch office can be established only if the foreign company already has a government contract to undertake a project for the benefit of the Omani government. 

Joint ventures

Are there any special legal provisions applicable to joint ventures?

Joint ventures under Omani law can take the form of either:

  • unincorporated or contractual joint ventures which:
    • have no separate legal personality;
    • are not registered with the Ministry of Commerce and Industry; and
    • are primarily governed by the contract entered into between its founders for its formation; or
  • a commercial company registered by multiple shareholders subject to the national shareholding requirements under the Foreign Investment Law (Royal Decree 102/94).

Both types of joint venture are governed by the Commercial Companies Law (Royal Decree 18/2019); however, unincorporated joint ventures are regulated only by Articles 85, 86 and 87 of the this law. 

Third parties

Can exploration and production rights be transferred to third parties?

According to Article 19 of the Oil and Gas Law, the transfer or waiver of concession rights by a concession holder to a third party is prohibited without ministry approval and a subsequent ratification of such transfer or waiver by royal decree.

Fracking

Is hydraulic fracturing (‘fracking’) permitted in your jurisdiction?

Yes – several large and state-owned oil and gas companies (eg, Petroleum Development Oman) employ fracking in their operations.