FINANCIAL TIMES: Shell and Oman fall out on oilfield deal: “News of the disagreement between the Omanis and Shell over the best way to extract more from the field will be a blow to the group's prestige in a key country. Shell is recovering from last year's overbooking scandal.” (ShellNews.net) 27 April 05

By James Boxell

Royal Dutch/Shell could lose out on the right to develop an Omani oilfield months after it signed a deal with the sultanate to develop its deposits for the next 40 years.

Oman has approached Occidental Petroleum, the US group, to provide an alternative proposal to develop the 2.4bn-barrel Mukhaizna field after it failed to agree an initial plan with Shell.

News of the disagreement between the Omanis and Shell over the best way to extract more from the field will be a blow to the group's prestige in a key country. Shell is recovering from last year's overbooking scandal.

The Mukhaizna field produces 10,000 barrels a day but Oman believes it could be a source for reviving its flagging production.

A person close to the government said it was almost certain Shell would lose out to Occidental, although a deal has not been signed. The Sultan of Oman has strong ties with the British government and could potentially overrule any deal put together by his ministers. A deal with Occidental could also contravene Shell's 40-year deal to develop fields on Block Six, which includes Mukhaizna.

The person close to the government said Occidental promised higher production more cheaply.

The Block Six concession is controlled by Petroleum Development Oman, which is 60 per cent-owned by the government. Shell owns 34 per cent.

Shell would not comment on the details of any talks on its Omani fields but said "discussions with the other shareholders are continuing and we are reviewing the options".

Occidental said it had "been in talks with the government of Oman about a project for some time" but gave no details.

Additional reporting by Sheila McNulty in Houston

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