Occidental Wins Rights for Oil Field

Occidental Petroleum Corp. said Monday that it won government rights to develop one of Oman’s largest oil fields, a project that could substantially boost Occidental’s overall production.

“It is a significant deal” for the Westwood-based oil company, said Irene Haas, an analyst with Sanders Morris Harris Group Inc., a Houston investment firm.

Occidental said it was teaming with a group led by Liwa Energy Ltd., which is owned by the government of Abu Dhabi, to further develop the massive Mukhaizna field in Oman.

Abu Dhabi is the largest of the seven emirates that make up the United Arab Emirates, which borders Oman on the Arabian Peninsula.

The Mukhaizna field became available because of a dispute between the Omani government and the field’s former manager, Petroleum Development Oman, over how to develop the site. Petroleum Development Oman is led by Royal Dutch/Shell Group. The government then accepted an alternative proposal from Occidental.

Occidental’s average daily production of oil and natural gas in the first quarter was the equivalent of 565,000 barrels of oil. The company said the Mukhaizna site is producing about 10,000 barrels of oil a day.

Occidental, which specializes in using steam technology and other processes to extract oil from older and difficult fields, said its group planned to spend more than $2 billion to boost the Mukhaizna field’s output to 150,000 barrels a day within the next few years.

Occidental can’t yet specify how much of that added production would flow directly to the company, but Occidental and Liwa together own more than 50% of the group, Occidental spokesman Lawrence Meriage said.

“We think we have an opportunity here to add significant value not only to Oman, but to our shareholders,” he said.

After the announcement, Occidental’s stock rose $1 to $70 on the New York Stock Exchange.

Shell’s U.S. office in Houston referred inquiries to the London home of Shell Transport & Trading Co., which didn’t respond to a call and e-mail seeking comment. Shell Transport and Royal Dutch Petroleum Co., based in The Hague, jointly own Shell’s worldwide operations.

Shell spokeswoman Lisa Givert told Bloomberg News that the Shell-led group was “considering alternative options” that would allow Petroleum Development Oman to stay involved in the Mukhaizna project after Occidental takes over.

Occidental has two other oil fields in Oman, where it has been operating since 1979, that together produce the equivalent of 32,000 barrels of oil daily. But the company hopes to recover about 1 billion barrels of oil over the life of the Mukhaizna field, “which makes it a really attractive project,” said Haas, who said she didn’t own Occidental stock.