The Energy Sector in Oman: Oil, Gas, and the Broader Energy Industry

Introduction

Oman’s economy has long been driven by oil and gas, which provide around 70% of government revenues and roughly 30% of GDP[1]. While Oman is a moderate producer relative to its Gulf neighbors, it has maintained output near 1 million barrels per day (bpd) of crude oil and condensate in recent years[2][3]. This production level is a significant recovery from earlier declines, achieved through enhanced oil recovery (EOR) techniques and investor-friendly terms that attracted foreign partners[2]. Oman’s reserves are geologically challenging, consisting largely of heavy crude that requires advanced recovery methods, making its production costs higher than in neighboring Gulf states[4]. Over 20% of Oman’s natural gas output is reinjected for EOR to lift heavy oil[5]. The past five years (2020–2025) have seen Oman navigate an oil price crash and pandemic in 2020, followed by a robust rebound as oil prices climbed above pre-pandemic levels[6]. Concurrently, Oman accelerated efforts to diversify its energy industry – scaling up refining capacity, launching large petrochemical projects, and pivoting to renewables and green hydrogen – all while grappling with fiscal pressures and the global energy transition. The following report provides a structured overview of Oman’s upstream and downstream oil & gas sectors, its broader energy landscape (including renewables and hydrogen), the major industry players, ongoing innovation initiatives, and the key challenges and unmet needs facing the sultanate’s energy sector.

Upstream Oil and Gas Developments (2020–2025)

Production and Reserves: Oman is the largest oil producer in the Middle East outside OPEC, consistently producing around 0.95–1.05 million barrels per day of crude and condensate[2][3]. In 2022, output rebounded sharply (up ~10% year-on-year) as OPEC+ cuts eased, and daily production averaged about 1.06 million bpd[7]. For 2023, Oman’s production held near 1.05 million bpd on average[3], constrained slightly by OPEC+ quota agreements. Oman’s proven crude oil reserves stand at 5.2 billion barrels, with natural gas reserves around 24 trillion cubic feet (Tcf) as of mid-2022[8]. Notably, new discoveries announced in 2022 are expected to boost output by an additional 50,000–100,000 bpd in the next few years[9], reflecting continued upstream investment. Most of Oman’s 150+ oil and gas fields are mature, complex, and relatively small, necessitating advanced techniques to sustain output[10][4]. The Ministry of Energy and Minerals has pushed enhanced recovery programs and in 2020 awarded at least four new exploration concessions (Blocks 12, 58, 36, 70) to international firms (e.g. Total, PTTEP, Tethys Oil, Maha) to stimulate exploration despite the pandemic downturn[11].

Enhanced Oil Recovery (EOR): Given the heavy, viscous nature of Omani crude, EOR is critical. Operators inject substantial gas and steam to maintain pressure and flow. About one-fifth of Oman’s gas production is reinjected into oilfields for EOR[5]. This gas-intensive approach led to periods of gas supply tightness; indeed, Oman had to import some pipeline gas from Qatar to meet domestic needs prior to recent gas field expansions[12]. To mitigate this, Oman has innovated with projects like Miraah, a solar thermal plant that generates steam for injection, reducing the reliance on burning natural gas for steam EOR[13]. Petroleum Development Oman (PDO), the country’s leading producer, has deployed such solar-EOR techniques and other efficiency measures to sustain output at aging fields[13]. Thanks to these technologies and new wells, PDO’s crude oil production climbed to a 19-year high by 2022[14], reinforcing Oman’s ability to offset natural declines with intensive field management.

Natural Gas Developments: Natural gas has become equally strategic, both for domestic industry and LNG exports. A major milestone was the development of Block 61’s giant tight gas fields. BP’s Khazzan and Ghazeer project (Block 61) ramped up in two phases (Ghazeer came on stream in late 2020) and now delivers over 1.5 billion cubic feet per day (bcf/d) of gas, plus ~65,000 bpd of condensate[15]. This has significantly expanded Oman’s gas output and feeds power plants, industries, and Oman LNG. Another boost came from Block 10 (Mabrouk North East) – a gas field operated by Shell in partnership with Oman’s OQ and TotalEnergies. Fast-tracked after a late-2021 concession award, Block 10 started production in early 2023 and is expected to supply 0.5 bcf/d by mid-2024 into the national gas grid[16][17]. These gas projects are pivotal for meeting Oman’s growing domestic energy demand and freeing up volumes for export. Indeed, Oman’s LNG export facilities (operated by Oman LNG in Qalhat) can produce around 10.4 million tonnes per year, and the new gas has enabled higher LNG utilization after years of flat output due to domestic constraints[12]. Gas also underpins Oman’s downstream expansion (fertilizers, petrochemicals) and future hydrogen production (as feedstock for “blue” hydrogen). In offshore exploration, Oman opened up frontier blocks: Italian major Eni explored deepwater Block 52, though the first well was dry[18]; the search for offshore gas continues, highlighting Oman’s ambition to broaden its resource base.

Key Upstream Players: The upstream sector is led by Petroleum Development Oman (PDO), a state-controlled joint venture that operates the majority of fields. PDO is 60% government-owned with Royal Dutch Shell (34%), TotalEnergies (4%), and PTTEP (2%) as minority partners[19]. PDO produces over 600,000 bpd of crude (2018 figure)[19] and substantial associated gas, focusing on interior regions. The largest independent oil producer is Occidental Petroleum, a U.S. firm that operates several blocks (notably the giant Mukhaizna heavy oil field) and accounts for the second-largest share of Omani oil output after PDO[20]. Other notable upstream operators include BP Oman (Khazzan/Ghazeer gas development), Shell (long present as a PDO partner, and now Block 10 operator for gas[21]), and TotalEnergies (partner in PDO and Oman LNG). Oman has also attracted mid-sized and regional players: Thai PTTEP and Swedish Tethys Oil have stakes in onshore blocks[22]; Eni and QatarEnergy have explored offshore; and smaller firms like Daleel Petroleum (a local/Chinese JV) and CC Energy Development (CCED) produce from legacy blocks. In 2019, Oman consolidated various state-owned upstream and midstream interests into a new company, OQ, which now holds stakes in multiple blocks (at least four producing and several exploration blocks)[20]. OQ and another state vehicle, Energy Development Oman (EDO), represent the government’s ownership in PDO and other assets, and have been used to raise financing (including via bonds) for energy projects[23][24]. This restructuring is part of Oman’s strategy to streamline management of its oil/gas assets and monetize them prudently to bolster state finances.

Downstream: Refining, Petrochemicals, and Gas Processing

Refining Capacity Expansion: Oman has made significant downstream investments in the past five years to increase value-added production and reduce reliance on fuel imports. Historically, Oman operated two refineries – at Mina Al Fahal (Muscat) and Sohar – which were merged under Orpic (now part of OQ) and had a combined capacity around 222,000 bpd. A major Sohar Refinery Improvement Project was completed to upgrade and expand the Sohar site, enabling it to handle heavier crudes and produce more petrochemical feedstocks[25]. The crown jewel of Oman’s downstream drive is the new Duqm Refinery on the central coast. Branded as OQ8, this state-of-the-art plant is a 50:50 joint venture between Oman’s OQ and Kuwait Petroleum International. The Duqm refinery, costing around $7 billion, achieved startup in 2023 and is designed to process 230,000 bpd of crude oil[25]. It is the largest industrial investment in Oman’s history[25]. By late 2024, OQ8 had successfully completed reliability tests and exported over 375 shipments of refined products, marking its full commercial operation[26][27]. Duqm’s configuration emphasizes middle distillates and naphtha, aiming to supply global markets (its location outside the Strait of Hormuz is strategically chosen for export access).

Petrochemicals and Gas Processing: Alongside Duqm refinery, Oman is planning an integrated petrochemical complex in the Duqm Special Economic Zone. A $10 billion petrochemical project (including steam cracker and derivative units) is in advanced planning, slated to follow the refinery[28]. This will likely use Duqm’s naphtha and LPG output as feedstock, producing plastics and chemicals domestically. In Sohar, Oman already operates polypropylene and aromatics plants (fed by refinery streams) and is expanding chemical production to diversify its export base[29]. On the gas side, Oman LNG (51% government-owned, with Shell, Total and others as partners) runs a three-train liquefaction plant (~10.4 mtpa capacity) to export Omani gas as LNG. By 2025, higher upstream gas supply allowed Oman LNG to increase utilization and sign new long-term LNG contracts, leveraging Oman’s reputation as a reliable exporter. Oman also has OPAL (Oman Polymer Applied Industries) and other gas-based industries like methanol and fertilizer (e.g., the Oman-India Fertiliser Company) that benefit from steady gas feedstock. An Oman Gas Pipeline Network, managed by OQ, connects fields to consumers, and was extended to supply Duqm and new power plants. Notably, gas from Shell’s Block 10 is tied into this grid to support domestic industrial growth and LNG backfilling[30].

Domestic Fuels and Retail: Oman’s growing refining capacity has enabled it to meet domestic fuel demand and even export surplus products. By end-2023, with Duqm online, Oman can produce far more gasoline, diesel, and jet fuel than it consumes, transforming it into a net refined products exporter. The retail fuel market in Oman is served by downstream arms of major players: Shell Oman Marketing (Shell holds 49%) operates many service stations[31]; OQ’s fuel retail network and BP’s joint venture (Al Maha) also distribute fuels. The increased local refining output has allowed the government to reform subsidies gradually, as fuel imports (which strained budgets when oil prices were high) are no longer a concern. Additionally, Oman has invested in storage and shipping: new crude and product storage parks, including a large facility at Raz Markaz near Duqm, aim to position Oman as a regional logistics hub[32][33].

LNG and Gas Export Trends: Oman’s LNG exports have historically been capped by domestic gas needs, but the new upstream projects are shifting this. In 2021, Oman produced ~49.5 billion cubic meters of gas, a record expected with Ghazeer’s addition[34]. This allowed Oman LNG to run closer to full capacity. However, Oman also inked import deals (an LNG import terminal in Duqm is planned) to manage seasonal or short-term gas supply gaps until all new projects are fully onstream. In 2023, China absorbed over 90% of Omani crude oil exports (thanks to Oman’s medium-sour crude aligning with Chinese refiners’ needs), but for natural gas, Oman diversified its LNG customer base, signing deals with Japan, South Korea, and European traders seeking non-Russian gas[35][36]. Oman is also exploring possibilities for gas pipeline exports to neighboring UAE, and potentially to Pakistan or India via seabed pipeline or as LNG, underscoring gas’s growing role in Oman’s external trade.

Broader Energy Industry: Renewable Energy and Hydrogen

Though hydrocarbons dominate Oman’s energy mix, the 2020–2025 period marked the first significant forays into renewable energy and clean hydrogen in Oman. The government’s National Energy Strategy and Vision 2040 set clear targets for a transition: by 2030, 30% of electricity generation should come from renewables[37], up from virtually zero in 2018. The push for renewables is motivated by multiple aims: freeing natural gas for higher-value uses (or export), meeting rising power demand sustainably, and reducing carbon emissions in line with Paris Agreement commitments[38][39].

Solar Power: Oman enjoys high solar irradiation levels in its deserts, and utility-scale solar projects have taken off. The flagship project was the Ibri II solar PV plant (500 MW), which came online in 2021 as Oman’s first large solar farm[40]. Led by Saudi developer ACWA Power and partners, Ibri II proved the viability of solar IPPs in Oman. Building on this, the Oman Power & Water Procurement Co. (OPWP) tendered additional massive solar parks. In 2022, competitive bids were held for two projects in Manah, each ~500 MW. By March 2023, a consortium of Jinko Power (China) and Sembcorp (Singapore) was awarded the Manah II Solar PV (500 MW) project, expected operational in 2025 under a 20-year power purchase agreement[41]. The companion Manah I project (also ~500 MW) was awarded to another consortium around the same time, indicating that by mid-decade Oman has ~1.5 GW of solar capacity either online or in development. These utility-scale plants, located in high-insolation areas and connected to the grid via new transmission lines, will supply daytime power and help displace gas-fired generation. Additionally, Oman launched the Sahim initiative which facilitates rooftop solar installation for homes and businesses. Through net metering and financing support, Sahim has driven adoption of small-scale solar, aiming to tap the significant rooftop potential (studies suggest 50% of Omani houses are suitable for PV installation)[42][43]. While still early, hundreds of facilities have begun installing solar panels under Sahim, contributing a modest but growing share of clean electricity.

Wind Power: Southern Oman boasts areas with strong wind, especially in Dhofar Governorate. In 2019, Oman inaugurated its first commercial wind farm – the 50 MW Dhofar Wind Project – developed by UAE’s Masdar and funded by a UAE grant. This wind farm, with 13 turbines, feeds the local grid in Dhofar and marked the first large wind facility in the GCC region. It operates at high capacity factors during the Indian Ocean monsoon season. Plans are underway to expand wind power; OPWP has identified additional sites in Dhofar and Al Wusta for potentially hundreds of megawatts of wind capacity to complement solar output. By 2025, Oman has also piloted the use of small wind turbines in remote rural locations and islands (Masirah) to displace diesel generators. Overall, however, renewables remain a small fraction of Oman’s power capacity – under 5% as of mid-decade (up from ~0.5% in 2018[39]). The challenge now is scaling from these initial projects to the 2030 target, which will require accelerating project approvals and potentially introducing incentives like auctions or further public-private partnerships.

Oman’s electricity generation is almost entirely fossil-fueled (natural gas), leaving ample room for growth in solar and wind. In 2018, renewables were practically 0.5% of capacity[39]. Oman’s goal is to reach 10% by 2025 and 30% by 2030.

Green Hydrogen Ambitions: Oman has emerged as a surprise front-runner in the nascent green hydrogen economy. The Sultanate’s vast open lands, high solar irradiance, coastal wind resources, and access to seawater (for electrolysis) make it ideal for producing hydrogen from renewable electricity (and converting it to ammonia for export). Since 2020, Oman’s leadership has signaled a strong commitment to clean hydrogen as a pillar of its future economy. In 2021, a national hydrogen alliance was formed and by 2022 Oman created a dedicated state-owned company, Hydrom, to mastermind the country’s hydrogen strategy. Hydrom, under the Public Authority for Special Economic Zones, has set an ambitious target: export 1 million tons of green hydrogen per year by 2030. To achieve this, Oman is allocating vast tracts of land for integrated renewable-hydrogen projects and inviting global developers via competitive auctions. Eight large project sites were awarded to consortia in 2022–2023 through Hydrom’s first two bidding rounds[44]. These sites, mostly in the Duqm and Dhofar regions, will host gigawatt-scale solar and wind farms powering electrolyzers to produce green hydrogen, which will then be used to synthesize green ammonia or methanol for export. Some of the marquee projects announced include:

• Hyport Duqm: A partnership of OQ (Oman’s OQ), Uniper (Germany), and DEME (Belgium) to build a green hydrogen and ammonia plant at Duqm. Powered by 1.3 GW of wind and solar, it will deploy a 500 MW electrolyzer to produce ~60,000 tons of green hydrogen per year (converting to ~330,000 tons of green ammonia). The project covers 150 km² in Duqm’s special zone. Final investment decision is expected in 2023, aiming for Phase 1 operations in 2026[45].
• SalalaH2: Announced October 2021 for Salalah (southern coast), by OQ in partnership with Linde (global industrial gases firm) and DHL (Dubai Transport Company). Using 1 GW of renewables to run 400 MW of electrolyzers, SalalaH2 will supply hydrogen to an existing ammonia plant in Salalah (currently gas-fed) to produce green ammonia. Investment is around $1 billion for this first phase[46].
• ACME Green Ammonia: In Duqm, India’s ACME Group (with Norfund and others) is investing $3.5 billion to build one of the world’s largest green ammonia facilities. It plans 3 GW of solar and 0.5 GW of wind capacity driving electrolyzers, ultimately yielding ~900,000 tons of green ammonia annually for export[47]. This project was among the first movers; ACME has already set up a pilot plant and aims for full capacity by late 2020s.
• BP Oman Renewables: In January 2022, Oman signed an agreement with BP to evaluate multiple gigawatts of renewables for hydrogen. BP is granted access to 8,000 km² of land to gather wind and solar data and potentially develop “multiple GW” of renewable generation by 2030 for integrated green hydrogen production[48]. This could see BP build wind/solar farms equivalent to several gigawatts, positioning Oman as a key supplier of hydrogen to BP’s global trading portfolio.
• Green Energy Oman (GEO): An international consortium (including OQ, InterContinental Energy, and others) announced plans for an enormous 25 GW hybrid wind-solar project in Oman’s deserts[49]. The goal is to produce up to 1.8 million tons of green hydrogen annually (which could be converted into 10 million tons of green ammonia[49]). In 2022, the consortium engaged Worley for engineering studies, though such a mega-project will be phased over a decade or more.

Oman’s strategy involves clustering these projects in special zones (Duqm and Dhofar) with port access for exporting hydrogen derivatives. By end-2024, Hydrom had launched a third auction round (targeting additional land blocks in early 2025) and is courting investors from Europe, Asia and the Americas to broaden participation[50][44]. While the scale of Oman’s hydrogen plans is huge, timelines are realistic: first commercial outputs are likely by 2026–2028, with most projects expecting Final Investment Decisions (FIDs) in 2025–26[51]. Key challenges include securing offtake agreements in a still-developing global hydrogen market and ensuring each project’s massive renewable plants can be built on schedule. Oman is proactively developing a regulatory framework for hydrogen – covering safety standards, licensing, and infrastructure – to support this new sector[52][53]. The government has also set interim goals (e.g., 10% renewable electricity by 2025, 30% by 2030) and is incorporating hydrogen into its Net Zero 2050 roadmap[54][37]. In sum, during 2020–2025 Oman progressed from virtually no renewables to launching some of the world’s largest green hydrogen projects – a remarkable pivot that could redefine its energy industry over the next decade.

Major Players in Oman’s Energy Sector

Oman’s energy industry involves a mix of state-owned enterprises, local private players, and international oil companies (IOCs). The table below summarizes key players across the oil, gas, and new energy segments, highlighting their roles and recent activities:

Table: Major local and international players in Oman’s energy sector and their recent initiatives.

Oman’s energy ecosystem is thus a collaborative landscape: the government (through MEM, OQ, PDO, etc.) provides direction and stakes, IOCs bring technology and capital, and newer entrants (renewable and hydrogen developers) are being courted to drive the transition. Local private-sector participation is encouraged via the In-Country Value (ICV) program – for example, PDO and OQ prioritize Omani SMEs for services and require foreign contractors to invest in local training[13]. The Oman Society for Petroleum Services (OPAL) further works to develop local talent and HSE standards industry-wide.

Innovation, Research & Development Programs

Oman has recognized that sustaining its energy sector competitiveness requires continuous innovation – from improving oil recovery and efficiency to incubating new clean tech solutions. Over 2020–2025, multiple innovation programs and partnerships have been launched:

• Corporate Innovation Accelerators: In 2025, OQ launched OQX, its dedicated R&D and innovation arm, with a flagship accelerator program for energy startups. The first cohort included 13 Omani startups tackling diverse challenges – from nanotech coatings to boost solar panel efficiency, to autonomous robot cleaners for solar farms, AI-powered inspection drones, smart pipeline monitoring, and even turning palm waste into advanced water filters[58][59]. This initiative, announced during Oman Sustainability Week 2025, aims to convert homegrown ideas into market-ready solutions, leveraging OQ’s industry expertise and global network[60][61]. It underscores a strategic shift toward nurturing local innovation that can not only serve Oman’s needs but also compete globally. Building on a 2024 pre-accelerator, OQX is establishing Oman as a regional innovation hub, especially in renewables, water sustainability, energy efficiency, and circular economy technologies[58][62].
• Industry-Academia Collaboration: Petroleum Development Oman (PDO) has been actively engaging universities and research institutes to solve technical challenges. A notable platform is Ejaad, a joint industry-academia-government initiative that connects researchers with energy projects. PDO’s knowledge management team works closely with Ejaad to support R&D and innovation aligned with Oman’s economic vision[63]. PDO has inked R&D agreements with local universities (Sultan Qaboos University, Sohar University, GUtech, etc.) focusing on enhanced oil recovery techniques, water management, and energy efficiency – key issues for Omani fields[64]. Through these partnerships, universities receive funding to conduct applied research and host technology centers, while PDO gains access to new ideas and talent. This model is helping build a domestic R&D ecosystem and giving students exposure to industry problems, fostering a new generation of Omani energy technologists[65][66].
• Digital Oilfield and AI: Oman’s operators are increasingly adopting digital solutions to boost productivity. PDO completed a multi-phase digital transformation (with partners like Hexagon and Kongsberg Digital) to implement real-time data platforms and digital twins for its fields[67]. These allow remote monitoring of wells and predictive analytics to optimize production – critical as fields grow more complex[68]. Oman has shown interest in proven fracking and shale technologies, as well as advanced seismic imaging and reservoir modeling tools[69][70]. For example, in 2022 PDO tested robotic inspectors and IoT sensors to improve safety and cut costs in the field. The government is also exploring blockchain for energy trading and AI for demand forecasting as part of a wider digitalization agenda under Oman’s 4th Industrial Revolution strategy[71].
• Renewables and Hydrogen R&D: To support the pivot to clean energy, Oman has set up research programs in solar and hydrogen. The government’s Research Council (now under the Ministry of Higher Education, Research and Innovation) has funded pilot projects like solar-driven desalination (critical for water in hydrogen electrolysis) and studying the performance of PV in Oman’s dusty, hot climate. An example is the Green Hydrogen Innovation Center in collaboration with international bodies, which shares knowledge on hydrogen production, storage, and use[72][54]. Oman’s regulators have been formulating hydrogen safety standards and training programs, knowing that human capital development is key for this new industry[52][53]. Omani engineers and students are increasingly sent to partner countries (like Germany and Japan) for specialized training in fuel cells, electrolyzers, and ammonia handling as part of knowledge transfer agreements.
• Energy Transition Funding: In 2023–2025, Oman took steps to financially back innovation in clean energy. The Oman Investment Authority (OIA) launched the country’s first Energy Transition Fund in mid-2025, with an initial $200 million capital (in partnership with Hong Kong-based Templewater)[73][74]. This fund will invest in high-potential sectors such as “clean molecules” (hydrogen, green ammonia), energy storage, e-fuels, smart mobility, and green data centers[75]. By providing patient capital and attracting foreign co-investors, the fund aims to accelerate the commercialization of new technologies in Oman and anchor advanced manufacturing related to the energy transition[73][75]. Such financing initiatives are crucial to bridge the gap from R&D to large-scale deployment.

The overall tone in Oman’s energy innovation is candid and forward-looking – there is recognition that while oil and gas will remain cornerstone industries for some time, the future lies in being at the forefront of efficiency and sustainability. Companies speak of “transforming the innovation landscape” so that Oman not only adopts imported solutions but develops its own competitive technologies[76][61]. There are, of course, challenges in this journey (funding, talent retention, scaling pilots to commercial stage), which we discuss next, but the period 2020–2025 has undoubtedly seen Oman lay critical groundwork for an innovation-driven energy sector.

Key Gaps, Challenges, and Unmet Needs

Despite the progress, Oman’s energy sector faces several structural challenges and unmet needs as it strives for growth and diversification:

• Resource and Reserve Challenges: Oman’s oilfields are mature and require continuous investment just to maintain output. Unlike some neighbors, Oman doesn’t have vast easy-to-extract reserves; its 5.2 billion barrel reserve base is modest and skewed toward heavy oil[8]. This means Oman must extract a high percentage of oil in place via EOR – a technically complex and costly endeavor. A key challenge is reducing the amount of valuable gas burned or reinjected for EOR. PDO has been trying techniques like polymer flooding and CO₂ injection to improve recovery efficiency, but scaling these across fields is an ongoing need. Similarly, discovering new fields is getting harder – exploration is moving to complex offshore geology (as in Block 52) or unconventional tight reservoirs onshore. Success has been limited so far (e.g., Eni’s first offshore well was dry[18]), pointing to a gap in geological understanding and the need for cutting-edge seismic and drilling tech. Unmet need: advanced subsurface imaging and unconventional drilling expertise to unlock new reserves.
• Domestic Demand vs. Export Balance: Oman’s rising domestic energy demand (for electricity, industry, water desalination) is eating into the volumes available for export. Power demand grows ~5% annually[77], met almost entirely by natural gas, which in turn reduces LNG export capacity and industrial feedstock availability. This tension already led Oman to import gas in peak times[78]. While renewables adoption will help alleviate this (every megawatt of solar/wind can save gas), integrating a large share of renewables is a challenge. Oman’s grid will need upgrades (transmission lines, storage solutions) to handle the variability of solar and wind, especially if it moves toward 30% renewable power by 2030. Unmet need: grid-scale energy storage or regional interconnections to balance renewables, and policies to incentivize energy efficiency on the demand side. Without curbing domestic consumption growth, Oman might struggle to both fuel new industries (like hydrogen production which itself requires power) and maintain oil/gas export revenues.
• Financial and Fiscal Pressures: The 2014–2015 oil price crash and the 2020 pandemic-induced crash both hit Oman’s budget hard, exposing its reliance on hydrocarbons. Oman’s debt levels rose and its credit rating was pressured, limiting capital available for energy projects. Though prices rebounded in 2021–2022, Oman is cautious. The government had to implement subsidy reforms (fuel and electricity subsidies were cut) and consider privatizing energy assets (talks of partial IPOs for OQ or selling stakes in oil blocks)[79][24]. A challenge is ensuring sufficient investment for upstream and renewable projects amid tight public finances. The new Energy Transition Fund ($200M) is a start but far from the hundreds of billions likely needed over the next decades. Oman will need strong foreign investment inflows to realize megaprojects like hydrogen. Maintaining an attractive investment climate – stable contracts, attractive risk-reward terms – is critical. Unmet need: innovative financing models (public-private partnerships, green bonds, carbon credit monetization) to fund energy infrastructure without overburdening state finances. The successful financing and on-time commissioning of Duqm refinery and BP’s gas projects show it’s possible, but hydrogen projects will require similar or greater investor confidence.
• Human Capital and Technology Transfer: A skilled workforce is the backbone of any industry. Oman has emphasized “Omanization” – raising the share of Omani nationals in the workforce – in oil and gas. PDO and others have training programs, but the sector still relies on expatriate expertise for certain advanced roles. As the industry adopts AI, digital platforms, and specialized hydrogen tech, there’s a skills gap to address. Academic institutions in Oman, while improving, have limited R&D budgets. The collaboration via Ejaad and scholarships are helpful, yet Oman would benefit from establishing dedicated research institutes (for example, a national center for hydrogen research, or an advanced petroleum research lab for EOR). Unmet need: more extensive R&D infrastructure on Omani soil and retention of Omani STEM graduates in the energy sector. Without nurturing local innovators and researchers, Oman could remain dependent on imported solutions and foreign experts, which is both costly and at odds with its job creation goals.
• Regulatory and Market Risks in New Sectors: Oman’s bold foray into green hydrogen is not without risks. The hydrogen market globally is still forming – off-take agreements, pricing mechanisms, and transport logistics (ships, pipelines) are all evolving. Oman’s Hydrom is essentially auctioning land and expecting developers to bring capital and customers. If global hydrogen demand or carbon pricing does not rise as projected, some planned projects could face delays or cancellations (a concern given some international firms have recently pulled back on energy transition projects elsewhere). To mitigate this, Oman may need to offer incentives or guarantees, or find anchor buyers (perhaps Europe or Japan under decarbonization agreements). Domestically, there’s also the regulatory task of setting safety standards for hydrogen handling, modifying port facilities for ammonia exports, and ensuring environmental safeguards in vast renewable installations. These frameworks are under development[52][80], but time is short as projects move to FID. Unmet need: a robust legal and regulatory framework for renewables and hydrogen that gives confidence to investors and buyers, including clarity on land leases, grid connection, taxes, and profit repatriation. Additionally, setting up certification for “green” hydrogen to meet importers’ requirements (e.g., EU’s standards) will be important for marketability.
• Climate and Environment Challenges: Oman is highly vulnerable to climate change (e.g., more frequent cyclones impacting infrastructure[81]), yet its economy depends on fossil fuel extraction and exports. Balancing these realities is a strategic dilemma. The government has committed to net-zero emissions by 2050 and to end routine gas flaring by 2030 (PDO has signed onto the World Bank’s Zero Flaring Initiative)[82]. Achieving this will require deploying carbon capture and storage (CCS) or otherwise repurposing associated gas that is currently flared or vented. CCS could also enable blue hydrogen (from natural gas with CO₂ capture) as a transition fuel. Oman has suitable geology (depleted reservoirs) for CO₂ storage, and Oxy – which has global CO₂-EOR expertise – could be a partner. Yet, as of 2025, Oman has no large-scale CCS project in operation. Unmet need: concrete progress on carbon management – either via CCS, nature-based solutions, or shifting more of the economy toward low-carbon sectors. Without this, Oman’s hydrocarbon exports could face demand risks in a decarbonizing world, and domestically, emissions will continue to rise with increasing oil and gas activity.

Conclusion and Outlook

In the span of five years, Oman’s energy industry has navigated turbulent times and emerged with “big ambitions” intact – if not heightened. On one hand, Oman shored up its legacy oil and gas sector: it stabilized oil output at around 1 million bpd with help from technological enhancements and foreign partnerships, unlocked major new gas supply to fuel economic growth, and built a modern refining and petrochemical hub at Duqm to move up the value chain[25]. On the other hand, Oman took remarkable strides toward an energy transition, committing to gigawatts of renewables and positioning itself to export green hydrogen by the latter 2020s[45][47]. Few countries of Oman’s size are attempting such a dual-track strategy – maximizing today’s resources while preparing for a post-oil future.

The candid reality is that Oman must do this to secure its long-term prosperity. The challenges outlined – from technical EOR hurdles to financing and workforce development – are substantial, but Oman has shown pragmatism and openness to innovation in tackling them. Its policy of moderate, independent engagement allows it to maintain good relations with Gulf neighbors, Western allies, and new partners like China, leveraging each where beneficial for investment or markets[83][35]. Major players like Shell, BP, TotalEnergies, and emerging Asian investors are continuing to bet on Oman, whether in conventional projects or renewables, thanks to Oman’s strategic location and improving business climate.

Going forward, the period to 2030 will be critical. We can expect Oman to:

• Boost oil recovery further (possibly exceeding 1.1 million bpd if new finds materialize[9], subject to OPEC+ agreements) while methodically cutting the carbon intensity of operations (energy efficiency, solar-EOR, and reduced flaring).
• Expand gas-based industries to monetize its gas (for example, new petrochemical derivatives, gas-to-liquids, or LNG bunkering fuels) even as it balances domestic and export needs.
• Rapidly scale up renewable power projects – with perhaps 2–3 GW of solar and wind installed by 2030 – to hit the 30% target and free gas for other uses[37]. OPWP’s pipeline of solar parks and wind farms will be a bellwether; timely execution is key.
• Translate hydrogen memoranda into concrete projects. By 2025’s end, several consortia should reach advanced engineering stages; securing off-take deals with Europe or Asia will greatly firm up these investments. Oman’s success here could make it one of the world’s top green ammonia exporters by 2030, carving a new niche in the global energy market.

In sum, Oman’s energy sector in 2025 is at an inflection point – bolstered by recent achievements but facing a new set of challenges to remain competitive and relevant in a changing world. The sultanate has shown a willingness to innovate and partner with others, a strategy likely to continue. As a business-savvy reader will note, Oman offers opportunities across the energy value chain: upstream oil projects needing enhanced technologies, downstream expansions seeking investors, and green energy ventures ripe for development. The coming years will test Oman’s ability to deliver on its plans. If it does, Oman could become a model of transformation – a small oil player that successfully evolves into a diversified energy powerhouse[84][85], balancing the legacy of its hydrocarbon wealth with the promise of a sustainable energy future.

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