OREANDA-NEWS. Oman's state-controlled and Shell-led oil and gas producer PDO has signed a \$900mn engineering and procurement contract with UK oil services company Petrofac for the Yibal Khuff oil project.

The 4?-year contract for the integrated project southwest of Muscat, which is scheduled to come on line in 2019, will also use associated gas from the field to generate power and support PDO's enhanced oil recovery (EOR) programme.

PDO has a key influence on Oman's economy as it accounts for more than 70pc of the country's oil output and 90pc of its gas production. PDO is also at the forefront of research and development of EOR technology, with around 22 projects currently under design or execution.

The company continues to adjust to the fiscal pressures caused by lower oil prices with a strict cost-cutting programme called Lean, which was started five years ago, PDO's managing director Raoul Restucci told Argus last month. PDO can withstand much lower oil prices without jeopardising the company's conventional and EOR-related oil and gas projects, he said, despite Oman's position as one of the most vulnerable economies in the region.

PDO also said it is on track to reach a plateau output target of 600,000 b/d by 2019, which supports Omani oil minister Mohammed al-Rumhy's plans to increase the country's average production of 943,000 b/d in 2014 to 980,000 b/d this year. But there is already doubt among officials in Muscat about how it will manage this and simultaneously fight for fiscal stability.