While PDO produces the bulk of Oman's crude oil and gas, a number of oil companies enhance the Sultanate's output in concession areas through production sharing contracts.

Indeed, Oman is actively seeking greater participation from international oil companies, and there are gradual signs that this may be achieved.

Most recently, Maersk Oil Oman signed a concession agreement with the Ministry of Oil and Gas for oil and gas exploration rights in blocks 45 and 48 in central Oman, a total area of 3,878 sq km close to the border with Saudi Arabia.

Maersk Oil Oman is a subsidiary of Copenhagen-based oil and shipping group AP Moeller.

Under the agreement, Maersk will have to conduct an extensive exploratory programme during the first four years, including several geological and geophysical studies, seismic surveys and drilling operations.

Maersk is expected to spend more than $18 million on the project, in which the government will bear no investment risk.

Maersk already has exploratory activities in the Sultanate in concession areas 36 and 38 in the southern part of the Sultanate.

French energy giant TotalFinaElf is also said to be looking for more concessions in the Sultanate.

The company's general manager in Oman, Jerome Bourceret, was quoted as saying that the company wants to develop its exploration and production activities in the country following relative disappointment in another concession.

''Despite having drilled a relatively dry well in block 4 in 1999 due to poor reservoir porosity, the company keeps working on the geology, geophysics and geochemistry of the concession,'' he said.

TotalFinaElf is already a partner in PDO and Oman LNG, and has an 18-month agreement in place to buy 187,000 tonnes of LNG from the plant.

The company also markets about 10 per cent of Oman's total crude oil production.

But with gas becoming increasingly important in the Sultanate, Bourceret feels that Oman should offer more competitive deals on its resources to stave off competition from its neighbours.

''Oman will need to offer more security packages in profit sharing, offer longer commitment or face strong competition from the Saudis once they have fully opened up their gas fields to foreign firms,'' he said.

In particular, Oman's gas is more expensive to exploit than Saudi Arabia's, while its reserves are considerably smaller than the regional energy powerhouse.

The solution, according to some analysts, is to revise the terms of the Exploration Production Sharing Agreements (EPSAs), which are little changed since the 1980s. In particular, the breakdown of profit percentages between investors and the government will be of key importance.

''Since the government does not contribute to the exploration capital, it needs to reduce its share of profits so investors can keep a little bit more from their efforts,'' one was quoted as saying.

Another industry official suggested that the Sultanate should offer longer exploration contracts to make the deals more attractive.

Oman currently grants a two or three year exploration contract which binds the investor to find gas or relinquish the field.

''The timeframe may not be enough to assess a field and an investor may find himself relinquishing it to his rival after he has made a considerable investment,'' the official said.

Gulfstream Resources Oman, a unit of Gulfstream Resources Canada Ltd, is for now the only company which has a gas production sharing deal in Oman, though this is expected to change given the surging rise in gas demand from industrial developments and population growth.

In 1997, Oman awarded Gulfstream oil exploration and production rights in Hafar block 30. The deal commits the company to spend at least $20 million over six years on exploration.

Officials had said Oman planned to invite more foreign firms this year to explore for gas on a production-sharing basis.

Gulfstream, said a company official, expected to start producing 100 million standard cu ft per day of gas next year. Under the terms of the agreement, the Canadian firm will sell the entire gas production to the government.

Production sharing agreements with foreign oil companies are to form the basis of Oman's energy policy in the future, according to officials, with the next few years dedicated to frontier exploration.

New exploration efforts, including foreign technology, will be required to lift output.

These ventures relieve some of the burden from the government on developing reserves, with finances able instead to be channeled to ventures which provide good returns.

This scenario has also been brought about by fluctuating oil markets over the years.