07 April 2008
While Oman, like most of the other Gulf states, is seeking to diversify its economy away from a dependency on fossil fuel exports, oil remains the driving force on which the sultanate relies, at least for the time being.
On April 2, the Omani Centre for Investment Promotion and Export Development (OCIPED) announced that the country's non-oil exports for 2007 had reached $3.4bn, up 59% on the $2.1bn of 2006. Aiman Ambusaidi, the centre's director of export development, said the group's objective was to lift non-oil exports to more than $5bn by 2010.
The sultanate's banking industry is also enjoying success, with the central bank releasing figures on April 1 showing robust combined growth of net profits for the country's commercial banks and steep rises in deposits and assets.
According to the report, Oman's commercial banks recorded net profits of $105m in the first two months of the year, up from $65m for the corresponding period in 2007. Total banking sector assets were up by 46.7% to hit $28bn, while deposits increased by 39.6% to nearly $18bn.
However, despite these and other achievements, it is oil that continues to grease the wheels of Oman's economy.
When handing down the 2008 budget in January, National Economy Minister Ahmed bin Abdulnabi Macki said oil production this year would be around 790,000 barrels per day (bpd), generating revenue of $9.4bn. This would represent 67% of the state's total earnings for the year, he said.
Even though Oman's oil output is in retreat, well down on the 959,000 bpd produced in 2000, revenues from this segment still overshadow those of non-oil products or the profits from the country's banking sector.
In order to maintain production, Oman is both promoting the development of new fields and investing heavily in enhanced oil recovery (EOR) technology to extend the life of existing fields. Last year, the ministry of oil and gas announced plans to invest $10bn by 2012 to boost production from operational oil fields, with one-third of this to be spent on EOR projects.
Some of the planned investments have already been made, with their effects expected to be felt this year. The production figure announced by Macki of 790,000 bpd is far higher than the average 710,000 bpd extracted in 2007, a reflection on the more than $2bn spent last year by Petroleum Development Oman on projects to enhance output.
Oman is also calling for bidders to develop three new onshore blocks and two offshore blocks, located between Salalah in the south and Musandam in the north, as part of its programme to extend the life and earning power of its oil industry.
Announcing the planned tender on March 30, Oil and Gas Minister Mohammed bin Hamad Al Rumhy said it was hoped negotiations on at least one concession could be finalised before the end of the year.
It is not just in its oilfields that Oman is stepping up investment. In late March, the state-owned Oman Shipping Company (OSC) unveiled plans to spend up to $4bn on new vessels, all intended to serve the oil industry.
At present, OSC has a fleet consisting of seven liquefied natural gas tankers and two clean tankers, with four oil tankers on order. Part of the $4bn expansion programme includes ordering ten very large crude carriers, to be built by Korean companies Hyundai Heavy Industries and Daewoo Shipbuilding and Marine Engineering, with the two contracts together worth around $1.5bn.
Kuldeep Mathur, OSC's chief financial officer, said the aim was ultimately to increase the company's fleet by between 15 and 20 tankers.
"We are expanding the fleet with a view to the future demands for our export grade crudes and products," he told the press.
Mathur said OSC was looking at chartering some of its new ships out to other companies, potentially including the National Iranian Tanker Company. While OSC may be looking abroad to broaden its operations, there is no doubt that oil-related industries will still be bringing the sultanate's revenues in.
While Oman, like most of the other Gulf states, is seeking to diversify its economy away from a dependency on fossil fuel exports, oil remains the driving force on which the sultanate relies, at least for the time being.
On April 2, the Omani Centre for Investment Promotion and Export Development (OCIPED) announced that the country's non-oil exports for 2007 had reached $3.4bn, up 59% on the $2.1bn of 2006. Aiman Ambusaidi, the centre's director of export development, said the group's objective was to lift non-oil exports to more than $5bn by 2010.
The sultanate's banking industry is also enjoying success, with the central bank releasing figures on April 1 showing robust combined growth of net profits for the country's commercial banks and steep rises in deposits and assets.
According to the report, Oman's commercial banks recorded net profits of $105m in the first two months of the year, up from $65m for the corresponding period in 2007. Total banking sector assets were up by 46.7% to hit $28bn, while deposits increased by 39.6% to nearly $18bn.
However, despite these and other achievements, it is oil that continues to grease the wheels of Oman's economy.
When handing down the 2008 budget in January, National Economy Minister Ahmed bin Abdulnabi Macki said oil production this year would be around 790,000 barrels per day (bpd), generating revenue of $9.4bn. This would represent 67% of the state's total earnings for the year, he said.
Even though Oman's oil output is in retreat, well down on the 959,000 bpd produced in 2000, revenues from this segment still overshadow those of non-oil products or the profits from the country's banking sector.
In order to maintain production, Oman is both promoting the development of new fields and investing heavily in enhanced oil recovery (EOR) technology to extend the life of existing fields. Last year, the ministry of oil and gas announced plans to invest $10bn by 2012 to boost production from operational oil fields, with one-third of this to be spent on EOR projects.
Some of the planned investments have already been made, with their effects expected to be felt this year. The production figure announced by Macki of 790,000 bpd is far higher than the average 710,000 bpd extracted in 2007, a reflection on the more than $2bn spent last year by Petroleum Development Oman on projects to enhance output.
Oman is also calling for bidders to develop three new onshore blocks and two offshore blocks, located between Salalah in the south and Musandam in the north, as part of its programme to extend the life and earning power of its oil industry.
Announcing the planned tender on March 30, Oil and Gas Minister Mohammed bin Hamad Al Rumhy said it was hoped negotiations on at least one concession could be finalised before the end of the year.
It is not just in its oilfields that Oman is stepping up investment. In late March, the state-owned Oman Shipping Company (OSC) unveiled plans to spend up to $4bn on new vessels, all intended to serve the oil industry.
At present, OSC has a fleet consisting of seven liquefied natural gas tankers and two clean tankers, with four oil tankers on order. Part of the $4bn expansion programme includes ordering ten very large crude carriers, to be built by Korean companies Hyundai Heavy Industries and Daewoo Shipbuilding and Marine Engineering, with the two contracts together worth around $1.5bn.
Kuldeep Mathur, OSC's chief financial officer, said the aim was ultimately to increase the company's fleet by between 15 and 20 tankers.
"We are expanding the fleet with a view to the future demands for our export grade crudes and products," he told the press.
Mathur said OSC was looking at chartering some of its new ships out to other companies, potentially including the National Iranian Tanker Company. While OSC may be looking abroad to broaden its operations, there is no doubt that oil-related industries will still be bringing the sultanate's revenues in.
© Oxford Business Group 2008
