Behind the figures: Why Oman's economy is set to thrive both now and in the future
There are numerous indicators that suggest, and rightly so, that the Omani economy is doing just fine. This is evidenced by the posting of a satisfactory surplus in 2013 and the absence of a serious public debt problem.
Other notable developments entail the clinching of an open skies agreement with the US. New statistics from official sources point to a budgetary surplus in excess of $1 billion (Dh3.67 billion) for fiscal 2013. The welcome development is attributed to a growth in revenues and a marked decline in expenditures. This is in comparison to a shortfall of $209 million posted in 2012.
Turning to the 2014 budget, revenues and expenditures are projected at $30.4 billon and $35.1 billion, which would lead to a deficit of $4.7 billion. Certainly, the assumed deficit is substantial by virtue of representing around 6 per cent of the country’s $78 billion GDP.
However, chances are that the deficit would be reversed into a surplus partly through enhanced revenues. Suffice to say that the 2014 budget was prepared with an average oil price of $85 per barrel, evidently well below prevailing market rates. Hence there is the opportunity to generate a stronger treasury income.
In reality, the oil industry has alone accounted for 76 per cent of total revenues in fiscal 2013. Average daily output stood at 945,000 barrels per day.
Output totalled 878,000 bpd in 2011 before rising to 920,000 bpd the next year. The steady rise in oil output is primarily attributed to a 2005 agreement to develop output at the Mukhaizna field from 10,000 bpd to 150,000 bpd.
Occidental of the US and its partners won the concession in 2005 and committed to invest $2 billion to develop the field. The job can best be described as mission accomplished.
Now, the attention must turn to getting the most out of gas reserves, thanks to the signing of a 30-year gas production and sales sharing deal with British Petroleum. Under the agreement signed in December 2013, BP intends to drill some 300 wells for tapping tight gas at Khazzan’s field in central Oman. The aim is to extract about 1 billion cubic feet a day, in turn a good piece of news for the Omani Treasury.
This is timely, as statistics set out in the 2013 budget point to gas revenues declining by almost 6 per cent, and therefore making up below 11 per cent of total revenues.
Another positive relates to the relatively small figure of outstanding public debt. At $4.2 billion, it makes up merely 6 per cent of GDP and clearly under control.
Another notable has been the deal with the US on open skies. Among other things, the deal grants airlines from both countries unrestricted access to one other’s market.
This is forward-looking as neither Oman Air nor US carriers operate flights between points in the US and Oman. The accord comes ahead of the completion of expansion at key airports in Oman notably Muscat International Airport.
Certainly having this kind of agreement with the world’s largest economy adds to the sultanate’s economic fortunes with accompanying benefits to flyers in terms of choices, prices and services.
Undoubtedly, the two sides are pleased with the outcome of the free trade agreement (FTA) between the two sides. The US-Oman FTA went into effect in early 2009 and eliminated most tariffs and non-tariffs.
The US also has an FTA with Bahrain. The two GCC member states had to streamline laws concerning the rights of foreign workers and intellectual property rights in order to win US Congressional endorsement.
By Jasim Ali