Economic Outlook

Published October 18th, 2000 - 02:00 GMT

April 6, 2000 marked the day in which Oman commenced exporting liquefied natural gas (LNG), with South Korea as its first partner. The first shipment -- 135,000 cubic meters – was directed to the Korea Gas Corp. under an agreement in which the latter will receive 4.1 million tonnes per annum of LNG for a 25-year period. Sales and purchase accords have also been reached with Japan's Osaka Gas, India's Dabhol Power Company, Coral Energy Resources of the United States and France's TotalFina-Elf. 


These exports are being shipped from Qalhat, the site of a $2.5 billion plant -- the Sultanate's largest single industrial project. This venture, designed to abate Oman's dependence on fluctuating oil income, coincides with plans to finance an ambitious industrialization program with 850 billion cubic meters of LNG reserves.  


For the moment, however, this Gulf state continues to depend on crude and refined oil for 77 percent of its exports and 65 percent of government revenues. Last year, Oman's reliance on oil income worked in its favour. Aggregate exports rose 31 percent in 1999 to $7.3 billion from approximately $5.8 billion a year earlier. Additionally, high international oil prices caused last year's budget deficit to contract to $1.086 billion from a projected $1.639 billion. As a result, analysts expect this year's increased government expenditure to boost the economy and encourage industrial financing. Bankers anticipate the government to channel most of the additional spending to infrastructure and industrial projects. Plans include the construction of an aluminum smelter, a petrochemical complex and a refinery in Sohar. 


Furthermore, new investment legislation should provide foreigners with enhanced opportunities to capitalize on Oman's ambitious expansion plans. The government is seriously considering allowing up to 70 percent foreign ownership of local businesses, a significant liberalization from the present 49 percent restriction. Such a move would be consistent with the Sultanate's review of its privatization process, which also aims to create a competitive commercial environment by further enhancing transparency and facilitating investor involvement. 

© 2000 Mena Report (

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