Sultanate on the right track to tide over oil crisis
In 2008 and 2009, lower oil prices resulted in negative effect on the country. However, the Sultanate was able to face the crisis head on and overcome it, despite negative effect on the state budget.
Haider Al Lawati –
These days it is not possible to predict the price of a barrel of crude in the international market. Signs, however, indicate that the oil market is currently experiencing a further decline in prices.
One of the recognised facts about international oil markets is the flexibility and continuous volatility in prices. This has forced oil-producing countries to take additional precautions to cope with such scenario.
The Sultanate is among these countries where the oil production is reaching about a million barrels a day. Several other factors including economic and political influence the swing in oil prices on a daily basis. Many countries
have attempted to manipulate these factors, one way or the other.
Such steps, in turn, influence production and supply in the international market. Thus influence demand like for any other commodity. This situation makes things difficult for many analysts and oil experts to predict what will be the situation of the oil markets in the short-term.
Oil-producing countries have to expect more developments in the global market regarding oil production and price.
These predictions conflict with past forecasts of sustained improvement in the oil market in the second half of 2015 despite the cold weather during that time in the northern hemisphere.
The main reason for lower oil prices is the widening gap between the global supply and demand for oil. When the supply is greater than demand, there will be further fall in prices and vice versa. This experience is not new
for the Sultanate. It has faced even worse conditions before.
In 2008 and 2009, lower oil prices resulted in negative effect on the country. However, the Sultanate was able to face the crisis head on and overcome it, despite negative effect on the state budget. The country will do the same in the coming budget. The budget will lay down financial allocations in such a way as to have no effect on the economic and social conditions in the country.
The Sultanate will face such eventualities like any other country which depends on a single major source of income. It will take the necessary measures to address this issue to limit the expected negative effects of worsening deficit, rising public debt and lower state general reserves.
The Sultanate is seeking to achieve economic diversification and raising the contribution of non-oil sector. It also continues to invest in the oil and gas sector through the launch of strategic initiatives aimed to maximise the sector’s contribution to the GDP in the next Five-year Development Plan (2016-2020).
Dr Mohammed bin Hamad al Rumhy, Minister of Oil and Gas, has recently confirmed that the situation regarding the Sultanate’s oil reserves was reassuring.
Production will continue for several decades, not for few years as indicated by
some studies prepared some years ago.
The general objectives of the oil and gas sector in the Sultanate in the Ninth Five-year Plan are numerous and based on the strategy adopted by the government in the future vision for the sector. It was aimed at increasing the contribution of the oil sector by diversifying the productive base of the Omani economy.
This contribution will be through the establishment of industries based on gas as an energy source.
In this regard, the Ministry of Oil and Gas had made tremendous efforts to implement these strategies and attract foreign investment and local expertise to invest in the concession areas. It will also promote the existing companies to direct their investments to new areas.
Likewise, the ministry will seek to provide sufficient gas supplies to meet the increasing demand for domestic consumption, giving priority to production of electricity and satisfying the requirements of the oil and gas sector.
In light of these developments in the oil and non-oil sectors, the next phase of the process of economic development in the Sultanate requires the private sector to play a more active role.
This includes investing in high value-added productive and service sectors which contribute in the diversification of income sources. The country also requires the contribution of oil and gas sectors. Al these efforts should help in providing job opportunities for citizens in promising sectors, such as industry, manufacturing, fisheries, mining, tourism, logistics and other fields. These are important sectors and can contribute more to the GDP.