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Massive Fiscal Surplus Reported for Oman in H1

Oman : 10 August 2010

The latest surplus report of RO708.2 million makes the RO2.5 million reported for the six months of 2009 seem miniscule

Oman reported a huge fiscal surplus of nearly RO708.2 million (Dh 6.8 billion) in the first six months of this year, due to a sharp rise in oil prices that went up over 50 per cent higher than expected, according to official data reported this week.

Paling in comparison, the 2009 surplus of RO2.5 million in the first six months were due to oil prices that were lower than the expected amount of $45 per barrel, as reported by the Ministry of the Economy.

A more detailed budget shows that the current surplus was given a boost by revenues that jumped almost 30.5 per cent, from RO3.23 billion in the first six months of 2009 to RO4.22 billion in the first half of 2010.

The revenue swell was thanks to oil export earnings jumping 54 per cent from RO1.84 billion to RO2.84 billion.

Not only was Oman’s oil income up because of an increase in the prices of crude, but also because the nation’s output climbed from 792,000 barrels per day in the first half of 2009 to 856,000 barrels in 2010.

Oman is in the midst of a large development program intended to reverse the drop in crude outputs due to lower field investments.

Statistics showed that the price of crude from Oman climbed from $45.7 per barrel in the first six months of 2009 to $77.3 per barrel in the same period of 2010.  Those oil prices reached a mark 50 per cent above the $50 per barrel the government planned for in their 2010 budget, which was up from the $45 in the 2009 budget.

Strengthened by strong oil prices, Oman announced a record setting budget earlier in the year, much like many other Gulf countries.  They also recorded a continued economic stimulus to assist with the negative effects seen during the 2008 global economic crisis.

The budget of 2010 was set on an optimistic price of $50 for oil, as reported by Ahmed Mecki, the Omani Minister of National Economy.  Mecki recorded spending would reach RO7,180 million, a full nine per cent more that the record high budget of 2009.

Projected revenues were set at RO6,380 million and came mainly from gas and oil sales.  This left a RO800 million deficit.

The official figures indicated that RO4,050 million in oil exports were included in that revenue or approximately 63 per cent.  Almost RO800 million were expected to come from gas revenues.

Oman saw approval of $10 billion in a development program aimed at crude oil and natural gas in 2007, despite not being a part of Opec.  These plans are to develop natural gas deposits and increase oil production, with official estimates reaching five million barrels of crude oil and 30 million of cubic metres of natural gas resources, climbing back up to levels seen in the past after a consistent drop over the last four years.

Oil production started to recover in 2008 and rose by almost 6.5 per cent from 2007 figures of 710,000 bpd to 756,000 bpd.  Then 2009 saw Oman reach their targeted amount of 810,000 bpd.

Ministry reports showed a huge surplus in the first six months of 2009 even though actual spending increased to approximately RO3.517 billion, up from RO3.232 billion in the opening months of 2009.

Many of the increased expenditures were development investments, spending that grew almost 7.9 per cent.  Current spending amounts rose 5.8 per cent, although defense expenditures, always a major part of the nation’s budget, were cut almost 3.2 per cent.  Oil production spending fell by almost 19 per cent.

The Central Bank of Oman (CBO) released their 2009 economic report in July, stating that the estimated $50 per barrel the government counted on fell on the conservative side.  Due to the indications of economic recovery across the globe, CBO predicts that oil prices would be much higher by the close of the year than that conservative estimate.

CBO’s report stated that it was tradition for the government to be conservative with crude oil price predictions for the budget, and that the RO800 million deficit projected was better than the RO810 million projected in the 2009 budget.

That 2010 deficit is expected to be covered by the government’s reserve funds, although the possibility of borrowing or combining both options is also on the table.  Since the average crude oil price per barrel will likely be much more than the $50 per barrel estimated, the deficit and resulting pressures may be much less than in 2009.

CBO stats reveal that the budgeted deficit for Oman in 2009 was reduced from the expected RO810 million to RO680 million by the end of the year, mainly due to the higher revenue on oil exports.

The 2009 deficit was cut even though actual spending rose from the expected RO6.42 billion to approximately RO7.4 billion.

Earnings from oil grew from the expected RO3.5 billion to RO4.49 billion, causing total actual revenue to climb from RO5.61 billion to RO6.74 billion, as reported by the CBO.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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