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Oman's oil deficit - need to diversify

The Sultanate of Oman shares borders with Saudi Arabia, United Arab Emirates and Yemen; the country also shares marine borders with Iran and Pakistan. Geographically, it is held on the mouth of Persian Gulf; besides, the Sultanate is also the second largest territory in the Arabian Peninsula. Thus, its physical location and peaceful political situation attract to invest in Oman and offer a convenient place to enhance trade and business relations.

It contrast to the excellent opportunities in trade and business. Oman is an oil rich monarchy, which heavy rely on its hydrocarbon resources, mainly oil and gas. Historically, the first ever oil discovery was made in 1956. Later, the first commercial oil discovery was achieved in 1962 and thus, the first ever export of oil cargo was made in 1967. It was accounted that by 2009, in Oman there were more than 135 oil producing fields, which rapidly reached the mark of 162 by 2013. According to the Ministry of Finance, Oman, in the year of 2012, hydrocarbon sector generated 86% of Government revenue.  

Parallel to that, for last several years it is also of the great concern that Oman is going short of the oil resource drastically. Even though the country is the biggest Middle Eastern oil producer, without being the member of Organization of the Petroleum Exporting Countries (OPEC). Its modest oil output make it hard to compete with its neighbor in the region.

According to Platts, one of the leading global energy provider, from last seven years the country has reversed a declining oil production trend. Furthermore, it states that while on the verge of decline in the oil resources, Oman has won recognition as the regional leader in development of unconventional oil and gas resources. 

Similarly, more recently, in March 2015, the International Monetary Fund (IMF) stated that Oman has been hit hard struggling with the oil prices. For example, according to the Ministry of Finance, Oman, in 2014, the country recorded a budget deficit of 600 million Rials Omani ($1.56 billion).[1]

Therefore, stability of the economy is a concern which is imminent to focus. According to IMF, there is a need to introduce a direct and indirect taxation, limiting growth to public sector wages and reformation of the system of subsidies for fuels, electricity and water. Most importantly, there is a need to diversify its approach from over-relying on single commodity and boost the economy by promoting other industries.  





[1] Besides that the IMF also pointed out the unrest of ‘Arab Spring’ in the Middle East some years back. To that Oman responded by increasing huge wages and creating tens of thousands of new jobs. It was quoted that the Government spending was increased by 35 percent in 2011.

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