Budgets, deficits and jobs
David Douglas, who resigned as CEO of Oman Oil Company in September 2004, said in the preceding February that "six projects with a combined investment of $6.5 billion in Sohar were key to the development of Batinah region."
He added, "three projects with a combined investment of $3.3 billion were important to the development of Sharqiya region." This would undoubtedly include the Qalhat LNG plant with its associated gas fields and pipelines.
Figures for these projects are often quoted in US dollars rather than Omani rials, and do vary sometimes between news reports.
Not only that, but Oman has been busy diversifying into the gas shipping business having chartered or comissioned seven LNG tankers, also entering into gas and oil exploration and exploitation agreements with China and Kazakhstan.
Since 1992, Oman has held a seven percent share in the Caspian Pipeline Consortium, set up jointly with the governments of Kazakhstan and Russia.
At the end of November 2005, Oman Oil Company acquired a 7.45 per cent stake in China Gas Holdings Ltd for HK$248 million ($31.8 million).
In mid-December, Oman Oil Company SAOC (OOC) acquired 30 per cent share in GS Group to invest in Qingdao Lidong Chemical Co. Ltd, an aromatics petrochemical plant, in the People’s Republic of China.
Oman's share in these ventures is managed by a number of companies in which the government holds major stakes. So we have some idea of where that deficit is going. Actually, it looks pretty small compared to the total financing of all joint ventures with other governments and private investors. It gives meaning to the concept of globalisation.
We have some idea of what is being spent but remain hazy about future revenue streams. Without access to the details of the 7th five-year plan, it's difficult to say exactly where the expenditure will be allocated. 81% of Oman's income is still projected to come from oil and gas activities in 2006. Revenue this year is based on an oil price of $32 per barrel and an average production of 746,000 barrels per day. Given that 2005 closed with a budgetary surplus of RO 1.479 billion as against a projected deficit of RO 540 million, it seems highly possible that 2006 might see a reduced deficit if not a surplus too, as Muscati has suggested.
The IEA's World Energy Outlook: Middle East and North Africa Insights (2005) maintains that the Gulf oil-producing companies will have to continue to make heavy investments in upstream oil development in order to sustain prices, and a future, for themselves, as well as the global economy. Oman's share of that investment is reckoned to be $10 billion.
The IMF advised Oman to investigate the feasibility of continuing to develop high-energy demand projects without guaranteed assurance of cheap gas supplies. Indeed, Cynthia Caroll, CEO of Alcan said that one of the reasons that her company had chosen Oman as a site for a smelter over a contesting site in South Africa, was the availability of cheap energy.
There's another aspect too. With over half a million young Omanis under the age of 19 in school, where are they going to work?
Although 3,500 people are expected to be employed in constructing the smelter, only 800-1000 will be directly employed. The Oman Fertilizer Project will employ 430 people. Sohar Refinery will employ 600. Oman Polypropylene will employ 150.
The Blue City project, whose construction agreement was signed this week, will employ 6,500 at the peak of construction. No mention has been made of how many people might ultimately be employed directly. There has been mention of universities and colleges at the complex. How many students? How many teachers?
Do Omanis generally choose to work in factories and construction?
