Oman reports massive fiscal surplus in 2011

A surge in crude prices allied with a steady rise in oil output to allow Oman to record one of its largest fiscal surpluses in 2011 despite a large increase in actual expenditure, according to official data.

After registering a deficit of RO48.8 million (Dh468 million) in 2010, the Gulf country’s budget balance turned into a huge surplus of RO964.8 million (Dh9.26 billion) in 2011, showed the figures by the Omani ministry of national economy.

The massive surplus was mainly a result of a 59 per cent rise in oil export earnings to nearly RO8.697 billion from RO5.470 billion due to a sharp rise in crude prices and Oman’s oil production to nearly 890,000 barrels per day from 864,000 bpd in the same period. High oil income boosted the country’s total actual revenue by about 44.6 per cent to RO11.43 billion from RO7.91 billion.

Actual public expenditure swelled by nearly 8.8 per cent to RO8.66 billion in 2011 from around RO7.96 in 2010, the report showed.

A breakdown showed current expenditure expanded by about 10 per cent while capital spending grew by seven per cent. It showed was a slight fall of 1.5 per cent in allocations for oil production and but a 16 per cent increase for gas.

In a recent report, the Abu Dhabi-based Arab Monetary Fund (AMF), a key Arab League establishment, expected Oman to record a much higher fiscal surplus through 2011 because of an increase in its crude output and nearly 40 per cent rise in oil prices above its budgeted price of $58 a barrel.

Oman, which is not an OPEC member, had projected a shortfall of RO850 million when it announced its record 2011 budget early last year.

But it massively revised up the gap to RO1,850 million after Sultan Qaboos approved new jobs and hefty pay rises for Omani government employees in response to demands during unrest in February 2011.

In its latest report, Oman’s central bank said that the budget deficit for 2011 was revised up following approval of extra spending in April.

It said the 2011 budget was based on an average crude oil price of $58 and production of 896,000 barrels per day. Oman expects to boost spending in its 2011-2015 development plan by a whopping 113 per cent as it expects high oil prices and is pursuing plans to boost crude output.

Announcing its 2012 budget, the government projected record high spending of RO10 billion and revenue at RO8.8 billion, leaving a shortfall of RO1.2 billion.

Quoted by the official Omani news agency on Friday, oil minsiter Mohammed bin Hamad Al Rumhi said the 2012 was based on a record high oil price of $75 and crude output of 915,000 bpd, which he expected to be achieved this year.

He said the breakeven oil price for Oman’s budget this year would be around $90 on the basis of an expected increase in the country’s actual spending.

“If average oil prices surpassed that level through 2012, then Oman will be able to achieve a surplus in its budget,” he said.

Oil prices averaged at an all time high of nearly $110 a barrel and analysts believe the price will remain above $100 during 2012.

Official data showed Oman boosted oil output to a 10-year high of around 884,900 bpd in 2011 and production swelled further to 894,400 in January. At 915,000 bpd, Oman’s output will reach its highest average this year while the country is pushing ahead with plans to reach one million bpd in three years.

Oman has around five billion barrels of proven oil deposits and nearly 25 trillion cubic feet of natural gas, which is used to feed its 10-million-tonne-a-year LNG plant in the southern port of Sur.

Follow Emirates 24|7 on Google News.