The Omani government is working to address unemployment by putting $1bn toward job creation after seeing higher-than-expected returns on oil in the first half of 2012.
On August 12 the Ministry of Finance announced plans to put $1bn, mostly generated from the additional oil revenue, toward job creation in the Sultanate. It has not yet been specified whether these jobs will be created in the public or private sector, nor exactly how the money would be spent.
The IMF in late 2011 warned that the Sultanate would have to address its high unemployment rate to maintain stable economic growth, suggesting that around 45,000 new private sector positions would need to be created annually to absorb the new entrants to the labour force and slash the unemployment rate.
According to an IMF statement from December 2011, 44,000 new government jobs were created in 2011 and the 2012 budget provided for the creation of 36,000 additional jobs.
Increasing oil production is being tapped to help create new jobs. Indeed, the Sultanate is well on its way to achieving its target of producing 915,000 barrels per day (bpd) of oil by the end of 2012. Production increased from 888,700 bpd in April to 932,800 in May, before declining slightly to 924,100 bpd in June. Average production was 902,000 bpd in the first half of the year, up from 878,800 during the same period in 2011.
This increased production, coupled with higher-than-expected oil prices, means the Sultanate will likely erase the predicted OR1.2bn ($3.11bn) deficit originally expected for this year. While the original budget forecast oil prices at $75 per barrel, the Sultanate sold its oil at an average price of $115 per barrel in the first five months of the year, Reuters reported in July.
The latest figures show that the Sultanate’s revenues had reached OR7.37bn ($19.12bn) in the first six months of 2012, a 35% year-on-year increase. This resulted in a budget surplus of OR1.61bn ($4.18bn), more than four times the amount of the surplus recorded after the first six months of 2011. Analysts polled by Reuters in March predicted that the Sultanate would post a fiscal surplus of around 5% of its GDP this year, up from 3.5% of GDP in 2011.
Indeed, recent discoveries and investment in the hydrocarbons sector have helped the Sultanate to increase its production and boost oil and gas revenues. In April global energy giant BP raised its estimates of the potential exploitable gas reserves of its Block 61 concession in central Oman by more than threefold – from 30trn cu ft to 100trn cu ft. The concession holds the Khazzan-Makaren gas fields and, by these estimates, is one of the richest blocks in the Sultanate.
Daniel Blanchard, the general manager of BP Oman, told the Oman Observer that the company was making excellent progress in the exploration and appraisal of the Khazzan gas field. According to Blanchard, an agreement between the company and the government on whether to continue developing the Khazzan field is expected to be released by the end of the year.
The Ministry of Oil and Gas also announced earlier this year that it had commissioned a study to assess the Sultanate’s shale gas potential. The government has recognised the need to attract international oil companies to the sector in the Sultanate, with Nasser Bin Khamis Al Jashmi, the undersecretary of oil and gas, saying in April that international investments could help unearth the potential of shale gas in the country.
“We think Oman has good shale gas potential, and we are working on this,” he told the Oman Observer. ”At the moment, we have some programmes to explore and assess [this resource].”
While hydrocarbons revenues remain high as a result of further discoveries and exploration in the sector, the Sultanate will likely continue to work toward a stable economic environment by budgeting significant funds for job creation, particularly in the private sector.