GENERAL & ECONOMIC NEWS

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Oman’s finance and leasing companies, popularly known as non-banking finance firms, were able to bring down their non-performing loans last year.

The gross non-performing loans (NPLs) at the end of 2015 fell to OMR49.5 million (by 10.5 percent)from OMR55.3 million a year earlier, according to the latest annual report of the Central Bank of Oman.

The CBO report said gross NPLs at the end of 2015 constituted 4.7 percent of the gross loan portfolio of hire purchase and leasing companies, compared to 5.9 percent in the previous year.

The total combined assets of finance and leasing companies (FLCs) grew by OMR118.4 million or 12.9 percent to OMR1,037.4 million by end-2015 from OMR919 million a year earlier. “The continued thrust on the part of the government on economic diversification and development of SMEs opened up opportunities for diversified growth and further credit outlays,” the CBO report said, adding, “Total outstanding credit (net of provisions) mainly constituting hire purchase financing, lease financing etc. stood at OMR990.6 million at the end of December 2015.”

Moody’s Investors Service has assigned a rating of ‘Baa1’ to the US dollar certificates issued by Oman Sovereign Sukuk which is a special purpose vehicle incorporated in Oman and wholly owned by its government, according to a report issued on 14 July.

“Moody`s notes that its Sukuk rating does not express an opinion on the structure`s compliance with Shari`ah law, the report clarified.

Despite Moody`s expectations for Oman’s debt to rise to about 30% of the gross domestic product (GDP) by 2017 from less than 5% at the onset of the oil price shock, the country`s fiscal buffers which Moody`s estimates at around 85% of GDP in 2015 will provide support through the process of fiscal and external adjustment, the report said.

Construction work on the multi-billion dollar Omagine Project is scheduled to begin in 2017 and should be complete by 2024, according to the Ministry of Tourism (MoT).

Located in Seeb, the project features seven pearl-shaped buildings which will host hotels, offices, residences and entertainment venues on one million square metres of land, the MoT said.

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The project is expected to create more than 1,000 jobs for nationals when it is completed in seven year’s time. The slump in global oil prices has meant project managers have been seeking further funding globally, according to Omagine chairman Frank J. Drohan.

Prominent Dutch-based greenhouse builder KUBO Group says it has been selected by GlassPoint Solar to provide high-tech greenhouses for the Miraah project — one of the world’s largest solar plants being developed jointly with Petroleum Development Oman’s (PDO) in southern Oman. The Netherlands-based KUBO, acclaimed for its cutting-edge greenhouse technology, will install custom-designed greenhouses covering a staggering 190-hectare desert expanse (equivalent to 160 football pitches) near Amal within PDO’s Block 6 concession.
Equipped with deck wash robots, as well as overpressure and filtration systems to keep moisture and dust out of the greenhouses, the structures represent an integral part of GlassPoint Solar’s award-winning technology to harness the sun’s energy to generate steam necessary to produce heavy oil from the Amal oilfield.
Construction work on the Miraah Solar Plant is well under way at a site adjoining the Amal oilfield. It follows a partnership deal forged exactly a year ago by PDO with US-based GlassPoint Solar, a leading provider of solar services for the oil and gas industry, to develop a massive solar park capable of delivering in excess of one gigawatt of solar thermal energy at peak capacity.
PDO is investing around $600 million in the project, with GlassPoint Solar providing the technology, as well as engineering, procurement and construction (EPC) support.

Sohar Aluminium has set a new production record. The company achieved a record output of 377,186 tonnes in 2015, the highest in its history. Total output in 2014 was 363,528 tonnes.

The record production was achieved by operating at the highest amperage - 389kA - at the end of the year, Sohar Aluminium said in its recently released sustainability report.

“To achieve this feat, all departments across the smelter operated at significantly better levels than in previous years. The plant also achieved its best specific energy efficiency in the last five years at 13.7kWhr/kg. Metal purity levels improved significantly through the year contributing to outstanding customer satisfaction,” the report said.

Sohar Aluminium’s smelter has an annual production capacity of 375,000 tonnes of high-quality aluminium.

To ensure the new results are sustainable, Sohar Aluminium said it undertook to improve its quality of operations by implementing a programme called ‘How We Operate’. Initially piloted in the company`s reduction department, the programme will be rolled out across the plant in 2016-2017.

The company said further efficiency gains are made through its `Value Creation` programmes that create significant costs savings but also improve production processes to market it safe, more efficient and reliable.

In 2015, the company saved US$11.9mn in costs as a result of the productivity gains. The total value creation for the plant was US$33.8mn in 2015.

Sohar Aluminium said its amperage creep project to increase production is progressing extremely well and within budget.

“The project was managed by Sohar Aluminium and great savings have been realised. The operations team has successfully managed the higher operating levels which has contributed to the project being ahead of schedule. This project will be complete by 2018, a year ahead of schedule,” the sustainability report said.

A tender of Government Treasury Bills, issue number 563, was held at the Central Bank of Oman (CBO) this week.

The total value of the allotted Treasury bills amounted to OMR20 million, for a maturity period of 364 days, from June 29, 2016 until June 28, 2017.

The average accepted price reached 98.720 for every OMR100, while the minimum accepted price arrived at 98.680 per OMR100. Whereas the average discount rate and the average yield reached 1.28352 per cent and 1.30018 per cent, respectively.

The Treasury Bills are short-term highly secured financial instruments issued by the CBO on behalf of the Government, which helps the licensed commercial banks to gainfully invest their surplus funds, with added advantage of ready liquidity through discounting and repurchase facilities (Repo) offered by the Central Bank.

The total assets of conventional commercial banks increased by 7.7 per cent to OMR28.6 billion in April 2016 from OMR26.5 billion a year ago. Of the total assets, credit disbursement accounted for 67.2 per cent and increased by 9.4 per cent at the of end April 2016 to OMR19.2 billion, according to statistics issued by the Central Bank of Oman (CBO).

Credit to the private sector increased by 12.1 per cent to reach OMR16.9 billion as at the end of April 2016. Conventional banks` overall investments in securities stood at OMR2.7 billion as at the end of April 2016.

Investment in Government Development Bonds and Government Sukuk increased by 37.7 per cent over the year to OMR923.1 million at the end of April 2016. Banks also invested OMR368.6 million in Government Treasury Bills as at the end of April 2016.

Commercial banks` investments in foreign securities stood at OMR853.1 million in April 2016, registering an increase of 61.3 per cent over the year. Aggregate deposits held with conventional banks registered a modest increase of 2.8 per cent to OMR18.3 billion in April 2016 from OMR17.8 billion a year ago.

Government deposits with conventional banks declined by 8.4 per cent to OMR4.7 billion. Deposits of public enterprises increased by 45.9 per cent to OMR1.2 billion during the same period.

Private sector deposits, which constituted 66 per cent of total deposits with conventional banks, increased by 4.7 per cent to OMR12.1 billion in April 2016 from OMR11.5 billion a year ago. The core capital and reserves of conventional banks stood at OMR3.7 billion as at the end of the April 2016, a rise of 17.7 per cent over the previous year.

The International Monetary Fund (IMF) has urged member states of the Gulf Cooperation Council (GCC), which includes the Sultanate Oman, to press ahead with their privatisation programmes as a means to ameliorate their beleaguered fiscal positions. It is one of many recommendations articulated in a newly published paper, titled, ‘Learning to Live with Cheaper Oil: Policy Adjustment in Oil-Exporting Countries of the Middle East and Central Asia’.
Referencing plans by Oman, among other GCC states, to step up their privatisation strategies, the multilateral financial institution noted that privatisation of state-owned enterprises had the potential to improve productivity and efficiency, while also raising temporary financing for budgetary shortfalls.
However, efforts to this end have been sluggish thus far, the Fund lamented. “Implementation has often moved slowly, particularly in GCC countries where supporting institutional frameworks have sometimes been lacking, and where privatisation programmes have often focused on already-successful enterprises. Nonetheless, GCC divesture programmes have, in the past, managed to generate significant receipts from only a handful of high value operations,” the IMF paper said.

Oman`s total crude oil and condensates production during May 2016 stood at 30.10 million barrels, a daily average of 999,836 barrels, constituting a rise by 0.56 per cent compared to the daily production during April 2016 when calculating the daily average, according to the monthly report published by the Ministry of Oil and Gas.

The total quantities of crude oil exported abroad during May 2016 stood at 26.94 million barrels, a daily average of 869,007 barrels, registering a decline of 10.45 per cent compared to April 2016 while calculating the daily average.
The report said that while the imported quantities by China still constitute the major chunk of the Oman’s crude oil exports (60 per cent). In terms of major countries that imported Omani crude oil, China was followed by USA (14.02 per cent), Japan (13.54 per cent), India (3.76 per cent) and Taiwan (3.80 per cent).

The report added that the price of crude oil for the reference oil round the world witnessed a remarkable increase during May 2016. It continued its upward trend for the settlement price in April 2016 ; up by more than $4 per barrel compared to the settlement price in April 2016.

The average price of West Texas Intermediate (WTI) crude grade in New York touched $47.27 per barrel in April 2016, showing a rise with $5.26 a barrel over the previous month.

The average price of North Sea Brent grade reached $47.65 a barrel, an increase of $4.32 per barrel over March 2016.

The trading of Oman Crude Oil Future Contract on Dubai Mercantile Exchange (DME Oman) rose by more than 12.5 per cent compared with April 2016. Oman oil price (July Delivery 2016) stood at $44.33 a barrel, comprising a rise by $4.93 compared to June delivery 2016. It averaged between $46.46 a barrel and $41.12 a barrel.

This increase in the settlement price is attributed to a number of key factors that have direct effect on prices including but not limited to decrease in USA reserves, the US dollar exchange rate, the decrease in production by Nigeria, Libya and Venezuela, in addition to decreased production from Canada due to fires.

US West Coast refiners have imported several cargoes of crude from Oman in recent weeks, marking the first arrivals of oil from the Sultanate to the US in nearly three years.

The imports of the medium sour crude blend started entering the US in April, shortly after the price of crude from the Sultanate became more competitive against other grades that typically feed West Coast refineries.

Roughly 2 million barrels of Omani crude were unloaded in April and May each, and in June nearly 1 million barrels have unloaded, mostly at Long Beach, California, according to Reuters Trade Flows data and sources. Prior to this, the US had not imported crude from Oman in nearly three years, according to the US Energy Information Administration, as pricing spreads between Middle Eastern crude and other global benchmarks did not make such imports economically viable.

The first cargo arrived in early April on a Very Large Crude Carrier (VLCC) co-loaded with Kuwaiti crude, according to a source with access to bill of lading data, which details a shipper’s cargo. Another VLCC discharged nearly 2 million barrels in May, and the tanker C. Freedom discharged roughly 870,000 in early June, according to trading sources.

CORPORATE NEWS

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Anticipating a quantum jump in potable water demand in Dhofar Governorate, the Omani government is finalizing plans for the procurement of new seawater desalination capacity to satisfy the region’s burgeoning needs well beyond the 2022 horizon.
Strong investment inflows into the commercial, hospitality, tourism and residential sectors are behind the robust eight per cent annual growth rate in peak water demand projected in the governorate. Furthermore, with the government planning to add outlying communities to the distribution network, new desalination capacity will need to be procured over and above capacity currently under tender.
Towards this end, Oman Power and Water Procurement Company (OPWP) — the sole procurer of all new electricity and water capacity — has initiated a study for the procurement of a fourth new Independent Water Project (IWP) in Dhofar Governorate.
Referred to as ‘Salalah IV IWP’, the proposed scheme is expected to be sized at 100,000 cubic metres per day (equivalent to 22 million imperial gallons per day), the state-owned utility said in its newly released 7-Year Outlook Statement covering the 2016-2022 timeframe.
“The required commercial operation date may be around 2021, which would imply that initial procurement stages would begin in 2016,” the procurer stated.
However, to meet demand growth nearer term, OPWP has already commenced the process for procurement of the Salalah III Independent Water Project (IWP), an award for which is anticipated in the fourth quarter of this year. Sized at 100,000 cubic metres per day, Salalah III IWP is proposed to come up adjacent to the Independent Water and Power Project (IWPP) developed by Sembcorp Salalah Power and Water Company near Taqah. A number of international developers are currently participating in the tender for the Salalah III scheme. The plant is expected to be brought into commercial operation in January 2019.
Sembcorp Salalah’s 68,190 m3/day capacity (15 MIGD) water plant is currently the only source of desalinated water supplying consumers in Dhofar Governorate. Supplemental demand is met by the governorate’s Directorate General of Water (DGW) which taps groundwater supplies up to a capacity of around 100,000-100,000 cubic metres/day.

The total number of fixed telephone lines in Oman, including post and prepaid lines, public telephones, ISDN and WLL connections as of May this year stood at 445,319, marking slight a decline from April 2016, when the number of lines was pegged at 450,443.

However, the number of fixed paid lines increased to 339,789 lines in May from 336,175 in April, according to recent statistics published by the National Centre for Statistics and Information (NCSI).

Mobile phone subscribers too registered a marginal increase in May over April figures, with total post and prepaid subscribers reaching over 6.67 million, compared with 6.66 million in April.

Post-paid subscriptions rose to 599,611 from April’s 597,732, while prepaid connections increased to 6.07 million from 6.06 million over the April to May period.

Internet dial-up subscribers fell to 2,641 in May from 2,656 in April; while fixed broadband subscribers rose to 258,254 from April’s 254,178 subscribers.

A tender of Government Treasury Bills, issue number 446, was held at the Central Bank of Oman (CBO) this week.

The total value of the allotted Treasury Bills amounted to OMR67.5 million, for a maturity period of 91 days, from July 13 until next October 12, 2016.

The average accepted price reached 99.794 for every OMR100, while the minimum accepted price arrived at 99.785 per OMR100. Whereas the average discount rate and the average yield reached 0.82716 per cent and 0.82887 per cent, respectively.

The Treasury Bills are short-term highly secured financial instruments issued by the CBO on behalf of the Government, which helps the licensed commercial banks to gainfully invest their surplus funds, with added advantage of ready liquidity through discounting and repurchase facilities (Repo) offered by the Central Bank. Furthermore, Treasury Bills promote the local money market by creating a benchmark yield curve for short-term interest rates. Additionally, the Government (MOF) may also resort to this instrument whenever felt necessary for financing its recurrent expenditures.

The interest rate on the Repo operations with CBO is one per cent for the period from July 12, 2016 to July 18, 2016, while the discount rate on the Treasury Bills Discounting Facility with CBO is 1.75 per cent, for the same period.

Non-petroleum industrial activities witnessed a marginal growth of 0.4 per cent in 2015, the Central Bank of Oman (CBO) said, citing mainly reduced government spending and the wider economic slowdown. This compares with a 3.8 per cent increase posted in 2014, the apex bank stated in its annual report for the year. Within the realm of non-oil industrial activities, manufacturing accounted for 51.3 per cent, followed by construction (38.9 per cent), electricity and water supply (7.3 per cent), and mining and quarrying (2.5 per cent), the report said.
While the share of manufacturing in the Gross Domestic Production (GDP) contracted by 6.7 per cent, the ‘mining and quarrying’, ‘electricity and water supply’ and construction sectors recorded positive growth of 13.8 per cent, 11.0 per cent and 8.6 per cent, respectively in 2015. The manufacturing sector accounted for 10.9 per cent of GDP in 2015 compared to annual average 10.6 per cent during the period 2011-2014.
“The diversification programme aims to achieve the medium term target of the manufacturing sector contributing about 15 per cent to the overall GDP by 2020. The setback to the manufacturing sector in 2015 was primarily due to weak external demand following the global slowdown,” the report said.
It noted that the Ninth Plan (2016-2020) aims to enhance economic diversification process by adopting set of sectoral objectives, policies and mechanisms. Concerted efforts to develop these five sectors would accelerate untapped growth potential and would facilitate expeditious growth of the non-oil sector. Moreover, these sectors have the ability to generate significant number of jobs in the coming years.
The agriculture and fishing sector registered a nominal growth of 5.2 per cent in 2015 as against an average growth of about 6.9 per cent in the previous four years, the report said. The relative share of agriculture and fishing in the overall GDP improved marginally to 1.6 per cent in 2015 compared to an average share of 1.3 per cent during the previous five years. The real GDP originating from the agriculture and fishing sector showed modest improvement during the recent years.

Oman Investment Fund (OIF), a Sovereign Wealth Fund of the Sultanate of Oman, has launched an idea generating initiative called ‘Fikrati’ to seek the opinions and insights of the public and spur their imagination and creativity for the integrated planning of Yiti and Yenkit. People are invited to submit their creative ideas and views on the future of Yiti and Yenkit, by visiting the initiative’s dedicated website www.fikrati.om. Covering over 12 million square metres of land combined, Yiti and Yenkit are national assets full of natural treasures with unique features.
They will be developed as communities and destinations that celebrate and honour the Sultanate’s heritage, culture and environment and at the same time enjoy the advantages of a modern lifestyle. The project seeks to capture the energy and vitality of Oman’s young population, embracing all future possibilities. The development of Yiti and Yenkit will offer today’s children and the next generation places to live and raise families, work, set-up businesses, create economic value, play, entertain guests and have fun, creating a new “Omani way of life”.
Yenkit and Yiti are exceptional pristine locations combining marina, beaches, highland plateaus and canyons and offer great views over the Gulf of Oman. They benefit from easy access from the city centre and Muscat International Airport. The plan is to build vibrant urban communities and host several offerings ranging from 3-star to upscale luxury hotels, affordable to luxurious residential propositions, retail, Food & Beverage outlets and office areas.

Private wealth in the Sultanate will rise from $300 billion to $400 billion by 2020, according to a new report.

In the next five years, the growth of private wealth in the Sultanate will be driven primarily by equities (5.8 per cent), followed by cash and deposits (4.1 per cent) and bonds (2.2 per cent), the Boston Consulting Group (BCG) said in its report titled Global Wealth 2016: Navigating the New Client Landscape. Over the next five years, wealth in the Middle East and Africa region is set to reach $11.8 trillion — and Saudi Arabia, the UAE, and Kuwait’s contribution will account for 22.7 per cent of that sum.

In terms of wealth distribution, private wealth held by ultra-high-net-worth (UHNW) households (those with above $100 million) in Omanis expected to grow by 7.2 per cent in the next five years.

In addition, by 2020, private wealth held by the upper high-net-worth (HNW) segment (those with between $20 million and $100 million) is projected to increase at a rate of 8.8 per cent. Interestingly, over the next five years, this specific segment will be witnessing the highest growth.

Raysut Cement Company’s new cement distribution terminal at Port of Duqm is likely to start operations in the third quarter of this year, said a top official of Port of Duqm Company.

Reggy Vermeulen, CEO of Port of Duqm Company (PDC), said the facility is currently at the pre-trial stage and the firm and various authorities, including Royal Oman Police, are testing equipment at the facility, including that used for fire-fighting. Once this process is over, trials will take place in Q3 of this year and operations could start in the same quarter, he added.

The terminal will help distribution of cement in the region where several infrastructure, housing and hotel projects are planned.

Vermeulen said the terminal will prove very useful as currently cement was brought there by trucks. Once the terminal is operational, cement will be brought in large quantities by sea from Salalah, at a much reduced cost, he added.

Vermeulen said the liquid berths terminal tenders are closed and Special Economic Zone Authority of Duqm (Sezad) is expected to award the contracts soon. The contract estimated to be worth $1 billion will involve design, dredging, reclamation and jetty work for the facility.

The terminal will be large enough to cater to the bulk liquid volumes associated with a large refinery of 230,000 barrels per day capacity or more and petrochemicals hub envisioned at the Special Economic Zone (SEZ) adjoining the port.

Duqm Petroleum Terminal Company (DPTC) will be the logistics provider for the storage and handling of liquid products at the port. DPTC will facilitate the export of refined products like Jet A1, naphta, fuel oil, gasoil and Refrigerated Liquid Petroleum Gas. It will also export pet coke from a quay wall with special installations. Oman Oil is building a $50 million bunkering facility in Duqm and Vermeulen feels it usefulness will grow with the completion of the port and growth in shipping traffic, which will increase demand for fuel. The port does not need any dedicated infrastructure to handle cruise vessels, as it already has customs and immigration facilities, but it could still be sometime before such vessels dock, as tourist infrastructure in the region needs to be developed further, said Vermeulen.

The Board of Directors of the Public Authority for Stores and Food Reserve (PASFR) approved the draft budget for 2017 during a meeting held under HE Dr Fuad Bin Ja’afar Al Sajwani, Minister of Agriculture and Fisheries, Chairman of the PASFR Board.

The board reviewed implementation of the decisions made at its previous meeting and viewed minutes of the first meeting.

It also discussed several items listed at the agenda that include discussing the PASFR administrative, financial and commercial report, as well as discussing and approving the draft PASFR budget for 2017.

Additionally, the board viewed outcomes of following up recommendations of the study on opportunities of improving financial revenues and developing the PASFR financial systems.

The recent upswing in international oil prices, which has seen the price of Omani crude more than double to over $46 per barrel since the start of the year, is no cause for celebration just yet, according to a top official of the Ministry of Oil and Gas. Salim bin Nasser al Aufi, Under-Secretary, urged the nation’s energy producers “to stay the course” as they continue to deliver on their production targets while operating in a low oil price environment. “It’s too early to start feeling comfortable now that prices are picking up,” Al Aufi warned. “We have a programme and strategy set for low oil price challenges. We are still in a low oil price scenario. The (recent) improvement in the oil price is shaky.”

Cost-containment strategies adopted by oil and gas producers in the wake of the oil price collapse have seen budgets pared to the bone, several capital-intensive mega schemes deferred, workforces downsized, and production costs and wastage significantly reduced, in a far-reaching effort to sustain operations in a low oil price environment. “It’s too early to start celebrating, and even if the price picks up I want the companies to continue to be very resilient and scrutinise every dollar they spend,” the Under-Secretary noted. “Our message to the companies is to stay the course, capture all the benefits gained by scrutinising all our activities and our spends, and building on it to make sure we don’t allow waste to creep back in again into the business. There is still a lot of work that needs to be done, and I think they should continue on that journey. Of course, a lot has been done, but we need to make sure we hold on to it,” Al Aufi stated.

The first phase of the Innovation Complex, Muscat will be completed next year and the construction of the second phase will commence after one year form the completion and operation of the first phase. Dr Abdulbaqi bin Ali al Khabouri (inset picture), Director of Science Parks at The Research Council (TRC), said that approximately 70 per cent of the first phase is complete adding that the main building occupies 32,000 sq metres. The 7-storey building will be constructed to the most advanced international standards which will make it a leading project for scientific innovation. A plot of 540,000 sq metres adjoining Sultan Qaboos University (SQU) in Al Khoudh district has been earmarked for complex which will be constructed in three phases in 10 years’ time.