GENERAL & ECONOMIC NEWS

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Oman plans to produce an average of one million barrels of crude oil per day this year, despite a production cut of 45,000 barrels a day agreed with oil exporting Opec bloc, a top-level official at the Ministry of Oil and Gas said.

“Production-wise, we are going to maintain the one million barrels per day. Our share in production cut is 45,000 barrels a day and we have already started reducing the production. But we see this as a short-term (phenomenon),” said Salim Al Aufi, undersecretary at the Ministry of Oil and Gas, while addressing the fourth Argus Middle East Crude Conference here on Monday.

Production target

However, Al Aufi said that the country’s production target in the first six months of 2017 is projected at 970,000 barrels per day. After June, Oman can go back to the original production target, depending on any possible agreement at that point of time.

Petroleum Development Oman (PDO) is installing thousands of solar panels in its car parks to provide power for its headquarters in Muscat.

The environmentally friendly move will save more than 3.1 million cubic metres of gas a year, enough to provide electricity for almost 1,000 homes. It will also cut carbon dioxide emissions by 6,662 tonnes annually, the equivalent of taking more than 1,400 cars off the road or planting almost 173,000 trees.

Once complete, the 5.92 MWp (megawatt peak) solar project will generate 9,480,000 KWh (electrical units) per year. Generated power will be connected to three of the main office buildings at PDO’s Mina Al Fahal complex.

PDO Managing Director Raoul Restucci said: “At present, PDO is fully dependent on fuel gas to generate electrical power for its business needs.

“At the same time, the level of solar energy density in Oman is one among the highest in the world so it made both financial and environmental sense to take the initiative to develop “green power” in a phased manner.

Oman’s gross domestic product (GDP) at market prices, which is popularly known as nominal GDP, plunged by 11.1 per cent to OMR17.48 billion for the first nine months of 2016, against OMR19.65 billion for the same January-September period of 2015.

This was against the government’s projection of a 3 per cent annual GDP growth, made at the beginning of the year.

A 28.9 per cent drop in average price of Oman Crude (to $40.1 per barrel) in international markets last year substantially pulled down the country’s revenue from hydrocarbon activities by 35.1 per cent to OMR4.64 billion from as high as OMR7.15 billion during the January-September period, according to the latest monthly statistics released by the National Centre for Statistics and Information (NCSI).

Total wealth generated from crude oil activities plummeted by 40.6 per cent to OMR3.72 billion during the January-September period of 2016, while the contribution of natural gas in total gross domestic product rose by 3.8 per cent to OMR925.2 million in the first nine months of 2016.

Besides, non-oil activities edged down by 0.2 per cent to OMR13.43 billion for the first nine months from OMR13.45 billion during the January-September period of 2015.

The banking sector remained resilient and total credit extended till the end of November 2016 went up by 9.6 per cent to reach 21.9 billion rials, according to monthly Central Bank of Oman (CBO) report.

Credit to the private sector increased by 11 per cent to 19.7 billion rials. Of this, household sector (mainly in the form of personal loans) stood at 46.4 per cent closely followed by the non-financial corporate sector at 45.4 per cent.

Deposits grew by 4.5 per cent to 20.3 billion rials. Here too, private sector deposits went up by 5.6 per cent to 13.1 billion rials. The share of households was 48.7 per cent, followed by non-financial corporations at 28.3 per cent.

Credit by conventional banks registered a 6.5 per cent growth.

That to the private sector went up by 8.6 per cent to reach 17.6 billion rials. Overall investments in securities stood at 2.7 billion rials.

Investment in Government Development Bonds and Government Sukuk increased by 18.9 per cent to 989 million rials.

Banks also invested 336.1 million rials in Government Treasury Bills and their investments in foreign securities stood at 714.7 million rials.

Aggregate deposits held with conventional banks went up marginally by 1 per cent to 18.2 billion rials from 18 billion rials a year ago.

A tender of Government Treasury Bills (issue number 22) worth 80 million rials was allotted at CBO this week.

The maturity of the 28-day bills will end on February 15, 2017. The average accepted price reached 99.967 for every 100 rials, and the minimum accepted price arrived at 99.965. Whereas the average discount rate and the average yield reached 0.43588 per cent and 0.43603 per cent, respectively.

Oman’s Special Economic Zone Authority in Duqm (Sezad) and China-based Asian Infrastructure Investment Bank (AIIB) have signed a $265 million loan agreement for funding the second phase of Duqm Port. The package is related to implementing the commercial terminal within the port.

As per the agreement, Sezad will receive $265 million worth of loan, which will be repaid in installments for a period of 25 years, including five-year grace period. The finance has been availed at a competitive price and low finance fees compared to other financing agencies. The Sultanate is one of the leading countries that contributed to the China-based AIIB.

Yahya bin Said Al Jabri, chairman of the Special Economic Zone Authority in Duqm (Sezad) on Monday signed the agreement with Dr. D J Pandian, AIIB vice president and chief executive officer for investment.

Signing this agreement is part of Sezad’s commitment to complete all infrastructure projects related to Duqm Port by 2020 and achieve the authority’s vision of enhancing the role of the Special Economic Zone of Duqm (SEZD) and attract more investments at the various industrial, business and tourism sectors.

Oman Shipping Co (OSC) on Sunday announced that its subsidiary, Oman Charter Co (OCC), has entered into a three-year contract of affreightment (CoA) agreement with Shell International Eastern Trading Co.

The contract grants Shell access to the very large crude carriers (VLCCs) operated by OCC for crude oil transportation requirements and provides OCC with the cargo base it needs to support its commercial operations.

“This CoA demonstrates the ability of Oman Shipping Company and its subsidiaries to deliver top shipping solutions that meet the requirements of our esteemed clients,” said Tariq al Junaidi, chief executive officer of OSC.


part of the global design, engineering and project management consultancy giant Atkins — says it has been appointed by state-owned Oman Power and Water Procurement Company (OPWP) to provide technical advisory services for the development of the Sultanate’s ‘Power 2021 Procurement Cycle’. The consultancy contract centres on the procurement of a new Independent Power Project (IPP) of a minimum capacity of 800 megawatts (MW) to help meet forecast power demand requirements of 2021.
OPWP, as the sole procurer of all new power generation and water desalination capacity — is overseeing the procurement of this new IPP, which is proposed to be set up within the Main Interconnected System (MIS), serving much of the northern half of the Sultanate.
As part of its contract brief, Atkins will develop a site selection strategy to determine the new IPP’s optimum location within the north Oman grid. Besides drafting the project definition report and competition paper, the consultancy firm will also support the evaluation of developer prequalification proposals, and will assist in the final shortlisting of developers through to bid evaluation and award of contract to the successful bidder.
Welcoming the contract, Callum McLaurin, Atkins’ project director and head of business Middle East, said: “This is considered a strategic win as it provides us with exposure to a major client in the region with significant expansion plans and enables both parties to develop a mutually beneficial working relationship. Furthermore, this win enables us to expand our Omanisation programme via additional recruitment and also enhances our corporate

Standard & Poor`s expects Oman`s economic growth to remain below two per cent in 2017 and 2018.

The Oman government, in its budget document for 2017, projected a gross domestic product (GDP) expansion of two per cent on the back of expected improvements in oil prices. It pegged growth in non-oil activities at 4.7 per cent.

In its `Middle East and North Africa Sovereign Rating Trends 2017` report released on Wednesday, the global ratings agency said it forecasts Oman`s GDP growth at 1.5 per cent for 2017 and 1.7 per cent for 2018, before picking up to 2.1 per cent in 2019.

S&P maintained its outlook for the sultanate at `negative`, which was revised in November last year from `stable`. “The negative outlook reflects that Oman`s fiscal consolidation might take longer than we expect. We meanwhile assume that government financing needs will largely be funded externally due to its narrow domestic capital markets.”



The Sultanate’s first salt refinery is currently under construction at Ras Bantoot near Duqm on Oman’s Wusta coast.
Well-known oil and gas services Al Ghalbi International Engineering & Contracting LLC (GIE) is investing in excess of RO 10 million in the establishment of a 135,000 metric tonnes (MT) per annum capacity plant.
Conceived in line with the government’s In-Country Value (ICV) strategy, the project will go a long way in meeting the domestic demand for industrial salt — which is currently sourced entirely via imports.
“This is the first large-scale salt processing and refining plant, which apart from its mammoth size, will also has a substantial eco-friendly energy component,” said Project Coordinator Tariq Farooq. “The sun’s energy will be harnessed to concentrate seawater into crystals of raw salt, which will then be processed and refined to produce 99.8 per cent pure salt.”
Aside from cooking purposes, salt has wide application in the Sultanate, most notably in the Oil & Gas and industrial sectors. As industrial salt, it is used in the production of drilling mud, and also finds application in steam injection, water softening, soap manufacturing, and so on.
“As an import-substitution project, GIE’s salt refinery will help meet around 25 per cent of national salt demand, which is estimated at 500,000 MT per annum.
Currently all of this demand is met through imports from the United Arab Emirates, Saudi Arabia and so on.
However, when our project comes on stream by around the third quarter of this year, we will be able to provide high-quality industrial and edible salt to the local market,” the Project Engineer said.

CORPORATE NEWS

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Removing the fuel subsidy early last year has resulted in a marked decline in demand for both petrol (gasoline) and diesel as the culture of consumption has undergone a drastic change, according to a top-level official at the Ministry of Oil and Gas.

The demand for gasoline fell by 3-4 per cent last year, which is against an average annual growth of 7-8 per cent prior to the subsidy cut. Similarly, consumption of diesel declined by 6-7 per cent, after the subsidy was cut. Oman government completely eliminated subsidy on petroleum products on January 15, 2016.

Bank interest rates have shown a substantial yearly increase, in view of the tight liquidity situation within the financial system.

According to the latest monthly statistics released by the Central Bank of Oman, the weighted average interest rate of deposits in Omani rial increased from 0.904 per cent to 1.443 per cent in November 2015 and November 2016 period. During the same period, the weighted average of the lending rate grew from 4.763 percent to 5.081 per cent.

Debt issues

The Omani government recently raised extra funds from the domestic market by issuing development bonds and sovereign sukuk, in order to partially ease its budget deficit. These measures had the effect of reducing liquidity within the financial system, with the banking sector being especially affected.

The market value of Sukuk and securities on the Muscat Securities Market touched 2.283 billion rials, an increase of 270.8 million in 2016. However, the number and value of traded securities and Sukuk declined.

The 47th Issue of Government Development Bond was the highest in terms of market value with 301.2 million rials. There has been no trading on these bonds during the past year. The nominal value of each bond is 100 rials. The first issue of the sovereign fund came second with 250 million rials. The nominal value of each Sukuk is 1 rial. Four transactions have been completed with the value of each Sukuk ranging between 988 baisas to 1.05 rials. The closing price at the end of 2016 stood at 1 rials, which is 5 baisas less than the price during the year 2016.

The Government Development Bonds account for 72.8 per cent of the total market value of the securities and Sukuk and stood at 1.662 billion rials. 12 issues of government development bonds (from issue No.39 to issue No.50) were listed on MSM, but no trading were made on them.

Seven new issues worth of more than 306.2 million rials were listed, the most notable of which were the issues 48th, 49th and 50th of the Government Development Bonds, 3 million bonds worth of 300 million rials with the nominal value for each bond 100 rials.

Al Anwar Holding and thirteen other minority stake holders of Falcon Insurance Company (FIC) have decided to sell their stake in FIC to Arabian Insurance Company (AIC) and Lawrence Investment. Both parties have entered into an agreement for sale and purchase of shares for divesting the stake.

According to the agreement, Al Anwar Holding will be selling 20.35 per cent stake, at a price of OMR1.876 per share, according to a disclosure statement posted by Al Anwar Holding on the MSM website.

The share purchase transaction is however, subject to FIC simultaneously acquiring business, assets and liabilities of Arabia Insurance Company S A L (Oman branch), in accordance with the terms of a business transfer agreement signed by FIC with Arabia Insurance Company and Arabia Holding.

Also, FIC and AIC have to obtain approval for the transaction from the Capital Market Authority, the court, under article 39 of the Insurance Law and other regulatory authorities, as applicable.

A huge untapped potential remains in the Sultanate’s tourism sector as the revenue share of foreign visitors remains at 23 per cent, according to the latest statistics.

Figures released on Tuesday by the National Centre for Statistics and Information indicate that 77 per cent of the total revenue of 1.26 billion rials generated by the sector in 2015 came from domestic tourists.

Among the visitors from abroad, those from the Gulf Co-operation Council countries accounted for 45.5 per cent.

The Ninth Five-Year Plan (2016 – 2020) has accorded a great attention to this sector as it can not only attract foreign investment but also generate employment.

The sector’s contribution to the Gross Domestic Product in 2015 was 2.8 per cent when it was 2.2 per cent the previous year.

A new mining law, drafted by the Public Authority for Mining (PAM), is expected to be announced in the first half of this year.

The law will focus on making Oman’s mining environment more attractive to investors and develop industry in Oman using extracted minerals and metals to cater before being exported, according to a top-level official at PAM. “We are expecting to have the law passed by mid of this year,” said Ali Al Rajahi, Director General of Research and Geological surveys.

“The law will focus on several areas, which include developing the local community and environment of mining. A very important factor is changing the people’s mentality towards mining sector. We will work to help local communities develop through mining activities,” he added.

“We have progressed very satisfactorily so far. The proposed law was finalised by all reviewing parties and now it is with the Council of Ministers and it will be send to Majlis Al’Shura,” said Hilal Al Busaidi, chief executive officer of Public Authority for Mining (PAM). The proposed law is also expected to streamline the presently tedious process of obtaining licence for mining. The licence period will also extend from one year to five years.

In a major development that bodes well for a strong uptick in Omani gypsum exports, top executives of all the leading gypsum mining companies have unanimously endorsed new regulations issued by the Public Authority for Mining (PAM) prescribing a minimum export price for gypsum. The endorsement came at a meeting of company chief executives held earlier this month. Also at the meeting, the attendees agreed to establish the ‘Oman Gypsum Association (OGA)’, a non-profit pan-industry grouping that advocates for, among other things, the best practice in gypsum mining, community support initiatives, and minimum Free-on-Board (FOB) pricing limits that take into account global demand and supply, and other measures aimed at supporting the growth of the domestic gypsum industry.
Alarmed by a downtrend in gypsum export prices, attributed to unhealthy undercutting by some players, PAM stepped in last month to fix a minimum export FOB price for raw gypsum at $12.50 per tonne with effect from December 2016.
Consequently, Omani gypsum exporters are barred from exporting raw gypsum below this designated price. Those found in breach of this regulation will be denied export permits, while repeat offenders are liable to have their mining licenses cancelled altogether. Welcoming these latest developments, and their beneficial implications for the positive development of the gypsum mining sector, Ramachandran, Director of USG Boral Zawawi Group, one of the key player in the industry, commented: “His Majesty Sultan Qaboos has attached great importance to economic diversification aimed at developing the non-oil sectors. Gypsum exports have the potential to drive GDP growth through enhanced non-oil exports. The Oman Gypsum Association’s main mission is to promote the Omani gypsum mining industry, which has the potential to fuel long-term economic growth by boosting the sector’s contribution to GDP through heightened exports.”

A substantial fall in investment income of Oman government is expected this year, mainly due to a drop in yield and drawing on reserves in recent years to meet budget deficits.

According to the state budget, income from government investment is expected to fall by 60 per cent to OMR200 million this year, from as high as OMR500 million in the proposed 2016 budget.

Although a large portion of deficit financing is coming from borrowings, there are withdrawals from sovereign wealth funds, as well. “So, this is resulting in a significant decline in income from government investments,” said Ashok Hariharan, Partner and Head of Tax for KPMG in the Lower Gulf.

In response to the projected deficit of OMR3 billion for 2017, the Omani government plans to borrow OMR2.1 billion from overseas markets, OMR400 million from the domestic market and OMR500 million by way of drawing on the sovereign fund.

The Capital Market Authority`s executive president, Sheikh Abdullah al Salmi, has approved the investor fund segregation form.

The form will help monitor segregation of customer funds at the end of the first trading day of each week and will be required to be filed with the capital markets watchdog the next day to enhance the regulatory processes under Article 157 of the executive regulations of the Capital Market Law, which provides that funds belonging to customers shall be deposited and kept in separate bank accounts of brokerage companies to settle obligations resulting from sale and purchase of securities. Customer funds shall not be used to cover deficits in the funds of other customers.

On the importance of the move, Khalfan Mohammed al Sharji, director general of capital market institutions at CMA, said the form was prepared in line with best regulatory arrangements to apply the rules for segregation of customer funds from the funds of companies operating in the field of securities and to provide robust measures for protection of investors’ funds recorded in the books of companies and to ensure they are not used for other purposes to boost investor confidence in the companies and the market in general.


A special team studying the feasibility of agricultural insurance in Oman recently discussed the requirements of insurance firms and the mechanism for farmers’s coverage, before implementing the scheme.

The team also looked at alternative measures to protect farmers and fishermen from natural calamities and plant diseases, according to a press release.

The team was formed after a seminar on agricultural insurance held at the premises of Capital Market Authority in the first half of 2016 with members from the Ministry of Agriculture and Fisheries and Oman Chamber for Commerce and Industry (OCCI).

Several representatives

The team is chaired by Capital Market Authority and includes representatives from the Ministry of Agriculture and Fisheries, OCCI, Oman Reinsurance Company and representatives of insurance companies.