More strikes, more concessions...
And speaking of useless, Omantel subsidiary WorldCall also successfully got their $35 million loan thanks to a guarantee by parent Omantel. Worldcall losses more than tripled to Rs1.51 billion (US$18 million)with revenues falling to just $88mln in 2010, compared with a loss of Rs490 million in the preceding year. It's shares remain priced at less than 10% of what Omantel paid for them 3 years ago. The loan is partially to be used for 'debt consolidation'. I'd love to know who owned the debt that the Omani overnment's money is being used to repay...
It will be interesting to see how the assignment of some legislative power to the Majlis A'Shura will actually work. Note that 7 of the newly appointed Ministers were current or ex- A'Shura members. This is probably the best thing to come out of the protests, if it's done properly, although they haven't had time to update their website yet. It implies massive constitutional change. But what use is an elected legislative body if there can be no public debate of Government policy, and no political parties? And will the elected Majlis be able to over-rule the HM appointed Majlis A'Dawla? It's worth noting that under current law the President of the Majlis is... appointed by HM.
Just say 'No' kids...
On a lighter note. In a further blow to Omani employment opportunities in what was the growing tourist sector, Oman's Grand Mufti Sheikh Ahmed bin Hamad al-Khalili, appearing on Oman's riveting state television channel last Tuesday, called for a total ban on Alcohol.
The announcement was met with delight by the many (Omani!) purveyors of illicit alcohol, who pointed out that they would welcome the opportunity to sell more of their premium 'Clan of the Glen' [note: made-in-India] whiskey flavoured beverage at even higher extortionate prices than they already do. "We're just a phone call away, and we deliver!" mentioned one of the sellers, speaking on condition of anonimity.
Bulk sales of alcohol, currently allowed on Oman's military bases, and over the counter sales in the many dedicated Royal Oman Police bars (yes folks, and even during Ramadan) would not be affected, a spokesman for African and Eastern confirmed. Senior members of the ROP, who would have to enforce any ban, almost spilled their pints on hearing of the call from HE Sh. Al-Khalili.
Photo: His Eminence Shaikh Ahmed bin Hamad al Khalili, Grand Mufti of the Sultanate. No fan of the demon drink or happy endings.
The Grand Mufti also denounced Oman's burgeoning
Speaking of growth...
Oman's Oil & Gas by the numbers
PDO staff continued to protest for ridiculous amounts of money and benefits above what are already top notch salaries compared to most Omanis. The prospect of a strike among oil workers in the field is really making foreign investors nervous, but I doubt there will be any significant impact at all on Oman's short term oil exports even if they do.
All these demands, including the new unemployment benefit and lashings of fresh faced ROP officers, will need to be paid for of course. And right now, most Omanis (and expats) seem to assume that Oman makes loads of money from its oil and gas exports, as if we were like Abu Dhabi.
So, how much is Oman's oil and gas worth?
The easy way is to look at the Government's own 2011 budget. You can see an official summary here and a good commercial one by OAB here. The budget assumes an oil price of $58/bbl, and states 'net oil revenue' as $12.8bln. Costs (operational and investment) in the oil sector are counted seperately under expenditure, at around $2.4bln. There are many summaries of the oil production for 2011, and the official estimate is 897,000 bbl/d. Gas adds just $640mln net to the Government coffers, which seems very low.
So according to the Government there's around $11bln in net oil & gas revenue in 2011 assuming $58/bbl.
What I can't make add up are those 3 official numbers: the estimate of 897kb/d, the price assumption of $58 and the net revenue of $12.8bln. This is because 897,000bbl/d * 365 days * $58/bbl = $19bln, vs a net revenue of $12.8 bln (not counting costs remember - they are accounted separately). The Government seems to be 'missing' a whopping $6.2bln! This delta can be mostly explained, give or take a billion, if we try to work it out independently (see below).
Anyway, Oman's population is around 2.45 million (excluding Expats). I think it's quite interesting that dividing $11 billion in net oil and gas income by 2.45 million gives ~US$4500 per annum, which is just about exactly OR 150/month, the unemployment benefit HM just announced. Coincidence?
Photo: It's just a fact - Oman is not oil rich.
Bottom line folks: Oman is NOT oil rich. Your country's imports last year cost $19 billion, more than actual net oil revenue even at $80/bbl. True, your debt level is low at just 4% of GDP (after HM spent the past 12 years paying it down), and you have net positive foreign assets of about $5 billion.
While the headline figures put oil and gas at 80% of Government revenue and around 15% of GDP, almost all of the rest of the foreign-exchange earning exporting economy is re-labled oil and gas: methanol exports (based on free gas); aluminum smelting (based on free gas as Oman produces no bauxite); steel (yep, yet more free gas and no decent domestic iron ore either). And all the industrial activity around servicing the oil and gas sector plus the Government multiplies to make GDP look much better than it really is.
Remember this OR150 per person per month has to pay for everything: the military & ROP*, the free schools & hospitals, all the Government salaries, the infrastructure investments, and the subsidised power (cost: $0.5bln) and petrol (cost: $1.5bln).
Al Jazeera ..."We want to see the benefit of our oil wealth distributed evenly to the population," one protester yelled over a loudhailer near the port.
"We want to see a scale-down of expatriates in Oman so more jobs can be created for Omanis."
I'm afraid these people asking for free stuff, big salaries, leave, etc are misguided: the Omani people are already getting the oil money and then some. It's OR150/mnth. If the country is to survive the current 2%+ population growth rate, the non-oil real economy has to grow exponentially, and this means Omanis working hard in real jobs that create value in the international market place as well as replacing the imported service and construction sector labour markets.
A few dates and fish won't buy very many Lexus.
The Expats are, 95% (?99%?) of them I'd guess, all doing jobs that Omanis:
1/ won't do (house maids, construction, massage)
2/ won't do for anything close to OR100 rial a month (tourism, retail, Ruwi light industrial)
3/ mainly can't do (skilled labour), or might do but generally at a far worse performance level for more money
Wholesale short-term replacement of such people by Omanis will devastate those few parts of the economy that are not oil and gas dominated.
*In 2007 Oman was
ranked #1 in the world for Military expenditure as a % of GDP. (#2 was Qatar, #3 Saudi, BTW)
Bottom's up Oil revenue estimates
According to Raoul Restucci, Petroleum Development Oman's Managing Director, in his 2011 media brief in February, PDO produced around 650,000 bbls per day in 2010. Adding production from Occidental and a few small payers, Oman in total produces around 870,000 bbls/d, and the Minister of Oil and Gas, Dr. Rumhi recently forecast continued production growth in 2011 to 900k.
But this is gross production, and is not all exported. Oman consumes around 80,000 bbls per day, according to industry analysts Business Monitor International and the CIA factbook. And let's assume 5,000bbl/d is consumed by producers as fuel oil.
So this brings crude exports down to 815k/d.
Plus, it's safe to assume Oman's foreign partners take a piece of the exports too, at least 10% (although they have a 40% shareholding in PDO, and 80% of Oxy's Mukhaisna development, the Government applies heavy additional taxes on this production, probably at a rate of over 80%). So I'll assume a net foreign take for 2011 of 90k/d.
This brings Oman's share to around 725k/d. Of this, around 130,000 bbl/d is refined in Sohar and exported as refined product, but international 'crack spreads' (the difference between crude cost and product prices) are pretty low and the refinery is not working as well as the best, so a $5/bbl spread seems reasonable. This then only 'adds' around 2.5% to the 150k/d, bringing net Omani exports up to 729k/d.
But the oil is not produced for free remember. According to the 2011 Government Budget, RO943mln is budgeted for oil production costs. Assuming a 60% government share, this means 2011 expenditure of $4.1bln. While the foreign interests will pay the remaining 40% in 2011, remember that eventually they will recover these costs, so we may as well assume for our purposes that the entire $4.1bln is the cost to Oman of the oil.
Assuming an average price of $80 this means Oman would get 729k/d * 365 days * $80 per bbl - $4.1bln (costs) = $17.2bln. But at the Government $58 oil price, this = $11.3 bln Still about $1bln more than the net Government figure less costs.
End Note for dedicated readers:
Photo: His Majesty Sultan Qaboos.
I'm told His Majesty gets a % of oil from the foreign take, rumoured to be around 15% of the 90kb/d, so a nice $400mln or so per annum at $80/bbl, from which he pays most of his own expenses. That's just OR5 rial per person per month, which I think most Omanis would say is a bargain.
Coming soon: Oman's Industrial-lead growth strategy