A new year begins with jail for journalists who insulted Minister, and more oil money for all!

Well, Happy New Year readers! Let's get straight to the news.

Azzaman Journos sent to jail (again)
The 2 journalists from Omani newspaper Azzaman, who were found guilty of insulting the Minister of Justice last October, had their convictions and draconian 5 month jail sentences upheld by the Omani Court of Appeal a couple of days ago.

This should not have come as a surprise, as in a legal sense they were clearly guilty - the law is so broad and is very easy to breach - plus, lets face it, when taking on the Ministry of Justice on a matter of law the odds are pretty stacked against you!

Arabian Business.com, by Claire Ferris-Lay Monday, 2 January 2012 Oman daily vows to appeal journalists’ jail terms.

Omani newspaper Azzaman has pledged to appeal a five-month jail sentence given to two of its journalists for insulting the Gulf state’s justice minister, it was reported Monday.

The court of appeal on Saturday confirmed the jail terms given to journalists Yusef al-Haj and editor-in-chief Ibrahim al-Maamaria for an article published in May alleging corruption in the justice ministry, newswire AP said.

The court initially ordered the newspaper suspend its operations for a month but decided not to enforce the ruling. Another justice ministry employee was also given five months in prison for telling the journalists that a ministry employee had been denied his salary and benefits by the justice minister without valid cause.

Azzaman’s board of directors in a statement complained against the court’s failure to respect an agreement to acquit the pair in exchange for apologizing to the minister, the newswire said.

I expect a royal pardon soon to get past this trivial issue. Having this case drag on means we get named in the company of really nasty places like Iran and other Middle East countries who are really imprisoning journalists by the bus load.


High Oil prices support Oman Economic 'Growth'
Meanwhile, Oman's Government continues to pump the extra cash from the high oil prices into the economy, with massive fiscal injections - Government spending is up by almost 20% in the last 10 months of 2011.

[Oman Observer]....
Regarding the Public Finance, the State General Budget for the fiscal year 2011 was approved with a total expenditure amounting to RO 8,130 million and a deficit amounting to RO 850 million and was based on the assumption of the oil price at $58, note that the average price of the Oman oil in the year 2011 amounted to about $102.
During the year, additional financial allocations have been approved that amounted to RO 1.8 billion, most of which was concentrated on the current civil and security expenditures bringing the deficit of the budget to about RO 2.6 billion. However, and as a result of the stable global oil prices at a higher level, the actual budget is expected to achieve a financial surplus that may reach about RO 1 billion, where an amount of RO 700 million will be used as a part of the means of funding for covering the deficit of the budget of the year 2012, while the remaining surplus, if any, in light of the final closing for the accounts of the fiscal year will be used to strengthen the financial reserves of the State.

The windfall from high oil prices is helping Oman to protect the domestic economy from the ongoing crisis in the Global economy, and to pay for all those extra Government jobs needed to keep the peace in Sohar and Salalah following the protests. It doesn't do much to diversify the economy, but hey, it's better than nothing.






Oman is still totally dependent on oil and gas exports, directly as oil and LNG, and indirectly via exports of either refined gasoline or the highly subsidised energy heavy exports of aluminium & methanol. This is why the reports from the Ministries of 20% growth in 'non-oil exports' is very misleading.

The preliminary forecasts of the Gross Domestic Product (GDP) suggest that the national economy in the year 2011 will achieve a growth of (7 per cent) exceeding the growth rate achieved in the previous year (2010) that amounted to (6 per cent). This growth in national economy is based on the added value of the non-oil activities that are projected to achieve a growth rate of (10 per cent) compared with (2 per cent) for the oil activities. This is also attributed to the increased domestic demand as well as the increased non-oil exports by (20 per cent) compared with the year 2010.

Oman still actually manufactures fuck all. Food imports are rising, and there is precious little to buy in the supermarkets that comes from within (as per the rest of the Middle East). Most non-Governmental services are provided by predominantly expat labour. Especially construction, which is perhaps the biggest real thing being made in Oman, GDP-wise.

Thus, the money from the extractive energy sector continues to hide the underlying malaise in Oman's 'real' economy, and job growth remains a matter of increased Government sector spending, either hiring directly (more ROP officiers) or indirectly from employment related to infrastructure projects funded by the State.

Eventually the Piper will need to be paid.


In Other News
We arrested and will deport 1,243 illegal workers around Seeb and Muscat, all doing nasty manual labour jobs Omanis don't want.

... "We caught 174 [all but one Bangladeshis] illegal workers from a single farmhouse in Baushar during one such raid," he said, and added that the Mawaleh Fruits and Vegetable Market was also raided by the teams to root out illegal workers from the wholesale market.

Al Badi pointed out that among the arrested there are 417 absconding workers, 525 released workers and 162 infiltrators.

According to him, most of the apprehended workers were mostly engaged in farm work, construction industry and restaurant businesses.

Killing ourselves by driving on the roads continue to be a real growth industry, with official deaths up 25% in 2011.

Muscat : Traffic accidents continue to be a big worry for Oman, with almost a 25 per cent increase in deaths during 2011, according to Lieutenant General Hassan Bin Mohsin Al Shraiqi, Inspector-General of Police and Customs.

Presiding over the second meeting of the National Committee for Road Safety at the Police Headquarters in Qurum on Saturday, the top police officer in the country said: "The 1,051 fatalities and 11,322 injuries in road accidents [last year] in Oman is a worrying trend, even though the Sultanate is not considered among the countries with high rates of road crashes."

"...not considered among the countries with high rates of road crashes". LMFAO. This is such typical Omani Government bullshit. As I reported earlier, these ROP stats only count those adults that die at the scene of the accident - to get a more representative number you can double the official one to take account of children and later deaths in hospital. With over 2100 road deaths a year in a population of ~2.5 million, we are killing close to 1 in a thousand, every year. Local blogger Muscat Mutterer posted about the reasons in an excellent rant.


At least the ROP border guards at Al Wajaja had an awesome New Year's eve, taking delivery of oops, I mean confiscating 35,000 rials worth of demon drink from a particularly unlucky 'Arab national'. I'm sure it was all properly disposed of... hic ... just like all the rest of the booze taken at the Oman border!

Cheers to that.

So here's to a good 2012. Feel free to recommend a facebook 'like' of Muscat Confidential to your friends!

Yet more protests. Oman's Oil by the numbers is just 150 rials a month. Grand Mufti calls for complete ban on booze and gyms

Feeling lonely? Hold a strike!
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 brothel & steroids business gyms as 'dens of vice', which is a fair call. I guess the on-demand massage business in Oman will have to go on-line to facebook and twitter, as the sex trade has done in Dubai. It's progress I guess, and e-commerce is, afterall, seen by the Government as a growth area.

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