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$55/barrel oil price basis for Oman’s 2023 Budget ‘conservative and solid’, says Aufi

Energy transition: Minister of Energy and Minerals share insights on Oman’s diversified energy strategy in interview to Al Monitor
Eng Salim bin Nasser al Aufi, Minister of Energy
Eng Salim bin Nasser al Aufi, Minister of Energy

The $55/barrel oil price adopted by the Omani government as the basis for the 2023 State Budget is “conservative and solid”, according to Eng Salim bin Nasser al Aufi, Minister of Energy and Minerals.

The characterisation came in an interview published by well-known Middle East-focused news platform Al Monitor on Tuesday, January 3, 2022.

Authored by Andrew Parasiliti, President and Chief Content Officer of Al-Monitor, the article featured Al Aufi’s views on, among other issues, Oman’s diversified energy strategy and its pivot to renewables and green hydrogen to decarbonize the national economy, as well as support the clean energy needs of the global market.

Earlier this week, Oman’s Ministry of Finance announced an average oil price assumption of $55 per barrel as the basis for budgeting Fiscal 2023, up from $50/b in 2022. In benchmarking this oil price for 2023, the Ministry noted that it served as a hedge against “oil price volatility”.

Speaking to Al Monitor, Al Aufi said the $55/barrel oil price basis for 2023 helps cushion Oman’s fiscals against sharp fluctuations in global oil prices. “The pricing set for oil price in the budget is at $55, as an average for this year, 2023, which is considered to be an acceptable level, and it's a quite conservative position considering we are at about $75 to $80 as we enter the year.”

He hastened to add, however: “That of course, doesn't mean it can’t go down. There are still chances that it does, but I think the cushion is pretty conservative and solid. Even with that, there is a small deficit that the government is trying to close using either loans or more aggressive control on the spending and so on.”

Oman’s hydrocarbon revenues, Al Aufi, further pointed out, are set to play a key role in bolstering the Omani economy in Fiscal 2023. According the Ministry of Finance, Oil and Gas revenues, projected to total around RO 6.720 billion, will account for sizable share of total budgeted revenues of RO 10.050 billion this year.

Al Aufi commented: “So both oil and gas seems to be on a good track to support the government policies and actions to try and reduce the total deficit and of course, close out the gap between the total level of borrowing and what the government have to pay back in terms of principles and interest. In addition to, of course, working on all the other sectors, be it tourism, logistics industries and so on, but the main contributor is coming still from oil and gas activities.”

In the interview, the Minister also reiterated Oman’s keenness to ensure that energy supplies are affordable, sustainable, and climate friendly. He noted in particular ongoing efforts to pare production costs.

“We can only control our cost; we can't control the market price,” Al Aufi pointed out. “So our cost has to be very resilient and should be able to continue supplying the energy market even at low oil prices, and that's our objective, that's our mission. That's why we continue challenging all the operators in terms of their activity levels and spend and so on. I think we stand at a very good position. Even if oil prices dropped to $30 or $25 per barrel, we should be able to continue producing.”

Also key to Oman’s energy policy is sustainability of supplies through the pursuit of a diversified portfolio of resources available to the country, the Minister said. “We do have oil, we do have gas, we do have renewable energy. We are looking very seriously into the potential of geothermal and tidal, where Oman is blessed with all these different options.”

Further, in line with Oman’s commitments to the Paris Climate agreement and net carbon neutrality, the nation has embarked on a green hydrogen pathway. To this end, the government and other stakeholders are working “aggressively” to reduce the carbon footprint of the hydrocarbon sector, as well as transportation and other carbon-emitting industries, he stated.

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