MUSCAT, AUG 25 – Notwithstanding the government’s longstanding and concerted drive to diversify the national economy away from the current dominance of hydrocarbons, the oil and gas sectors continues to play a pivotal role in fuelling economic growth, according to the Central Bank of Oman (CBO). “The petroleum sector contributed significantly to economic activities directly and indirectly and remained as the mainstay of the economy in the Sultanate,” the apex bank said in its Annual Report 2018 issued here last week.
“Since government spending has a major influence on private sector activities, the petroleum sector being a major source of government revenue also becomes important for growth in the private sector,” it stated. Omani crude oil prices averaged $69.7 per barrel in 2018 as compared to $51.3 per barrel during 2017, recording an increase of 35.8 per cent. Daily average oil production also witnessed an upturn during 2018, while gas production from the Khazzan gas field was ramped up during the year, boosting total gas output by 12.3 per cent.
“The surge in oil prices coupled with an upturn in hydrocarbon production conditioned the accelerated growth in the petroleum sector during the year,” the Central Bank said. “The value addition emanating from the petroleum sector witnessed an accelerated growth of 37.1 per cent in 2018, as compared to 18.1 per cent during 2017, and contributed considerably to a surge in overall growth.” The share of petroleum activities in the Gross Domestic Product (GDP) rose to about 36 per cent during 2018 as compared to about 29 per cent in 2017. However, the three years moving average share of petroleum activities in nominal GDP witnessed a decline in recent years, suggesting a modest decoupling of overall GDP from petroleum activities.
In value terms, the share of petroleum activities (crude oil and natural gas) in GDP (at current market prices) climbed 22.9 per cent to RO 10.830 billion in 2018, up from RO 7.901 billion a year earlier. Of this aggregate total, the share of crude oil soared 40.5 per cent to RO 9.226 billion in 2018, up from RO 6.567 billion in 2017. The share of natural gas, on the other hand, jumped 20.3 per cent to RO 1.607 billion last year, up from RO 1.334 billion in 2017. The strong growth of the petroleum sector also supported activities in related industries, such as fertiliser, petrochemicals, aluminium, power generation, and water desalination, and contributed directly to the economic diversification in the economy, the Central Bank report noted.
Indirect support to diversification in the economy also emanated through positive spill-overs from the petroleum activities during the year, according to the CBO report. “The expanding non-oil economic activities led to a jump also in domestic consumption of oil and gas products in the Sultanate. Out of total crude oil production, the share of exports dropped from 87.6 per cent in 2016, through 83.0 per cent in 2017, to 81.0 per cent during 2018, partly because of increased domestic consumption. The usage of crude oil for export of refined oil also increased over the years, reflecting expanding refining capacity in the economy,” it said.