Muscat performs tricky budget balancing act
12 December 2023
On 11 November, Oman’s Etco Space sent its first nano-satellite, Aman-1, into orbit aboard a SpaceX Falcon 9 rocket launched from California. It is the sort of endeavour Muscat is keen to promote as it tries to diversify its economy.
Etco Space chief executive Abdulaziz Jaafar said his company will be “pushing the boundaries of our space programme in the coming months and years”. It aims to launch more satellites and get involved in deep-space missions.
Oman’s economy needs to find new areas to exploit. GDP growth slowed from 4.3 per cent in 2022 to 1.3 per cent in 2023, according to the Washington-based IMF. The organisation expects the growth rate to revive to 2.7 per cent in 2024, but that is at least partly dependent on a rebound in hydrocarbons production.
This may not come to pass. Oman is part of the wider Opec+ arrangement to curb production and at the group’s meeting on 30 November, Oman agreed to cut 42,000 barrels a day (b/d) from its output during the first quarter of 2024. Opec said the cuts will be gradually unwound later in the year “subject to market conditions”.
Soft oil prices
It is not just about output, however. Oil prices have also been weaker in 2023. The Finance Ministry says Oman received $81 a barrel on average in the first nine months of 2023, compared to $94 in the same period last year.
Caroline Bain, chief commodities economist at Capital Economics, said the Opec+ cuts “should at least act as a floor under prices at current levels, but we would be surprised if it prompted a sustained price rally”.
As it stands, Oman’s net oil revenues were RO4.8bn ($12.5bn) in the first nine months of 2023, 10 per cent lower than a year ago.
Gas revenues have fallen even more significantly – by 42 per cent to RO1.6bn – prompting an overall drop in public revenues of 16 per cent, or RO1.7bn.
Wider market dynamics mean the pressure is likely to continue into 2024. Bhushan Bahree, executive director at S&P Global Commodity Insights, says that crude prices are “under pressure from a looming oil over-supply early next year”, amid strong oil production growth in the Americas.
The economic pressures follow a period of fairly benign conditions. High oil revenues in recent years have enabled Omani authorities to post fiscal and current account surpluses and pay off some sovereign debt.
Such trends have prompted the main credit ratings agencies to issue upgrades. In May 2023, Moody’s Investors Service promoted Oman from Ba3 to Ba2, while both Standard & Poor’s and Fitch Ratings upgraded the sovereign from BB to BB+ in September.
Debt and spending
Government debt rose from just 5 per cent of GDP in 2014 to a peak of 68 per cent in 2020, but since then there has been a concerted effort to reverse that trend. By 2022, it had dropped to 40 per cent of GDP and Fitch predicts it will stabilise at about 35 per cent in 2024-25.
Overall public debt is now at about RO16.3bn, levels last seen in 2018-19.
Despite the lower oil and gas revenues, the government has kept its spending discipline, with expenditure down 14 per cent in the first nine months of the year. This has meant the budget remains in surplus, albeit at lower levels than in 2022. Figures from the Finance Ministry show a surplus of RO791m for the first nine month of 2023, down from RO1.1bn in the same period a year earlier.
In the longer-term, Oman is pinning much of its hopes on hydrogen production. Hydrogen Oman (Hydrom) signed five deals for projects in Duqm in mid-2023, involving total potential investment of $30bn. It is hoping a second round of deals, covering blocks of land in the Dhofar region, could attract a further $20bn-$30bn, with awards due in early 2024.
Hydrom managing director Abdulaziz al-Shidhani has said total investments in the sector could reach $140bn by 2050, by which time the country is hoping to produce 8 million tonnes a year (t/y) of green hydrogen. There is an interim target of 1 million t/y by 2030.
Even if these investment and production targets are achieved, oil and gas will remain central elements of the Omani economy for some time. In a sign of the sector’s continuing importance, the $7bn OQ8 refinery project in Duqm is due to be completed by the end of 2023, with partners OQ and Kuwait Petroleum International aiming to process about 230,000 b/d of oil once it is up and running.
Compared to the undulations in oil and gas and the wider economy, Oman’s political scene is far more stable. Since taking over in 2020, Sultan Haitham bin Tariq al-Said has pushed economic reforms but made few changes on the political side, other than gradually adjusting some of the key personnel. In late October, he appointed new governors to take over in South Al-Batinah, North Al-Sharqiyah and Al-Wusta.
There have also been public protests in Muscat over the Gaza war, but they have been more limited than some other demonstrations in recent years, such as the protests against high unemployment and inflation seen in 2018 and 2019 in cities around the country.
As long as the government can keep the economy relatively stable, it should also be able to maintain the political equilibrium.
MEED's January 2024 special report on Oman also includes:
> BANKING: Omani banks look to projects for growth
> POWER & WATER: Oman expands grid connectivity
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MEED understands that the contract was finalised in Q1 of this year, and the construction works have started.
The airport, which will cover an area of 70 square kilometres south of Dubai, will have five parallel runways, five terminal buildings and 400 aircraft gates.
It will be five times the size of the existing Dubai International airport and have the world’s largest passenger handling capacity of 260 million passengers a year. For cargo, it will have the capacity to handle 12 million tonnes a year.
The construction works on the first phase of the project are expected to be completed by 2032.
Dubai approved the updated designs and timelines for its largest construction project in April last year.
The government of Dubai said that the plan is for all operations from Dubai International airport to be transferred to Al-Maktoum International airport within 10 years.
The government statement added that the project will create housing demand for 1 million people around the airport.
In September last year, MEED exclusively reported that a team comprising Austria’s Coop Himmelb(l)au and Lebanon’s Dar Al-Handasah had been confirmed as the lead master planning and design consultants on the expansion of Dubai’s Al-Maktoum International airport.
Project history
The expansion of Al-Maktoum International airport is a long-standing project. Also known as Dubai World Central (DWC), it was officially launched in 2014 with a different design from the one approved in April 2024. Back then, it involved building the biggest airport in the world by 2050, with the capacity to handle 255 million passengers a year.
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Progress on the project slipped as the region grappled with the impact of lower oil prices and Dubai focused on developing the Expo 2020 site. Tendering for work on the project then stalled with the onset of the Covid-19 pandemic in early 2020.
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Siemens Energy signs preliminary 14GW Iraq pact
9 May 2025
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Germany’s Siemens Energy and Iraq’s Electricity Ministry have signed a preliminary agreement to add 14GW of electricity generation capacity to Iraq’s grid.
The firms also signed two long-term service contracts for the Dibis and Al-Mussaib gas-fired power plants.
The contract for the Dibis power plant covers two generating units with a combined capacity of 340MW.
The five-year maintenance contract for the Al-Mussaib power station includes rehabilitating units with a capacity of 750MW and an additional 150MW, along with support for safe operations and performance optimisation.
The announcement was made following a meeting between Siemens Energy CEO Christian Bruch and Iraqi Prime Minister Mohammed Al-Sudani, local media reported.
The deals were signed a few weeks after US-headquartered GE Vernova signed a memorandum of understanding (MoU) with the Iraqi government to establish 24GW of combined-cycle gas turbine (CCGT) power plants in the country.
In late April, Iraq and Siemens Energy also announced breaking ground on a project to build a new CCGT power generation plant in Nasiriyah in Iraq’s southern Dhi Qar governorate.
The project is part of a $1.68bn development package that Al-Sudani recently launched.
In addition to the CCGT plant, the other projects include the Nasiriyah Integrated Medical City, a 700-bed hospital complex and infrastructure works in the Suq Al-Shuyukh district.
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Abu Dhabi hopes bigger is better with Disney theme park
8 May 2025
Commentary
Colin Foreman
EditorEver since Aldar Properties first launched the Yas Island project with its Yas Marina Circuit for the Abu Dhabi Grand Prix in 2006, Abu Dhabi has been steadily adding theme parks to the island’s roster of attractions. First, there was the Ferrari theme park, then came a water park, a Warner Bros theme park and, most recently, SeaWorld.
The theory with theme park development is bigger is better.
A destination needs a series of parks to create a critical mass to attract visitors who can stay and enjoy multiple parks in one visit. The example always cited is Florida, which is home to many of the world’s largest theme parks, including Disney World.
The theory gained particular traction in the region when Dubai Parks and Resorts opened. The company, which was public until it was acquired by Meraas in 2021, reported significant losses as it struggled to attract enough visitors.
Although it opened with Legoland, Legoland Waterpark, Motiongate and Bollywood theme parks, insiders said that the problem with the development was that it did not have enough attractions to turn it into a successful theme park destination.
The financial performance of theme parks on Yas Island has not been publicly disclosed. While it is accepted that they have been more successful than their counterparts in Dubai, some say that the island still does not have the critical mass required to establish itself as a global destination for theme park visitors.
Miral has developed a series of theme parks and other entertainment-related attractions on Yas Island
Enter Disney
Disney changes that. It is the largest brand in the theme park space and will be a major attraction, but with limited information released on the project so far, it is difficult to fully gauge how significant the project will be.
The official release said that the project will be developed and operated by Abu Dhabi developer Miral, adding that Disney’s in-house design and engineering unit, Walt Disney Imagineering, will lead creative design and operational oversight to provide a world-class experience. It did not give any details on the ownership of the project.
In Hong Kong, for example, a company, Hong Kong International Theme Parks, was established as a joint venture, with the Government of Hong Kong holding 57% and The Walt Disney Company holding 43%.
In Japan, the structure is different. The Tokyo Disney Resort is owned and operated by Oriental Land, and the company pays licences and royalties to The Walt Disney Company.
In interviews following the launch announcement, Miral CEO Mohamed Abdalla Al-Zaabi confirmed the arrangement will be like Tokyo.
Waterfront location
The official release for the Abu Dhabi launch also said that the project is on Yas Island, which only has limited areas of land to develop. The release also said that the land is waterfront, and imagery in the launch video shows the Abu Dhabi skyline in the background, suggesting the land is on the northern waterfront of Yas Island.
There is a substantial tract of undeveloped land on the north shore of the island, which measures about 2 square kilometres (sq km). This is larger than the site that Hong Kong Disneyland occupies, and much smaller than Disney World in Florida, which spans an area of 111 sq km – nearly five times the size of the whole of Yas Island and nearly double the size of Abu Dhabi Island.
The hope is that Yas Island will become a leading global theme park destination and attract large numbers of visitors wanting a holiday with multiple theme park visits
Exclusivity clause
Another area of interest will be whether Abu Dhabi has an exclusivity agreement with Disney for the region. No exclusivity was mentioned at the launch, but in Hong Kong, the issue became contentious when Disney announced plans to build a park shortly after Disneyland Hong Kong opened. Local politicians criticised the Hong Kong government for not including an exclusivity clause in its deal with Disney.
Tourism gateway
Like Hong Kong, Abu Dhabi is a smaller economy sitting next to a larger regional player. With Saudi Arabia’s ambitious Vision 2030 strategy and its existing roster of theme park developments at Qiddiya, which includes a Six Flags, a water park and a Dragon Ball Z theme park, developers in Riyadh would likely be keen to have a Disney theme park, too.
For now, with Disney on board in Abu Dhabi, the hope is that Yas Island will become a leading global theme park destination and attract large numbers of visitors wanting a holiday with multiple theme park visits.
The potential is certainly there. During the project launch, Disney highlighted that the UAE is located within a four-hour flight of one-third of the world’s population, making it a significant gateway for tourism. It is also home to the largest global airline hub in the world, with 120 million passengers travelling through Abu Dhabi and Dubai each year.
If that potential is realised, then the bigger is better theory will be proved right. If the park’s performance disappoints, then it will suggest the region is not such a great destination for theme parks after all.
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Firms bag $850m Qatar substation contracts
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State-backed Qatar General Electricity & Water Corporation (Kahramaa) signed the contracts, which have a total combined value of approximately QR3.1bn ($850m), with the following firms:
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Kahramaa said the projects aim to “meet electrical network demand in light of the country's fast-growing …urban development”.
The contracts include the provision and installation of underground cables and overhead lines extending around 212 kilometres to connect these substations.
Qatari companies won the largest share, equivalent to 58.4% or QR1.8bn, of the total contract value.
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Qatar Minister of State for Energy Affairs, Saad Sherida Al-Kaabi, and senior executives from Kahramaa and the contracting firms signed the deals at a ceremony held in Doha.
Al-Kaabi said the projects will help “ensure our networks' continued and sustainable ability to accommodate the unprecedented growth of the power sector and meet the increasing electricity demand”.
Kahramaa said the contractors will undertake the construction of electrical substations and the connection of cables and overhead lines, as well as the development of some existing substations to increase their capacity.
Qatar has been ramping up its power generation capacity in recent years.
Qatar's Emir, Sheikh Tamim Bin Hamad Al-Thani, inaugurated the Ras Laffan and Mesaieed solar photovoltaic (PV) power plants on 28 April.
The two plants have a combined capacity of 875MW and will more than double Qatar’s solar energy production to 1,675MW.
In February, Qatar Electricity & Water Company (QEWC) and Kahramaa signed a power-purchase agreement for a 511MW peak electricity generation plant at Ras Abu Fontas, which will have a total cost of approximately QR1.6bn. The peak power plant is scheduled to become operational by January 2027.
A consortium led by South Korea's Doosan Enerbility, and that includes Beijing-headquartered PowerChina, will undertake the Ras Abu Fontas peak power plant's engineering, procurement and construction contract, with Germany's Siemens Energy supplying the plant's gas turbines.
Photo credit: Kahramaa
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OQ to take interest in Oman renewable projects
8 May 2025
OQ Alternative Energy (OQAE), part of Oman’s state-backed energy group OQ, will be taking shares in Oman’s renewable energy independent power projects (IPP), starting with the Ibri 3 solar scheme.
“The direction seems to be for OQ Alternative Energy to own up to 25% shares in the upcoming solar and wind IPP projects in the sultanate,” says a source familiar with the plans.
Before this development, private developers and investors owned the total shares in such projects, similar to the existing structure in Saudi Arabia.
With this policy change, Oman will now be more closely aligned with the existing project structure in the UAE, where either Abu Dhabi National Energy Company (Taqa), Abu Dhabi Future Energy Company (Masdar) or the state utility, Dubai Electricity & Water Authority (Dewa), owns stakes in these projects.
However, OQAE’s planned 25% ownership share will be slightly lower than the typical 40% to 60% shares that Taqa, Masdar or Dewa owns in the UAE’s renewable energy IPP projects.
Currently, OQAE owns a 51% share in three renewable energy projects being developed in partnership with France’s TotalEnergies for the state-backed firm, Petroleum Development Oman (PDO).
The Riyah-1 and Riyah-2 wind power plants will be located in the Amin and West Nimr fields in southern Oman, while the North Solar project will be situated in northern Oman.
Each plant will have a capacity of 100MW, Total Energies announced in December.
PDO will purchase the electricity from the plants through long-term power-purchase agreements with the developer team, whose 49% shares are owned by TotalEnergies.
OQAE is also part of Hyport Coordination Company, a consortium comprising Belgium’s Deme Concessions and BP Oman. The consortium plans to develop a green hydrogen project in Duqm that can produce more than 50 tonnes a year of green hydrogen in its first phase by 2029.
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