Economy of Oman - Overview

Overview

Oman's economic performance improved significantly in 1999 due largely to the mid-year upturn in oil prices. The government is moving ahead with privatization of its utilities, the development of a body of commercial law to facilitate foreign investment, and increased budgetary outlays. Oman liberalized its markets in an effort to accede to the World Trade Organization (WTO) and gained membership in 2000.

When Oman declined as an entrepot for arms and slaves in the mid-19th century, much of its former prosperity was lost, and the economy turned almost exclusively to agriculture, camel and goat herding, fishing, and traditional handicrafts. Today, oil fuels the economy and revenues from petroleum products have enabled Oman's dramatic development over the past 30 years.

Oil was first discovered in the interior near Fahud in the western desert in 1964. Petroleum Development Oman (PDO) began production in August 1967. The Omani Government owns 60% of PDO, and foreign interests own 40% (Royal Dutch Shell owns 34%; the remaining 6% is owned by Compagnie Francaise des Petroles and Partex). In 1976, Oman's oil production rose to 366,000 barrels (58,000 m³) per day but declined gradually to about 285,000 barrels (45,000 m³) per day in late 1980 due to the depletion of recoverable reserves. From 1981 to 1986, Oman compensated for declining oil prices, by increasing production levels to 600,000 b/d. With the collapse of oil prices in 1986, however, revenues dropped dramatically. Production was cut back temporarily in coordination with the Organization of Petroleum Exporting Countries (OPEC), and production levels again reached 600,000 b/d by mid-1987, which helped increase revenues. By mid-2000, production had climbed to more than 900,000 b/d where they remain. Oman is not a member of OPEC.

Natural gas reserves, which will increasingly provide the fuel for power generation and desalination, stand at 18 trillion ft³ (510 km³). The Oman LNG processing plant located in Sur was opened in 2000, with production capacity of 6.6 million tons/YR, as well as unsubstantial gas liquids, including condensates.

Oman does not have the immense oil resources of some of its neighbors. Nevertheless, in recent years, it has found more oil than it has produced, and total proven reserves rose to more than 5 billion barrels (0.8 km³) by the mid-1990s. Oman's complex geology makes exploration and production an expensive challenge. Recent improvements in technology, however, have enhanced recovery.

Agriculture and fishing are the traditional way of life in Oman. Dates and limes, grown extensively in the Batinah coastal plain and the highlands, make up most of the country's agricultural exports. Coconut palms, wheat, and bananas also are grown, and cattle are raised in Dhofar. Other areas grow cereals and forage crops. Poultry production is steadily rising. Fish and shellfish exports totaled $34 million in 2000.

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