MUSCAT – When Oman unveiled a plan this year to build a large petrochemical complex alongside a $6 billion refinery in the southern coastal town of Duqm, officials hailed the project as a step toward diversifying income and creating jobs. Promoting new industries and expanding downstream oil operations such as petrochemicals have been a cornerstone of Oman as it aims to cut its $73 billion economy's reliance on crude oil exports and create jobs to combat unemployment, which the IMF puts at over 24 percent. The government earmarked Duqm as the next industrial growth city with investments of up to $15 billion planned in new petrochemical and infrastructure projects at the port over the next 10 years. Among other projects, Oman hopes to boost growth and employment with a 1,000 km (625 mile), $13 billion railway. It is also investing heavily in airport and port operations in the southern city of Salalah near the border with Yemen. It is all part of a plan to give the private sector a bigger role in the economy as oil production, which accounts for 77 percent of government revenues and half of economic output in non-OPEC Oman, looks to be nearing a peak. “Gas and energy remain significant constraints on growth going forward, although there are promising signs that new fields may be coming on line in the near future,” said Farouk Soussa, Citigroup's chief economist for the region. He estimated that energy shortages could reduce economic growth by 2-3 percent a year over the next decade based on a similar experience in other countries. After nearly doubling in 2001-2010 and feeding economic expansion, gas output in Oman fell 2.2 percent to 26.5 billion cubic meters (bcm) in 2011, the first annual drop in a decade, BP's world energy review from June showed. Gas consumption in Oman meanwhile soared by 180 percent to 619 billion cubic feet (17.5 bcm) in the decade to 2010, according to the US Energy Information Administration (EIA), due to fast economic growth which averaged 5.8 percent annually in 2001-2011. As a result, Oman has insufficient fuel to meet power demand in summer when air conditioning use soars as temperatures frequently top 40 degrees Celsius. The government is pinning its hopes on a $15 billion tight gas project being developed by BP, which could unlock some 100 trillion cubic feet (2.8 trillion cubic meters) of reserves. The project will be costly however as tight gas is more difficult to extract than gas from conventional fields. – Reuters
