In one of its first official responsibilities since it was formally established by Royal Decree last month, Energy Development Oman (EDO) has been tasked with, among other things, raising an estimated RO 2.3 billion, representing government expenditures towards the oil and gas sector for 2021.
Consequently, the 2021 State Budget, unveiled by the Ministry of Finance on Friday, is bereft of any allocation towards oil and gas expenditures – that burden, with effect from this year, having been bequeathed to state-owned EDO in keeping with its mandate.
EDO was instituted on December 6, 2020 as an Omani joint stock company to invest in conventional as well as renewable and alternative energy resources within and outside the Sultanate. Its most significant asset is the government’s 60 per cent shareholding in Petroleum Development Oman (PDO), presently the largest producer of crude oil and natural gas in the Sultanate. Consequently, EDO also now owns an interest in the prolific Block 6 licence currently held by PDO and which contributes the bulk of the country’s hydrocarbon production.
As the primarily recipient of the funding allocated towards oil and gas expenditures in the annual State Budget, PDO’s parent organisation Energy Development Oman (EDO) is now responsible for raising this amount. It was estimated at RO 2.230 billion in the 2020 Budget, similar to the amount earmarked in the previous year’s budget, representing around 17 per cent of total expenditures for the year. With EDO now taking on responsibility for funding the oil and gas sector’s estimated share of RO 2.3 billion, the deficit burden on the government shrinks to RO 2.24 billion for 2021, based on figures provided by the Ministry of Finance.
Total expenditure for the year is projected at RO 10.88 billion, which is 14 per cent lower than that of 2020. Revenues are estimated at RO 8.64 billion, which is down a significant 19 per cent from the corresponding figure in 2020. The 2021 Budget is based on an assumed oil price averaging $45 per barrel (versus the present daily average of $51 per barrel), which leaves the government a reasonable cushion to mitigate the effects of any sharp fluctuations in prices.
Of the total deficit of RO 2.2 billion, around RO 600 million (27 per cent) will be come from state reserves, while the rest will come from a mix of sources, including local and external borrowings, dividends from State-Owned Enterprises (SOEs) and proceeds from the sale of state-owned assets.
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