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WWW.TIMESOFOMAN.COM S ATU RDAY, AUGUST 29, 2015
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‘CHINESE ECONOMY IS NOT FALLING OFF A CLIFF’ China’s economy may be slowing but it is “not falling off a cliff ”, the chief executive of Southeast Asia’s biggest bank said Friday. >B2
MOODY’S REPORT
C O M M E R C E D E PA R T M E N T
‘Oman’s economic growth projected to slow’ $57 per barrel in 2016, suggesting fiscal deterioration if oil prices remain subdued. According to Moody’s, the Sultanate’s high levels of current government spending are not sustainable under a multi-year, low oil price scenario.
Times News Service MUSCAT: Oman’s economic growth is projected to slow to around three per cent over 20152016 period, down from the 4.9 per cent average between 2005 and 2014, international rating agency Moody’s Investor Service has said in a report. The decline in economic growth projection is mainly due to pressure on revenue amid multi-year low oil price scenario. Crude oil revenue accounted for 48 per cent of nominal gross domestic product (GDP) on average between 2005 and 2014. Lower oil prices Moody’s also projected that Oman would report substantial fiscal deficits in 2015 and 2016, at around 12 per cent of GDP, as government revenues will be negatively impacted by lower oil prices. “We expect Oman’s fiscal deficits to widen from 2015 onwards, as hydrocarbon-related government revenues drop by more than 40 per cent this year. However,
FISCAL DEFICITS: Moody’s also projected that Oman would report substantial fiscal deficits in 2015 and 2016, at around 12 per cent of GDP, as government revenues will be negatively impacted by lower oil prices. — Times file picture
Oman’s low government indebtedness — at around 5 per cent of GDP in 2014 — gives it room to increase debt issuance to finance budget deficits,” said Steffen Dyck, a senior analyst at Moody’s Investor Service. While solid economic growth
continues to support Oman (A1 negative), its very high economic and fiscal reliance on the oil and gas sector and limited scope for fiscal reforms will add pressure to public finances in 2015-16, noted Moody’s Investors Service. Moody’s estimates Oman’s
fiscal breakeven oil price — the price of oil at which the budget can be balanced — at $105 per barrel in 2015. This is high compared to its peers, and almost double Moody’s base case projection of $55 a barrel for Brent in the same year, and
Sizeable financial buffers However, Moody’s notes that Oman has sizeable financial buffers which the rating agency estimates at 82 per cent of 2014 gross domestic product. In addition, Oman’s high domestic savings and healthy banking sector will continue to provide stable funding for the government, added Moody’s. As a result, liquidity risk is unlikely to significantly affect government debt sustainability. Moody’s notes that regional geo-political events pose lowprobability but high-impact risks for Oman. However, these risks are to some degree mitigated by Oman’s position as a neutral, mediating nation in the region, as well as its close relations with major global powers.
US consumer spending rises in July WASHINGTON: US consumer spending picked up a bit in July as households bought more automobiles, offering further evidence of strength in the economy that could keep the door open to a Federal Reserve interest rate hike this year. The Commerce Department said on Friday consumer spending increased 0.3 per cent after an upwardly revised 0.3 per cent rise in June. Consumer spending, which accounts for more than two-thirds of US economic activity, was previously reported to have gained 0.2 per cent in June. Economists polled by Reuters had forecast consumer spending rising 0.4 per cent last month. It was the latest report indicating momentum in the economy as it confronted recent global financial markets turbulence, sparked by concerns over a slowing Chinese economy, which has diminished the chances of an interest rate increase next month. — Reuters
New floating storage facility at Omans’ Mina Al Fahal launched hub that gives them unprecedented flexibility and control to capitalize on favourable market conditions. We congratulate OTTCO on this landmark initiative which will dramatically augment the capacity for storage and exports of the Oman blend,” he added.
Oman Tank Terminal Company’s floating storage facility has been developed in partnership with Oman Shipping Company, Petroleum Development Oman and the Dubai Mercantile Exchange
Times News Service MUSCAT: A new floating storage facility, with a 2.1 million barrel capacity at Mina Al Fahal, for global customers of Oman Export Blend, was launched on Thursday by Oman Tank Terminal Company (OTTCO), a subsidiary of Oman Oil Company (OOC). Three customers — China Oil,
STORAGE FACILITY: China Oil, Glencore and Oman Trading International have won bids for access to the facility on board a Very Large Crude Carrier, which will be provided and operated by Oman Shipping Company. — Bloomberg files (Picture for illustrative putpose only)
Glencore and Oman Trading International (OTI) — have won bids for access to the facility on board a Very Large Crude Carrier (VLCC), which will be provided and operated by Oman Shipping Company (OSC). OTTCO’s floating storage facility, which was initiated and supported by Oman’s Ministry of Oil & Gas (MOG), has been developed in partnership with OSC, Petroleum Development Oman (PDO) and the Dubai Mercantile Exchange (DME). While the vessel itself will be operated by OSC, scheduling and nomination for the loading of crude oil will be managed by PDO. Shipto-ship (STS) transfers will be ex-
ecuted by Fendercare Marine, an international specialised STS firm. The initiative makes OTTCO the first storage company in the world to provide floating storage linked to an energy futures contract. This initiative also makes DME the first exchange in the world to incorporate floating storage at delivery point for customers, thereby supporting the trading of DME Oman crude oil futures on the exchange while strengthening its strong trading ecosystem to create more efficiencies. This new facility will also enable buyers on the DME to store their oil and optimise market circumstances to their benefit giving
ECONOMY
Oman committed to currency peg despite cheap oil: Central bank chief Times News Service MUSCAT: Oman is committed to maintaining the peg of its currency against the US dollar despite the drop of oil prices, according to a Reuters news agency report. “We are committed to keeping the Omani rial pegged to the US dollar,” Central Bank of Oman (CBO) executive president Hamood Sangour Al Zadjali. He did not elaborate. The plunge of oil prices since mid-2014 has put heavy pressure on Oman’s state budget, causing one-year dollar/rial forwards to rise as high as 1,000 points this week, their highest since 2006, as some investors hedged against the risk of an eventual rial devaluation. Devaluing the rial could aid state finances by increasing the local currency value of oil exports. However, it would also raise the cost of the many imports on which Oman depends and could shake investor confidence, so economists do not think authorities will abandon the peg.
UNWAVERING STAND: Central Bank of Oman executive president Hamood Sangour Al Zadjali. — Times file picture
They note that Oman has maintained the peg, set in 1986 at 0.3849 rial to the dollar, through past periods of extreme oil price weakness. On Monday, credit rating agency Fitch cut its long-term issuer default ratings for five Omani banks, saying the government had become less able to support the banking system.
But Zadjali noted that after the downgrade, Fitch had left the outlooks for the banks stable, and he said they did not face significant financial pressures. “Omani banks are in an excellent position, and well covered financially. They don’t need the government support, and will not be affected with the recent downgrading,” he further said.
them additional flexibility. Moreover, the storage facility will enable buyers to face any unforeseen circumstances by providing a viable storage option for the oil they have purchased. Nasser Al Jashmi, Deputy Chairman of Dubai Mercantile Exchange (DME), said: “The floating storage facility will deliver improved convenience to customers of Oman Export Blend oil, and stands as a brilliant testimony to the Sultanate’s commitment to create a better, more efficient oil trading environment.” “With the launch of this facility, buyers on DME will now have access to a world-class oil storage
Unique project Salim Al Aufi, Undersecretary of the Oman Ministry of Oil & Gas, added: “Linking floating storage to energy future contracts is what makes this project unique; with the commencement of this project we aim to support the positive growth trend demonstrated by DME by introducing a new tool as well as creating value for Oman crude oil customers.” Hilal Al Kharusi, Chairman of the Board of OTTCO, concluded: “OTTCO’s floating storage facility is an important step in the introduction of our organisation to the global oil trading community, and the strong interest that we have had from bidders has been encouraging. As we continue to make progress towards the development of Ras Markaz Crude Park, I am pleased to say that we are already serving the needs of our crude oil customers.” “This is an exciting time for
OTTCO, and we expect the floating storage facility to add value to Oman Export Blend as a benchmark, as well as directly benefitting Oman’s crude oil market. I would like to thank the Ministry of Oil & Gas and the project stakeholders for their continuous support for the project,” he added. Commenting on the announcement of the successful bids, Said Al Maawali, Project Director, OTTCO, said: “We are delighted to announce the award of our floating storage facility at Mina Al Fahal. Ahead of the commissioning of the Ras Markaz Crude Oil Park, this is an ideal option for customers seeking to store Oman Export Blend in a strategic location on the Indian Ocean coastline. The OTTCO team has worked in partnership with MOG, OSC, PDO and DME to bring this project to the market, and I am proud to say that our joint efforts have now come to fruition.” OTTCO’s floating storage facility has been introduced as an interim storage solution for select customers ahead of the commissioning of Ras Markaz Crude Oil Park. Once complete, the facility will cover an area of approximately 1,600 HA in Oman’s Al Wusta region, approximately 70-km south of the Duqm Port.