Adipec 2015: Oman adjusts to oil price by trimming costs

Oman is cutting costs at some of its energy projects to cope with the crude price rout, which is set to slash the country’s income this year and drive it into a fiscal deficit, its oil minister said.

Oman, the largest oil producer in the Middle East outside of Opec, is talking to its partners in the energy industry to reduce costs, said Mohammed Al Rumhy at the Adipec conference in Abu Dhabi.

“We are cutting cost, but we are not cutting projects,” said Mr Al Rumhy.

“We are really asking others to decide how they will cut costs, and our partners to identity areas where we can slow down without affecting the production and essential services.”

The international benchmark Brent crude has fallen by more than 50 per cent from US$115 per barrel in June last year amid an oil supply glut, weaker demand in Asia and a strong dollar.

Oman produces about 1 million barrels of oil per day, which includes crude and condensate, he said.

The sultanate is not alone in cutting costs.

The UAE’s state-run Abu Dhabi National Oil Company is targeting cost savings of 25 per cent on major oil projects.

The goal is more ambitious than the 10 to 15 per cent that Adnoc said it was targeting in May.

Mr Al Rumhy has also been vocal about Opec’s strategy to protect market share rather than prop up prices, to the chagrin of members such as Venezuela, Algeria and Iran. He said at the conference that oil producers were being irresponsible by pumping more oil than the market has demand for.

“I think the current situation is a crisis, and this is a man-made crisis in our industry,” he said. “We have a responsibility and we are not taking this responsibility very seriously.”

Opec, which pumps more than a third of world’s oil, meets on December 4 to decide on its output policy. Analysts do not expect the organisation to change course and cut production, as its strategy has begun to squeeze out high-cost producers such as shale companies in the United States.

Follow The National’s Business section on Twitter

Share This Post