Economy

Oman is a remarkably stable country in the Middle East. Current GDP per capita has expanded continuously in the past half-a-century. It grew 339% in the Sixties reaching a peak growth of 1,370% in the Seventies scaling back to modest 12% growth in the turbulent Eighties and rising again to 34% in the Nineties.

Oil and Gas

When Oman declined as a market centre 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.

A joint venture called IPC drilled a number of dry holes from 1956 onwards, though the logistics of doing this were extremely difficult due to the lack of transport infrastructure. A lack of success, combined with worsening logistical problems and a glut of oil on the world market, led most of the partners to withdraw from the venture in 1960. Only Royal Dutch/Shell and Partex opted to remain in Oman to continue the search for oil. They struck oil at Fahud in 1962 at a site just a few hundreds of metres from the last dry hole. Petroleum Development (Oman) Ltd (PDO) began production in August 1967. The Omani Government now owns 60% of PDO, and foreign interests own 40% (Royal Dutch Shell owns 34%; the remaining 6% is owned by Compagnie Francaise des Petroles (Total) and Partex).

In 1976, Oman's oil production rose to 366,000 barrels (58,000 cubic metres) per day but declined gradually to about 285,000 barrels (45,000 cubic metres) 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 barrels/day. With the collapse of oil prices in 1986, however, revenues dropped dramatically. Production was cut back temporarily in coordination with the Organisation of Petroleum Exporting Countries (OPEC), and production levels again reached 600,000 barrels/day by mid-1987, which helped increase revenues. By mid-2000, production had climbed to more than 900,000 barrels/day.

Today Oman produces around 700,000 barrels (110,000 cubic metres) of oil per day and oil represents about 90% of Oman's exports. The income generated was quickly deployed into building infrastructures of roads, schools, hospitals, water and electricity generating plants. All of this activity has made Oman a major success story for economic growth despite being the only oil-producing nation in the Middle East that is not a member of OPEC.

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

Agriculture

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 totalled $34 million in 2000.

Modernisation

The government is undertaking many development projects to modernise the economy, improve the standard of living, and become a more active player in the global marketplace. Oman became a member of the World Trade Organisation in October 2000, and continues to amend its financial and commercial practices to conform to international standards. Increases in agriculture and especially fish production are believed possible with the application of modern technology. The Muscat capital area has both an international airport at Seeb and a deepwater port at Mina Qaboos. The newly opened (1999), largescale modern container port at Salalah, capital of the Dhofar Governorate, and a seaport at nearby Raysut were recently completed. A national road network includes a $400 million highway linking the northern and southern regions. In an effort to diversify the economy, in the early 1980s, the government built a $200-million copper mining and refining plant at Sohar. Other large industrial projects include an 80,000 barrels/day oil refinery and two cement factories. An industrial zone at Rusayl showcases the country's modest light industries. Marble, limestone and gypsum may prove commercially viable in the future.

The Omani Government is implementing its sixth 5-year plan, launched in 2000, to reduce its dependence on oil and expatriate labour. The plan focuses on income diversification, job creation for Omanis in the private sector, and development of Oman's interior. Government programs offer soft loans and propose the building of new industrial estates in population centres outside the capital area. The government is giving greater emphasis to "Omanisation" of the labour force, particularly in banking, hotels, and municipally sponsored shops benefiting from government subsidies. Currently, efforts are underway to liberalise investment opportunities in order to attract foreign capital.

Some of the largest budgetary outlays are in the areas of health services and basic education. The number of schools, hospitals and clinics has risen exponentially since the accession of Sultan Qaboos in 1970.

In 2006, the US approved a US-Oman Free Trade Agreement, which ended all duties on trade in industrial and consumer goods and gave US farmers duty-free access to Oman's market for 87% of their products.