Oman Cement Firms Say Gov’t To Double Gas Prices From Jan 1

Oman’s Ministry of Oil and Gas will double natural gas prices charged to cement companies from Jan. 1, two of the firms said on Sunday, as the country scrambles to offset the impact of slumping oil prices on state revenues.

Along with Bahrain, Oman is being hit particularly hard among the Gulf Arab energy exporting nations by oil’s slide. The larger exporters have built up huge fiscal reserves, which they are expected to use to maintain state spending at high levels, but Oman and Bahrain lack such deep pockets.

Although Oman was running a small state budget surplus as of end-September, the government is likely to post a deficit of OMR3.05 billion ($7.9 billion) next year, assuming an average oil price of $80 next year and no additional steps to boost revenue, state news agency ONA reported last month.

The Shura Council, an advisory body, has therefore suggested reforms to expand Oman’s tax revenues. Some state subsidies are expected to be cut, hitting the industrial sector as well as household consumers.

The statements by the cement companies suggested a decision to cut gas subsidies has already been made. In separate announcements, Oman Cement and Raysut Cement said the price of gas supplied to them would double from Jan. 1.

Oman Cement said the price would rise to $3.00 per million British thermal units, raising its costs next year by OMR6.63 million. It made a net profit of OMR11.4 million in the first nine months of 2014.

Raysut forecast its gas costs would rise by OMR4.5 million. It did not specify the time period for the additional costs, but it apparently meant over 2015. Its shares tumbled their daily 10 per cent limit on Sunday.

Oman Cement, which has appealed against the price rise, said the ministry would in future hike prices at the start of every year. Raysut said gas prices would in future rise either three per cent per year or at rates specified by the ministry. A price of $3/MMBtu would still be well below levels in many industrial countries.

Also on Sunday, other Omani industrial companies including Salalah Mills Co and National Detergent Co posted announcements on Muscat’s bourse estimating hikes to their costs due to higher gas prices next year.

Credit rating agency Standard & Poor’s on Friday cut its outlook for Oman’s sovereign rating to negative from stable, citing a risk that the country’s fiscal or external positions could deteriorate faster than expected.