Dubai — With OPEC+ production quotas set to expire at month's end, Oman will be joining its Arab neighbors in ramping up its oil output, even as it slashes its budget to weather the coronavirus crisis, two government sources told S&P Global Platts.
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Oman pumped 970,500 b/d of crude and condensate in December 2019, according to its ministry of oil and gas, but will be boosting volumes to its full capacity of 1 million b/d over the next few months, an oil ministry official said.
"It is not easy to increase production in any country, including Oman, and we are to be using the maximum capacity that we have now," the source said, adding that raising production beyond 1 million b/d would require additional investment.
Oman's quota under the OPEC+ supply accord is 961,000 b/d. It is the largest Arab oil producer outside of OPEC.
The sultanate's economy has been buckling under the pressure of low oil prices, exacerbated by the coronavirus outbreak. Revenues from the hydrocarbon sector account for about 80% of Oman's national budget, which is in deficit.
The break-even oil price needed to balance the budget this year is $85.90/b. Front-month Brent crude was trading at $31.29/b at 1330 GMT Tuesday.
"We need to produce as much [crude] as we can," a second source said.
The Omani government announced Tuesday it would slash 5% from 2020 budgets for all of its ministries, according to a document seen by S&P Global Platts. The decree urged all ministries to "review all types of spending, especially on consumer items on which the reduction is still available."
"Around 60% of oil industry costs are facilities, pipes, valves, so we are expecting some natural cost optimizations without impacting the economy," the second source said.
Elsewhere, Petroleum Development Oman, the semi-state-owned company responsible for the bulk of the Sultanate's oil production, said it was working to protect its business operations in light of the spread of the coronavirus.
PDO produces the bulk of Oman's gas and also 630,000 b/d of oil as well as 90,000-00,000 b/d of condensate. It has a production target of reaching 700,000 b/d of oil within five years.