Oman Stymied by the “Green” Turning

A year after the death of Sultan Qabos Ben Said Al-Said, the “father of the nation”, Oman is still trying to find its way in a world where the supremacy of petroleum is on its last legs, losing out to renewable energies which require a profound socio-economic transformation.

First turbines for the Dhofar wind farm project

The time is ripe for a “greening” of the economy. The sales of electric cars are skyrocketing, the democratisation of eco-friendly mobility in the streets of Western capitals and the commitment of the US giant General Motors to wind up its production of internal combustion vehicles by 2035 are the harbingers of an electrification of transports which are responsible today for 25% of the global emissions of CO2.

Sixty percent of Oman’s budget for 2021 relies on the income generated by its oil and gas deposits. Hence, the ongoing energy transition is synonymous with the gradual erosion of its main source of income and an in-depth revision of its model of development. At the same time, a report by the United Nations Development Program (UNDP), tells us that this tiny Gulf State is the country in the world where human development has progressed the most between 1970 and 20101.

“The fluctuations in the price per barrel can no longer be the basis for a healthy economy” is the analysis of Alexandre Briand, a Franco-Omni who chairs the France-Oman Club. Undermined by the ups and downs of the oil markets since 2014, the Omani economy has borne the brunt of the economic crisis due to the Covid-19 pandemic. The country’s debt-to-income ratio has flown sky-high, from 5% of the gross domestic product to more than 80% in 2020. “Faced with the challenges posed by the pandemic and the falling oil prices, many Omanis became aware that the old system was inadequate,” says Ismail Al-Muqbali, an activist who was involved in the “Omani Spring” in 2011.

The reforms promised by the former sultan, Qabus Ben Said Al-Said (1970–2020), described today by activists as “stopgap solutions,” failed to cure the country’s addiction to the oil windfall and to prepare it for the in-depth mutation of the world’s energy systems. Under the authoritarian leadership of Haitham Ben Tarek Al-Saïd, the new sultan since the death of his predecessor on 10 January 2020, the country wonders whether it is to be one of the last bastions of the all-oil era? Or a convert to the so-called “clean“ energies? Or both at the same time?

World map of petrochemical processes

Locally, Oman sees solar energy and windmills as a viable alternative to its polluting power plants, offering that two-fold advantage of portraying the country as a participant in the movement towards energy transition while at the same time funnelling into the export market the oil and gas currently devoted to the production of electricity for local consumption. If, as of today, Muscat is one of the worst performers in the matter of energy transition—less than 3% in 2018 —the sultanate hopes to reach 30% by 2030.

Some of the many projects under way are a huge wind farm in the Dhofar, a southern governorate located on the border with Yemen, the installation of solar panels on single dwellings, mansion blocks and office buildings, as well as the inauguration of the Oman Energy Efficiency Centre. In the future, the country hopes to export its electricity in the form of “green” hydrogen, a gas often seen as one of the instruments necessary for the decarbonisation of transports and heavy industries. However, at the present time, hydrogen is still too costly to occupy a significant place in the world energy mix.

For all that, Oman is not about to desert the hydrocarbon market. The worldwide demand for oil, though bound to dry up in the end as far as transports are concerned, still amounts to nearly 1000 million barrels per day. Oman, like the other Persian Gulf countries, has in its favour one of world’s lowest extraction costs and intends to drive the less competitive countries away from the market so as to be sure it will produce the last drops of oil to be consumed worldwide. In the face of international public opinion which demands an end to oil supremacy, the sultanate is counting on the petrochemical industries—especially plastics, synthetic fibres and pesticides— to continue discreetly selling its oil.

Like its Arabian neighbour, which intends to transform the gigantic Saudi Aramco complex into a world leader in the petrochemical field, Oman wants to carve out a niche for itself in the international petrochemical industry. The Liwa Plastics Industries Complex is meant to produce 1.5 million tons per year of polyethylene, the main plastic material consumed in the world. According to the Gulf Petrochemicals and Chemicals Association, a body representing all the chemical industries of the region, the demand for raw materials derived from petroleum should “grow four times faster than the world-wide demand for oil” between 2019 and 2030. At the same time, the country is counting on its liquefied natural gas reserves, a form of energy destined to play a key role in the energy transition.

The end of the welfare state

This new positioning on the energy markets is accompanied by reforms meant to rid the country of the “rentier mindset” which has gradually taken hold over the years. One sign of this sea change is the way the new monarch has speeded up the introduction of economic decisions which were unthinkable during the reign of his predecessor: an added value tax, partial suppression of the water and electricity subsidies, obligatory retirement of the eldest civil servants and income tax for the wealthy, a first in a region reputed for its tax-free salaries. “To be honest, we were expecting it… Everybody knows our economy is in a bad way,” says Mounira; a young woman with a degree in political science and a lucid take on her country’s difficulties. The Sultan’s priority sectors are tourism, transports and logistics, agriculture, fishing and the manufacturing and mining industries.

However, the Sultan’s intentions are likely to come up against the mentality of a population accustomed to relying on the public sector, known for its generous wages and low workload. Although one Omani out of four was employed by the civil service in 2019, this tendency has been declining since 2009. Publicity campaigns meant to promote entrepreneurship among young people seem to be paying having an effect. Between 2019 and the end of 2020, the number of small and medium-sized firms registered in the country has grown by 14%. Yet in the area of clean energy, Oman is far from rivalling with its neighbour, the United Arab Emirates, a regional “hub” for companies specialising in innovative energy solutions.

“The current economic reforms may be positive and necessary, but I think there should be a public debate,” Ismail Al-Muqbali suggests. Despite the Sultan’s economic audacity which activists are happy to greet favourably, Oman remains an absolute monarchy. Since January 2021, a new law requires any question put to ministers by members of the majlis al-chura—a parliament elected by universal suffrage but with no legislative powers—to be kept secret. “There are some who do not believe the majlis has any role at all and demand it’s dissolution to save money,” Munira remarks.

She regrets the absence of any “channel of discussion” between the population and the government. Like the other Gulf countries, the governing bodies in Oman grant their population the redistribution of the oil windfall money in exchange for absolute allegiance to the royal family. “We try to make ourselves heard via Twitter, but nobody is really listening,” she adds. The Omani security services carry out a low-profile repression of dissident voices, discrediting activists on the social networks and arresting those whose tweets are felt to be over-critical of the power structure.

Little awareness of the health hazards

Aside from the economic imperatives, reducing the country’s dependence on hydrocarbon production is a question of public health. The oil and gas industry is the largest source of industrial emissions of biogenic organic compounds, pollutants suspected of cancers and respiratory diseases. The United Nations Environment Programme (UNEP) considers atmospheric pollution, partly caused by this sector of activity, to be the most important health hazard of our time, responsible for one death in nine worldwide.

Very often the populations of the Arab-Persian Gulf are unaware of this reality: the six countries of the Gulf Cooperation Council (GCC) figure among the 20 countries in the world emitting the most CO2 per capita.2 Despite an increased awareness of global warming, a major share of the population remain uniformed—or misinformed—about environmental issues, as was revealed in a study carried out by the Boston Consulting Group. Thus, 25% of the respondents believe that climate change has a positive effect on the planet. The impact of the gas and oil industry on people’s health is often ignored by media outlets controlled by local authorities and social networks under close surveillance.

Toxic as it for the environment, it is Oman’s “black gold” that enabled the country to recover its economic prosperity, once ensured by the Arab slave trade on routes linking the Middle East to East Africa and Asia. After their capture in East Africa, most of the 800,000 African slaves conveyed through the Gulf countries between the end of the 19th century and the nineteen thirties, transited via the harbours of Yemen and Oman. If this age-old maritime nation made a successful transition from slave traders to oil exporter, the challenge facing Sultan Hatham is reminiscent—proportionately speaking—of the one encountered by his predecessors a century ago: restore the image of Oman in a world where public opinion points an accusing finger at the nature of the windfall that has made its fortune.

2CO2 emissions (metric tons per capita) | Data (