One of the questions that I ask everyone in my quest to understand water policy formation in Oman, and decision making in general, is: "Without oil revenues what happens to the economy and water management/ development?" Of course, whenever you ask a question, you already have an answer in mind. And mine is: Well, diversification needs to happen faster; it needs to happen in sectors that are very water productive; and desalination [despite new technologies making it less and less expensive] will become more difficult. Yet the discourse in Oman tends to follow this train of thought:- We are diversifying. Look, we're trying to expand agriculture for instance.
- We still have oil now. Plus we're finding a lot of minerals too.
- We are expanding the electricity network to fuel desal stations.
For a country that knows her oil reserves are limited, Oman seems [as one interviewee brilliantly put it] content to "make hay while the sun shines." Oil production increased this year, to an average of 812,500 bpd, up from 765,800 bpd in 2008, and the Sultanate has plans to raise output in 2010 as well. As the Reuters piece acknowledges, the oil & gas sector still accounts for 80% of Oman's income.
I fear that the announcement of a new crude oil recovery project will perpetuate short-term thinking and contentment. Petroleum Development Oman (PDO, aka the demi state within Oman, as I like to think of it) secured the commission to develop reserves at Marmul, which will increase oil production by 8,000 bpd in the near future. PDO claims to have a promising new gas site at Burhaan West as well.
The sanctioned discourse on the crisis level of water reserves in Oman and the strength of the economy is perpetuated and crystallized by such announcements. The government has the convenience of seizing upon such news to continue short term strategies, and there is no accountability that ministries are implementing lofty long term plans. I hate to sound pessimistic, but this does Oman no good. The sun is setting, how do we make hay in the dark? Or perhaps becoming the hottest destination for extreme sporting will cover loses from oil rents?
So the solution is not to look for more oil?
ReplyDeleteNo. But the solution should be to have a realistic plan, and importantly a plan to implement the plan, so that when oil does run out, Oman is on the most solid footing possible. From what I have seen, the population does not feel that a natural resource crisis is occuring. And this is because Oman is a welfare state, and citizens are not incurring high costs for water and the gas they put in their cars. Such announcements can therefore prolong the delusion that serious action does not have to be taken now to prepare for the future. And politicians do not have an incentive to change the economics (charge people more for electricity, water, etc) because this will simply provoke a backlash and harm the regime's legitimacy.
ReplyDeleteThoughts?
I'm all for squeezing money out of oil. But even if we deny the existence of a resource "curse" persay, I think we can agree that mineral wealth places many obstacles in front of decision makers when they are tasked with keeping the population happy while preparing for life after oil.
As with all things, its complicated.
ReplyDeleteI think despite the new discoveries, Oman must face up to the demand side on both water and electricity. Karim is right, there's no reason NOT to try to find more oil and gas.
One way to bridge the divide between the requirements and the politics would be differential pricing. Let households have a small, fixed, yet heavily subsidised quantity. No-one wants to screw little old ladies and poor families that are willing to rationalise their consumption. Accompany this with a big effort to fix all the by-passed electricity meters and start fining people who do by-pass, by pointing out they are stealing from Oman.
Transfer some of the current subsidies to encouraging more efficient housing standards (double glazing, preferably locally manufactured), insulation, and more traditional passive designs that are more energy efficient.
For industry, possibly tie the subsidy to Omanisation and employment levels. Again, have a variable pricing scheme.
Build a lot more recharge dams and regulate aquifer offtake from wells.
Do more to reuse waste water.
Look at district cooling schemes based on sea water.
Its a long list.
Just to clarify, the Enhanced Oil Recovery project in Marmul delivers the increase in production through, in lay-man's terms, a more efficient way of production. This is in no way a discovery of a new oil field, but a better way of utilizing the existing field. The PDO spends a lot of energy and resources on evaluating and implementing such new techniques (unlike the UAE or Saudi Arabia, where oil fields get simply abandoned if the yield drops).
ReplyDeleteI'd enforce triple-glazing instead of double, tax breaks or cash incentives for energy efficient appliances, cash for clunkers (appliances), low-flow showerheads and toilet flushing. That's all on the consumer side though.
I don't think you've tapped into the realm of water produced as a byproduct of oil recovery (in Oman it is anywhere between 30 to 80%, so take your annual oil production numbers and figure out how much water is sucked out). Some of this water is from aquefers, other times it is purposely pumped into the oil reservoirs to push the oil out onto the surface. What is being done with this water after it is separated from oil?
My point - industrial use of water (particularly the petroleum industry) must greatly outweigh that of the consumer use. Now go ahead and try curb that demand...
Yes, let's state from the start that this is complicated, and deserving of much more than a simple blog post! However, I am digging the discussion. I will also be upfront: I'm a political science and arabic student, with an interest in economics but not a solid background. That being said, I have read a good deal about the economics of water demand management.
ReplyDeleteBoxster, thanks for underlining the difference between discovery/efficiency. I think that your and the Dragon's economics suggestions would ease citizens down the road from subsidized pricing to paying the real price of utilities. The government has the money now to undertake these initiatives, so it would be great to see a change to actually giving people incentives to use less water...
The problem though is that Omanis are using water from conventional (aquifers) and nonconventional (desal) sources. Groundwater is being pumped by farmers and industry, desal for domestic uses, and wastewater for beautification purposes. 90% of groundwater is used by agriculture, so incentives/restrictions must target farmers so that naturally recharging reserves are not wasted and so that quality does not continue to deteriorate (saline intrusion).
However, while agriculture is consuming this large amount of water (and industry is gaining due to land use shifting, not sure about your oil industry point), it is the domestic water use that is most costly. The little demand coming from homes is serviced through desal plants and the government recoups basically nothing through the current price structure.
Lastly (for now!) I was surprised and delighted a few months ago to run across PDO on the Global Water Partnership's site, describing the restrictions they have in place to protect groundwater. In Oman it is always a case of enforcement, but this seems promising.
http://www.gwptoolbox.org/index.php?option=com_case&id=107
My summary point: We need to restrict agricultural use of water (not simply making it more efficient through Modern Irrigation Technologies; and not simply through halting further well construction). We also need to reevaluate pricing for domestic water (increasing block tariffs, correct?) while providing incentives for water/energy saving technologies. And I still don't know enough about industrial use to go there...
...unlike the UAE or Saudi Arabia, where oil fields get simply abandoned if the yield drops...
ReplyDelete????
There's plenty of secondary recovery going on in the UAE - water injection, gas (petroleum)injection, and soon to be CO2 injection.
Q What is being done with this water after it is separated from oil?
A If water is produced with oil then it will be re-injected to keep producing oil from the reservoir
thanks anonymous, do you work in the oil biz?
ReplyDeleteWSJ is confident about oman's economic future and cites extreme sporting! hah
http://online.wsj.com/article/SB10001424052748703315004575073422581147064.html?mod=googlenews_wsj