RenewableEnergyResources in Oman A basic principle of the market structure is a single point of subsidy injection, i.e. the Government provides subsidies to the licensed suppliers - all other entities are self-sustaining in economic terms and charge fully cost reflective tariffs for the services they provide. 3.3.7 Energy costs in Oman The current natural gas price provided by the Ministry of Oil and Gas Resources is 1.5 USD/MMBtu for all power generators. This is below the current economic opportunity cost of natural gas, assumed to be 3 USD/MMBtu with a 3% depletion premium. In combination with the end-user subsidy provided by the Government to the DC's, the level of subsidization is quite large. Cost of Diesel is 146 Baiza per Litre. 3.3.8 Energy supply and consumption Present The annual crude oil production is nearly 300 MN BBL per year and has been slightly declining between 2003 and 2006. Approximately 90% is exported and the remaining used domestically. The annual natural gas production is approximately 900 000 MNSCF per year and has been increasing over the last years. In 2005 the natural gas production was 918 000 MNSCF. The usage of the natural gas in 2006 is shown in Fig. 3.6. Fig. 3.6 Usage of natural gas in 2006, Ref /6/ Flared, 6% Other, 11% Government, 19 % Oil Fields, 16% OIC, 4% UAE, 4% OLNG, 40% The Government accounts for 19% of total gas, while the remainder is used in oil-production and for export. The largest share (40%) is used for LNG and exported. Oman natural gas resources are constrained due to long-term commitments to export LNG to Korea and Japan, and due to the usage in local industry and power stations. The low price of gas charged for local use has been considered important to stimulate and attract of industrial development. Page 46 of 134 .
RenewableEnergyResources in Oman The use of natural gas by the Government is shown in Fig. 3.7. Fig. 3.7 Government of Oman -use of natural gas, Ref /6/ Other, 1% Cement Production, 6% Mining Activities, 1% Power Stations, 92% 92% of natural gas used domestically is used for power production. Coal production and usage in Oman is insignificant. Page 47 of 134 .