The UAE and Oman have made the greatest progress in reducing the hydrocarbon component of their exports in the past decade, says a global ratings agency.
The concentration of the UAE’s hydrocarbon exports as a percentage of total exports has declined by almost 15 percentage points since 2001, mainly owing to re-exports and the services exports of Dubai. Oman reduced its export dependence by almost 10 percentage points between 2001 and 2013, to stand at 66 per cent of total exports in 2013.
Standard & Poor’s primary credit analyst, Trevor Cullinan, does not agree with the diversification approach adopted by some countries in the region.
“A proportion of what classifies as the non-oil sector according to generally accepted statistical methods in many of the GCC economies does not in our opinion constitute true diversification away from the hydrocarbons sector.
“It is to a significant extent downstream activity, such as the production of petrochemicals and is directly related to the hydrocarbons sector through the provision of competitively priced oil and gas feedstocks by the national oil companies.
“The GCC governments are using their competitive advantage in the development of these downstream industries. However, as their hydrocarbon reserves are depleted it is possible that these industries may not prove to be sustainable. The supply of feedstocks could become less abundant, absent further discoveries of new oil and gas fields and any substantive development of new technologies such as shale,” says Cullinan.
Fiscal breakeven oil prices have also increased across the GCC, indicating the still high fiscal vulnerability of the GCC economies to a decline in oil prices. For instance, in 2008, breakeven prices of all GCC sovereigns were below the market price for Brent oil. In 2009, when Brent crude oil prices dropped substantially to slightly above an annual average of $61 per barrel, only Kuwait and Qatar’s breakeven oil price remained below the market price for Brent.
Tuesday, July 1- 2014 @ 13:16 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.