Gas deals lift Oman net gas revenues

Gas-linked contracts and stronger pricing are set to lift net gas revenues in Fiscal 2026, with the Sultanate’s public finances benefiting from higher export realisations and improved terms with upstream partners, according to budget projections and sector disclosures that point to a more resilient hydrocarbons outlook despite market volatility.

Net gas revenues are estimated at RO 1.961 billion in Fiscal 2026, accounting for about 17 per cent of total public revenue, reflecting the growing contribution of gas to the fiscal mix alongside oil. The increase is driven by a combination of long-term sales agreements indexed to international benchmarks, incremental production from existing fields, and optimisation of feedstock allocations to liquefied natural gas and domestic industries.

Officials have framed the gains as a result of disciplined contract management and capacity utilisation rather than a reliance on short-term price spikes. Multi-year gas supply agreements signed or renegotiated over the past two years are delivering more predictable cash flows, cushioning the budget against swings in spot markets. The structure of these deals, which blend oil-linked formulas with destination flexibility for LNG cargoes, has improved realised prices while preserving volumes for domestic power generation and industrial use.

Budget documents indicate that the government expects overall hydrocarbon revenues to remain the largest contributor to the treasury in Fiscal 2026, but with gas taking a larger share of the total than in earlier cycles. The shift reflects sustained investment in upstream gas development and midstream processing, as well as the steady performance of LNG exports through established terminals serving Asian and European buyers.

Production guidance suggests that gas output will hold firm, supported by enhanced recovery techniques and debottlenecking projects across mature assets. While no single mega-project is driving the forecast, incremental additions across several fields are expected to offset natural decline. The approach aligns with a broader strategy to prioritise reliability and cost efficiency over rapid expansion.

Executives at state-linked energy firms have said that gas economics have benefited from lower unit costs and a more efficient allocation of capital. The focus has been on improving uptime, reducing flaring, and aligning upstream supply with downstream demand. These measures have supported margins even as global gas prices have normalised from earlier highs.

The fiscal uplift from gas comes as policymakers continue to emphasise debt reduction and reserve rebuilding. Higher non-oil revenues, including dividends from state enterprises and fees, complement the hydrocarbons inflow, but gas remains central to the medium-term balance. The budget assumes conservative price decks, a stance intended to preserve buffers should markets soften.

International demand dynamics are also shaping the outlook. Asian buyers remain the primary destination for LNG cargoes, underpinned by power generation needs and long-term decarbonisation pathways that favour gas as a transition fuel. European demand has added optionality for cargo placement, improving negotiating leverage and portfolio optimisation.

At the same time, domestic consumption is projected to grow steadily, driven by industrial projects and electricity demand. The government has sought to balance exports with local requirements, ensuring that feedstock availability supports value-added industries such as petrochemicals, metals, and fertilisers. This balance is reflected in contract structures that prioritise domestic supply while allowing flexibility in export volumes.

Analysts note that the fiscal impact of gas revenues extends beyond headline figures. Stable gas income reduces the need for short-term borrowing, lowers refinancing risks, and supports credit metrics. It also underpins spending on infrastructure and social programmes without resorting to procyclical cuts.

Risks remain. A sharper-than-expected downturn in global growth could pressure prices, while competition from new LNG supply entering the market may weigh on margins over time. Cost inflation in services and maintenance could also erode gains if not managed carefully. Officials have acknowledged these uncertainties, pointing to hedging strategies and conservative assumptions as safeguards.